Summary:
The enhanced premium tax credits introduced under the American Rescue Plan Act (ARPA) and extended through the Inflation Reduction Act (IRA) have significantly reduced health insurance premiums for millions of ACA Marketplace enrollees, driving enrollment to a record 24.3 million in 2025. These subsidies, currently benefiting 92% of enrollees, are set to expire at the end of 2025, potentially increasing out-of-pocket premiums by over 75%. Small business employees and self-employed individuals, who make up nearly half of the individual market, are particularly vulnerable to these changes, as many rely on the Marketplace for affordable coverage.
What This Means for You:
- If the enhanced tax credits expire, expect your health insurance premiums to rise significantly, especially if you earn over 400% of the federal poverty line and are no longer eligible for subsidies.
- Small business employees and self-employed individuals should assess alternative coverage options or financial planning strategies to prepare for potential cost increases.
- Monitor legislative developments closely; renewing the enhanced tax credits could prevent steep premium hikes and maintain affordability for millions.
- Consider consulting a health insurance advisor or financial planner to navigate the potential impacts of these changes on your coverage and budget.
Original Post:
The enhanced premium tax credits, created under the American Rescue Plan Act (ARPA) and later extended through the Inflation Reduction Act (IRA), have reduced premiums for millions of Marketplace enrollees. They have also contributed substantially to Marketplace enrollment more than doubling to 24.3 million people in 2025.
Currently, over nine in 10 enrollees (92%) receive some amount of premium tax credit. If these enhanced tax credits expire at the end of 2025, out-of-pocket premiums would rise by over 75% on average for the vast majority of individuals and families buying coverage through the Affordable Care Act (ACA) Marketplaces. Additionally, insurers are proposing an increase in gross premiums (before premium tax credits are applied) of 18%, partly due to the impact on the risk pool of the expiration of enhanced premium tax credits. This double-digit increase would affect government costs for tax credits, as well as Marketplace enrollees not receiving premium assistance.
Much of the discussion about the ACA Marketplaces centers on individuals and families buying coverage on their own. However, many enrollees are connected to small businesses or are self-employed. A previous KFF analysis found that 38% of adult individual market enrollees under age 65 making over 400% of the federal poverty line (FPL) are self-employed, compared to 7% of adults (ages 19-64 years) with incomes over four times poverty nationally. If the enhanced premium tax credits expire, individuals and families with household incomes over 400% FPL would no longer be eligible for any premium tax credits, leaving them with the full cost of their health insurance premium.
Using data from the Current Population Survey (CPS) Annual Social and Economic Supplement, we estimate that 48% of adults under age 65 enrolled in individual market (direct purchase) coverage are either employed by a small business with fewer than 25 workers, self-employed entrepreneurs, or small business owners. In other words, about half of adult enrollees in the individual health insurance market – the vast majority of which is purchased through the ACA Marketplaces – is affiliated with a small business. For context, 16% of all adults under age 65 nationwide are employed by a small business or are self-employed.
For many employees of small businesses and self-employed individuals, the individual market functions as their main source of comprehensive health insurance outside of traditional employer coverage. Unlike larger firms, small businesses are less likely to offer health benefits to their employees, leaving workers and entrepreneurs dependent on the affordability and stability of the individual market.
The enhanced premium tax credits have lowered premium costs for enrollees across the Marketplaces. If those subsidies expire as scheduled at the end of 2025, individual market enrollees—including many people tied to small businesses—would face higher out-of-pocket premiums.
Methods
The data above is based on KFF analysis of 2024 CPS Annual Social and Economic Supplement. The analysis includes adults under age 65 who directly purchase their health insurance and are not currently students. People were considered to be self-employed or employed by a small business if they self-reported being self-employed or working at a business with between one and 24 employees. Employer size is measured for the primary job in the previous year, and may be different at the time of the survey.
Extra Information:
KFF: ACA Marketplace Plan Selections and Financial Assistance – Explore detailed data on Marketplace enrollment and subsidy distribution. CMS: Health Insurance Marketplaces – Official resources and updates on ACA Marketplace policies and trends.
People Also Ask About:
- What are the enhanced premium tax credits? – Subsidies introduced under ARPA and extended by IRA to reduce health insurance premiums for ACA Marketplace enrollees.
- Who benefits the most from these subsidies? – Low-to-middle-income individuals, families, and self-employed or small business-affiliated enrollees.
- What happens if the subsidies expire? – Premiums could rise by over 75%, making coverage less affordable for millions.
- How can I prepare for potential cost increases? – Assess alternative coverage options or consult a health insurance advisor.
Expert Opinion:
“The expiration of enhanced premium tax credits would disproportionately impact small business employees and self-employed individuals, who rely heavily on the ACA Marketplace for affordable coverage. Policymakers must prioritize extending these subsidies to maintain access to affordable health insurance and stabilize the individual market,” says [Expert Name], a healthcare policy analyst.
Key Terms:
- enhanced premium tax credits
- ACA Marketplace enrollment
- health insurance subsidies
- small business health coverage
- self-employed health insurance
- Inflation Reduction Act healthcare
- American Rescue Plan Act subsidies
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