The ACA’s New Year’s Eve Cliff

Scorned and denigrated during its first decade, the Affordable Care Act’s health insurance exchanges/marketplaces have blossomed in this decade to become a substantial and established coverage option for millions of individuals and families without other choices. From 8 million enrollees at the time of its 2014 launch, to 11.4 million by the end of the first Trump Administration in 2020, enrollment reached 24.2 million in 2025. Americans have affirmed the value and legitimacy of this pathway.

Now this success faces dire threat. Without legislative action by Congress and President Donald Trump by December 31^st, much of this progress will be reversed.    

The 2020-2025 enrollment surge was not accidental. It resulted from action by President Joe Biden and Democratic Senate and House majorities to enhance affordability in ACA exchange plan coverage. Two laws, the 2021 American Rescue Plan Act (ARPA) and the 2022 Inflation Reduction Act (IRA) provided new funding that enhanced exchange plan subsidies and affordability dramatically.

The original Affordable Care Act, despite its name, was not affordable enough for many lower-middle and middle-income households who could not obtain coverage from Medicare, Medicaid, or employer-sponsored insurance. Back in 2008 and 2009, the ACA’s legislative planners and designers wanted coverage to be as affordable as Massachusetts had provided in its successful 2006 near-universal health insurance law. But President Barack Obama, Senate Majority Leader Harry Reid, and House Speaker Nancy Pelosi all agreed that the 10-year cost of the ACA could not exceed $1 trillion. They believed that legislation exceeding that level would not get enough votes for passage in either chamber.

When ACA architects priced out the cost to replicate Massachusetts’ affordability scheme, the price tag landed between $1.6 to $2.5 trillion. So, changes were necessary, such as pushing back full implementation from 2012 to 2014 and lessening the cost of exchange subsidies known as advance premium tax credits (APTCs). Thus, the ACA that Obama signed 15 years ago on March 23, 2010, had less-than-optimal subsidies. Though many had hoped that Congress would improve affordability prior to the 2014 launch, the Republican takeover of the House in 2011 eliminated that possibility.

The ACA that went into effect in 2014 was less generous than desired. Its first year saw eight million enrollees, substantially less than anticipated. By the end of the Obama Administration in 2016, coverage had reached 12.6 million. Though President Trump’s 2017 drive to repeal the ACA failed, his executive actions cut enrollment to 11.4 million by his first term’s end.

With the enactment of ARPA/IRA enhanced subsidies, enrollee numbers jumped from 14.5 million in 2022 to 16.3 million in 2023, then to 21.4 million in 2024, and now 24.2 million in 2025. The ARPA law, a response to the COVID-19 pandemic, only increased subsidies for 2021 and 2022. The IRA, with limited funding and many competing needs, extended them from 2023 through 2025, thus setting a major affordability cliff on December 31, 2025. If Congress does nothing, ACA marketplace subsidy levels will revert to pre-2021 levels in 2026. Unless Congress acts before September, health plans will begin notifying enrollees of much higher premiums coming next January, and some consumers will begin to drop coverage.

In 2024, the Congressional Budget Office estimated that non-extension by itself would trigger coverage losses of 7.4 million persons by 2030. KFF estimates the impact on individuals with these examples:

“…two 40-year-old parents with two 10-year-old children in Davis, West Virginia making $125,000 would go from paying $885 to $2,918 per month, an increase of $2,033 ($24,392 per year). A 30-year-old in Dallas, Texas making just over poverty would go from paying $0 to $24 per month (an increase of $291 per year).”

In the original ACA, APTC subsidies were available only to households with incomes between 100% and 400% of the federal poverty level (FPL). Folks under 138% of FPL were expected to enroll in Medicaid (though 10 states still have resisted the ACA’s expansion). Households with incomes over 400% of FPL were considered able to afford full coverage without assistance. For a household of one, 400% of FPL is $62,600 in 2025, and for a household of three, it is $106,600. The average annual premium for individual insurance in 2024 was $8,951, and for family coverage, $25,572, and much higher for those over age 50. Republicans used to highlight the plight of this population segment to disparage the law, though offering no solutions.

ARPA/IRA enhancements for the first time provided APTC subsidies regardless of household income. For households with incomes over 400% of FPL, the annual premium is set at 8.5% of household income. According to KFF calculations, a 60-year-old couple earning $85,000 annually (416% of FPL) would face a premium increase of $1,507 per month (or more than $18,000 per year) if the enhancements disappear.

Had Democrats won control of the White House, Senate, and House of Representative for the 2025-2026 sitting, the exchange enhancements would have been extended without doubt, perhaps for a full 10 years in which case continuing Congressional reauthorizations would no longer be required. Had the nation entered 2025 with a divided government, a deal likely would have been struck with Republicans getting some of their favored tax cuts in exchange for Democrats winning continued enhanced ACA subsidies.

For ACA supporters, today’s Republican trifecta represents the worst-case scenario. Zero Republicans, Senate or House, voted to pass the ARPA or IRA laws. Some Republicans have noticed, notably Senator Lisa Murkowski (R-AK). In January she told the Northern Journal: “For the tax credits to continue, yeah, I think we’re going to have to … and I think we’re going to be hearing a lot from our constituents on it.” Senator Thom Tillis (R-NC) told Axios in late March: “There’s a case to be made for trying to figure out how we can continue the subsidies…”

The Congressional Budget Office estimated last year that a 10-year extension from 2025 to 2034 would cost $335 billion, starting around $25 billion per year. No encouraging signs have appeared from White House, Senate, or House leaders whose top priority is finding major budget savings to pay for their planned tax cuts estimated at $4.5 trillion.

In that effort, Republicans are looking for major Medicaid reductions in the range of $800-900 billion over 10 years. Health access advocates are more worried about damage to Medicaid than to the ACA exchanges. For Medicaid, the challenge is to stop Congress from taking action that would hurt any of the program’s 72 million enrollees. For the ACA subsidies, the challenge is to get Congress and the White House to act affirmatively. If the subsidy enhancements expire on December 31, 2025, tax cut bill writers will achieve no savings because lower costs from the subsidy expiration are already baked into the federal budget status quo.

Over 24 million Americans have grown accustomed to enhanced subsidies. They are primarily lower-middle and middle-income Americans. The highest concentrations are in states that refuse to expand Medicaid as permitted by the ACA—including Texas and Florida. These Americans will wake up to this unpleasant surprise in the fall and feel the full effects early in 2026, a pivotal and high stakes mid-term election year. To those who will face staggering premium increases, Republicans’ responsibility will be undeniable.

Some voices are cheering for expiration, especially Brian C. Blase, PhD, president of the conservative Paragon Health Institute, and a special assistant to the President for economic policy during the first Trump Administration. Paragon released a June 2024 paper by Blase called “The Great Obamacare Enrollment Fraud,” alleging that millions of newer Exchange enrollees, assisted by “unscrupulous insurance brokers” have “misestimate(d) income to qualify for larger subsidies.” Residents in these states (Alabama, Florida, Georgia, Mississippi, North Carolina, Tennessee, Texas, and Utah) show the greatest numbers of deceivers according to Blase’s recommendations. “The problem is particularly acute in Florida,” he asserts without irony.

When it comes to cutting government spending relating to health and social services, the Republicans’ word of the year is “fraud” hoping that program cuts can be justified as fraud control, especially in Medicaid. In March, the Trump Administration issued new regulatory changes to the Exchanges and APTCs, many of which reflect Blase’s recommendations, except his first: “Congress should permit the enhanced subsidies to expire after 2025.”

A February 2025 retort from the pro-ACA advocacy group Keep Americans Covered asserted that Paragon’s report “relies on problematic data, fails to account for income misestimations, and exaggerates the extent of possible enrollment fraud. The result is a skewed and misleading analysis that wrongfully concludes enhanced tax credits should not be extended.”

Allies in efforts to retain ARPA/IRA subsidies include consumers, physicians, hospitals, health insurers, employers, disease groups, and many others. It’s a truism of behavioral economics that people value held assets more than hypothetical gains. That is true for the wealthy who have enjoyed benefits from President Trump’s 2017 tax law since 2018, and it is true for the 24 million Americans who value the enhanced coverage that the ACA has been able to offer since 2021.

About the Author