The enhanced Affordable Care Act (ACA) Premium Tax Credits — a key driver of record Marketplace enrollment — are set to expire at the end of 2025 unless extended by Congress. While much of the public discussion centers on the impact to individual consumers, the expiration would have significant downstream consequences for employers subject to ACA compliance.
If these credits lapse, out-of-pocket premium costs could rise by over 75% on average, millions could lose coverage, and the risk of ACA penalties for large employers could increase substantially.
What Are the Enhanced Premium Tax Credits?
Introduced during the pandemic and extended through 2025, the enhanced credits:
- Lowered premiums by an average of $705 per year.
- Expanded eligibility to individuals earning more than 400% of the federal poverty level.
- Drove record Marketplace growth, particularly in Republican-leaning states where many consumers took advantage of lower premiums.
Without an extension, eligibility would shrink, and many enrollees — particularly lower-income, older, and rural populations — would face higher costs or lose coverage altogether.
The Compliance Ripple Effect for Employers
The prospect of PTCs going away after 2025 would increase healthcare costs but would remove a notable compliance hurdle for employers.
While expanded PTC eligibility benefits employees and their families, it also raises compliance risks for employers. PTCs serve as triggers for the IRS to identify potential ACA non-compliance.
When an employee receives a PTC from a state or federal health exchange, the IRS cross-references the request with the employer’s ACA filings to identify organizations that may not be compliant with the ACA’s Employer Mandate.
However, there are other downstream effects that could surface if PTCs are not extended.
When Marketplace subsidies shrink, more individuals may seek coverage through employer-sponsored plans. This could lead to:
- Increased enrollment activity outside of open enrollment periods.
- Higher complexity in tracking full-time eligibility for ACA purposes.
Why It Matters Now
If PTCs are not extended, the impact will be immediate once 2026 plan design begins. Employers who wait until late 2025 to adjust could face a compliance scramble — or worse, receive costly penalty notices from the IRS in subsequent years.
The Congressional Budget Office projects that without an extension, 4.2 million people will lose coverage by 2034, which means employers should anticipate a shift in employee coverage behavior and prepare accordingly.
How Trusaic Helps You Prepare
Trusaic’s ACA compliance solutions are built to help employers manage complexity in a shifting policy environment:
- Penalty Risk Assessment: Detect and correct issues in your ACA data before they trigger IRS penalties.
- Real-Time Eligibility Tracking: Monitor and update eligibility status dynamically as coverage needs shift.
- Safe Harbor Optimization: Confidently calculate affordable contributions using the method that best fits your workforce.
- Audit-Ready Reporting: Maintain complete, defensible records for IRS inquiries — critical in a less-subsidized ACA landscape.
The Bottom Line
The possible expiration of Premium Tax Credits raises the stakes for ACA compliance. As subsidies disappear, coverage affordability will become a bigger concern for employees — and a bigger compliance challenge for employers.
Proactive planning now will put you in a position to adapt quickly, protect your organization from penalties, and ensure your employees continue to have access to affordable coverage.
Don’t wait for Congress to decide the future of these credits — start preparing today.