Health Care Subsidies Debate Intensifies as ACA Tax Credits Near Expiration

The looming expiration of enhanced Affordable Care Act subsidies has become a central point of contention in the ongoing government shutdown, with both parties offering contrasting narratives about who benefits from these tax credits and who stands to lose the most.

Democrats emphasize potential premium increases that could reach $1,000 to $2,000 per month for some middle-income Americans, while Republicans argue the subsidies unfairly benefit higher-income individuals. The reality, according to health policy experts, falls somewhere in between.

If the expanded tax credits expire as scheduled, the average premium increase would be $1,016 for the year—a substantial 114% rise—according to estimates from KFF, a health policy research organization. This figure accounts for an expected 18% increase in premiums by insurers, who cite rising healthcare costs and the anticipated departure of healthier enrollees from the insurance pool.

The impact varies significantly based on age, income, family size, and location. Those earning above 400% of the federal poverty level—more than $84,600 for a couple or $128,600 for a family of four—would experience the most dramatic increases, as they would lose eligibility for subsidies entirely. Older enrollees would be particularly hard hit, as their premiums can be three times higher than those for younger policyholders.

“While virtually all subsidized enrollees will pay more next year to keep the same plan, older middle-income ACA enrollees will see the largest dollar increases in premium payments due to the return of the ‘subsidy cliff,'” wrote Shameek Rakshit, a KFF research associate.

In some stark examples, a 60-year-old couple making $85,000 (just over 400% of the federal poverty level) could see yearly premium payments rise by more than $22,600 in 2026, bringing their insurance costs to about a quarter of their annual income, up from the current 8.5%.

The enhanced subsidies, first implemented in 2021 as part of pandemic relief legislation and later extended through 2025, eliminated the 400% income cap and increased financial assistance for all eligible enrollees. A permanent extension would cost nearly $350 billion over ten years, according to the Joint Committee on Taxation and Congressional Budget Office.

Enrollment in ACA marketplace plans has more than doubled since 2020, reaching 24.3 million people in 2025—approximately 7% of the U.S. population. With 92% of enrollees receiving subsidies, more than 22 million Americans could see some increase in out-of-pocket costs if the enhancement expires. The Congressional Budget Office estimates that 4.2 million more people will lack health insurance by 2034 if the subsidies are not extended.

While Republicans like Sen. Katie Britt have claimed that “millionaires” receive these subsidies, the data shows a different picture. According to 2024 data from the Centers for Medicare & Medicaid Services, about 95% of subsidy recipients earn up to 400% of the poverty level—$62,600 for an individual, though the threshold is higher for families.

Only about 5% of those receiving financial assistance earned above the 400% threshold, primarily due to living in high-premium areas or having larger families. The Joint Committee on Taxation estimates that 85% of federal spending for the subsidies would go to those earning $150,000 or less, with just 5.5% going to the $200,000 to $500,000 income group.

“There isn’t a single income that premium tax credits are phased out at,” explained Justin Lo, a senior researcher for KFF’s Program on the ACA. “With enhanced premium tax credits, the maximum amount for the subsidized, out-of-pocket premium payment is capped at 8.5% of annual income.”

Health policy experts note that while it’s theoretically possible for a family earning $400,000 to qualify for subsidies—as some Republicans have claimed—such cases would be “extremely unlikely” and would require a specific combination of factors: a large family, older parents, and residence in a high-cost state.

Jessica Banthin, a senior fellow at the Urban Institute’s health policy division, explained that such high-income families would typically have better insurance options through employers or small-group markets.

As the deadline approaches, millions of Americans are receiving notices about potential premium increases, adding urgency to a political standoff that has already resulted in a government shutdown with no immediate resolution in sight.