The potential expiration of health insurance premium tax credits at the end of 2025 will have an adverse effect on the U.S. economy, according to a report from researchers at the Milken Institute School of Public Health published March 3.
The study, led by professor of health policy and management Leighton Ku, showed the expiration on Dec. 31, 2025, of the COVID-19-era enhancements to premium tax credits — first introduced in the Affordable Care Act in 2010 to reduce health insurance payments — will lead to significant economic strain in the United States if Congress lets them expire. The study states that the credits’ expiration could cause GDP to fall by an estimated $34.1 billion, economic activity to fall by $57 billion and national employment to decline by 286,000 due to the health care sector losing revenue from the expiring tax credits.
“State economies will take a fairly big hit because of this,” Ku said. “They will lose a lot of their gross domestic product. We will have more than a quarter of a million people lose their jobs, about half of them in health care, about half of them outside of health care, and state and local tax governments will lose tax revenue.”
The enhancements, which were established by the American Rescue Plan Act of 2021, introduced in February 2021 in the House of Representatives by Rep. John Yarmuth (D-KY), reduced monthly premium costs for marketplace health insurance by an average of $85 per policy, according to the Centers for Medicare and Medicaid Services, and were initially planned to expire at the end of 2022.
Congress extended the enhancements to 2025 by the Inflation of Reduction Act of 2022, and they will now expire at the end of the year without further congressional extension.
According to the study, with the expiration of premium tax credits, millions of Americans will become uninsured because they will no longer be able to afford their insurance. The study states this will cause a loss of revenue for health insurers and in turn cause the insurers to cut payments to hospitals and health care providers.
The study concludes the cut in payments will lead to a loss of revenue in the health care sector overall, causing massive job cuts and cuts to services for consumers, hurting state economies because job loss will decrease consumer spending.
Sen. Jeanne Shaheen (D-NH) and Sen. Tammy Baldwin (D-WI) introduced legislation in September of 2024 to permanently codify the enhancements to premium tax credits, however, the bill has yet to be voted on as of this month.
Ku said the Republican majorities in Congress are likely ignoring the codification of the enhancements due to their main focus on extending the Tax Cuts and Jobs Act of 2017, which she said primarily reduced taxes for “high income people.”
“I have not heard a great deal of discussion about this particular provision,” Ku said.
Ku said to model the impact of the expiration of the enhancements, his team used data estimating economic losses from the Urban Institute, a think tank based in D.C. His team then inserted the collected data into IMPLAN, an economic modeling software, which they used to find their results by changing inputs of funding and seeing how it impacts revenue.
In addition to modeling the economic consequences of the enhancement’s expiration, the team’s research also found that the expiration of the tax credits would cause 7 million Americans to lose their Medicare insurance because they can no longer afford it. Ku said of these 7 million, an estimated 4 million would be unable to find coverage and would be left completely uninsured. He said this widespread loss of insurance coverage would cause millions of Americans to lose access to basic medical services, like regular checkups and vaccines.
“Now, what that means is they have a harder time paying their medical bills,” Ku said. “We know that in general, when people don’t have health insurance, they can’t afford to go to the doctor as much, so they don’t get their preventive services. They don’t get things like vaccinated.”
The model showed that rural residents in states that have not expanded Medicaid eligibility — like Kansas, Tennessee and Wyoming — are potentially at the highest risk of losing their health insurance. Alee Lockman, a professor of health policy and management at Texas A&M University, said lower income levels in rural communities make it harder for residents to afford health care without the aid provided by the tax credit enhancements.
“Typically, rural communities tend to be older and poorer than more suburban and urban communities, which means often a higher percentage of rural residents are lower-income or seniors,” Lockman said. “And so if you’re 65 plus, you qualify for Medicare, which is great, but if you’re a lower-income adult in a rural community, and perhaps you’re self employed or working for a very small employer, like a farmer or a mom-and-pop grocery store, that doesn’t offer health insurance to their employees, you’re out of luck.”
Lockman also said the lack of resources among lower-income Americans in rural communities could make it difficult for organized opposition to form against the expiration of the enhancements.
“If you’re a lower-income American, you’re possibly working several jobs to make ends meet,” Lockman said. “You don’t have a lot of disposable income, and so the opportunities to become as politically mobilized as higher-income seniors who have both time and perhaps some disposable income is a little bit more limited, and so that’s a challenge when we think about possible mobilization.”
