This content relates to a study commissioned by Blue Cross Blue Shield Association (BCBSA).
The Affordable Care Act (ACA) has always provided a financial boost for low-income individuals who need help buying coverage on the Exchange. The law created premium tax credits (PTC), which are based on a sliding income scale and capped at 400% of the federal poverty level (FPL). But the need to ensure people had continuous health coverage became more pronounced during the COVID-19 pandemic. As a result, lawmakers extended subsidies to a broader population.
The American Rescue Plan Act (ARPA) of 2021 extended the subsidy eligibility to people over 400% of the FPL and increased the premium subsidy amount for people at lower incomes who were already eligible. Those provisions were continued under the Inflation Reduction Act but will expire at the end of 2025 without congressional action.
Role of enhanced tax credits in driving ACA enrollment
The enhanced premium tax credits played a significant role in driving ACA enrollment to historic levels in 2024. In fact, ARPA resulted in a 20% increase in the number of people eligible for subsidized Marketplace coverage.
At a more detailed level, the impacts to enrollment in recent years have been more significant for certain segments of the population than others. Between 2020 and 2022, the number of Hispanic/Latino and Black, non-Hispanic enrollees in the Marketplace increased by 52% and 49%, respectively, compared to an increase of 11% for the White, non-Hispanic population. In addition, the share of enrollees in the lower income range of 100%–150% FPL has increased from 32% during the 2021 Open Enrollment Period (OEP) to 44% during the 2024 OEP.
Impact on ACA enrollment if PTCs expire
ACA enrollment could look significantly different if the enhanced PTCs expire. Using our Healthcare Reform Microsimulation Model (HRM Model), Oliver Wyman Actuarial analyzed the potential impact of the expiration of enhanced PTCs on certain patient populations. Our analysis suggests that the number of enrollees receiving PTCs would fall by 7.7 million but 0.7 million of those enrollees would stay in an ACA Marketplace plan. Other key findings include:
Impact on premium rates for younger adults
The expiration of enhanced PTCs will increase net premium rates across the board for Americans of all ages, but younger adults (ages 18-34) are projected to be impacted the most.
Income-based enrollment premiums
More than half of the enrollees who are projected to leave have a household income between 100% and 200% FPL.
Effect on enrollees with chronic conditions
Roughly 1.7 million enrollees with at least one of six chronic conditions (arthritis, asthma, cancer, cardiovascular disease, COPD, and diabetes) are projected to leave the individual ACA market if the enhanced premium tax credits expire.
Impact on Black and Hispanic/Latino enrollees
About 1.3 million, or 52% of, Black, Non-Hispanic enrollees and 2.4 million, or 49% of, Hispanic/Latino enrollees receiving PTCs would be projected to leave the individual ACA market.
Young adults leaving the ACA market
Roughly 2.8 million young adults — ages 18-34 — are projected to leave the individual ACA market if the enhanced PTCs expire.
