Modeling how the scheduled expiration of IRA enhancements affects health insurance costs
Maximum percentage of income required to pay for the benchmark plan
The Affordable Care Act (ACA) created premium tax credits to help Americans afford health insurance purchased through the marketplace.
These credits work by capping how much of your income you're required to pay for a benchmark health plan—the second-lowest cost silver plan (SLCSP) in your area.
If the benchmark plan costs more than your required contribution, the government pays the difference as a tax credit.
The American Rescue Plan Act (ARPA) of 2021 temporarily enhanced these subsidies. The Inflation Reduction Act (IRA) of 2022 extended them through 2025.
Key changes: • Removed the 400% FPL ceiling—credits available at any income • Capped contributions at 8.5% of income for everyone • Lowered contributions at every income level
The chart shows how the IRA (blue) differs from the original ACA (gray).
The ARPA/IRA enhancements expired at the end of 2025.
The subsidy structure reverted to the original ACA rules: • The 400% FPL ceiling returned • Required contributions increased
The baseline contribution schedule now requires higher payments and ends at 400% FPL—the "subsidy cliff."
To illustrate the impact, consider a 45-year-old single adult in Lebanon County, Pennsylvania, earning $104,200 a year—about 650% of the federal poverty level.
In 2025, under the IRA enhancements, this household: • Paid $963/month for the benchmark plan (SLCSP) • Received a $242/month tax credit • Paid a net premium of $720/month
In 2026, this household:
a) Faces a higher premium for their benchmark plan: $1,003/month (up from $963/month, +4.2%)
b) Lost their subsidy entirely: tax credit dropped from $242/month to $0 because they exceed the 400% FPL ceiling
Net premium rose from $720/month to $1,003/month—an increase of $283/month (+39%).
Two proposals were introduced in Congress:
IRA Extension: Maintains the 8.5% cap structure • Tax credit: $265/month → Net premium: $738/month
Bipartisan Health Insurance Affordability Act: Introduced by Rep. Dunn (R-FL) and Rep. Schneider (D-IL) on December 9, 2025, this bill extends eligibility to 700% FPL with a 9.25% cap • Tax credit: $223/month → Net premium: $780/month
Premium tax credits are one part of the health coverage landscape. Americans may also qualify for:
• Medicaid: Free coverage for low-income households (eligibility varies by state) • Marketplace subsidies: PTCs for those not eligible for other programs
The chart shows how these programs interact across income levels for our Pennsylvania example.
Medicaid provides coverage for low-income Americans. Pennsylvania expanded Medicaid, so adults qualify up to 138% FPL.
For our 45-year-old, this means Medicaid covers incomes up to about $22,000. If they earn more, they may be eligible for premium tax credits (PTCs).
The chart shows premium tax credits across income levels under three scenarios:
• Gray line: Baseline (post-IRA expiration) • Blue line: IRA extension • Purple line: Bipartisan Health Insurance Affordability Act
The baseline drops to zero at 400% FPL. Both reform options continue providing credits at higher incomes.
The blue shaded area represents the additional premium tax credits available under the IRA extension compared to baseline.
For this Pennsylvania household: • Below 400% FPL: The IRA provides lower required contributions • Above 400% FPL: The IRA provides full subsidy access where baseline provides none
The size of the shaded area shows the dollar value of the difference at each income level.
The impact of ACA policy changes varies by household type, location, and income level.
Click below to explore how four different households are affected—with details on Medicaid expansion, CHIP eligibility, and the subsidy cliff for each.
