Pursuant to the COVID-era American Rescue Plan Act, Congress enhanced the existing premium tax credits that serve to reduce health care premiums for qualifying taxpayers.
The credits are paid directly to health insurance providers, rather than to taxpayers, in exchange for the reduced premiums. The enhanced credits provide increased subsidies for taxpayers who already qualify for them absent the enhancement.
The premium tax credits also extend eligibility to taxpayers with annual income that equals 400% of the federal poverty line. Taxpayers with income under 150% of the federal poverty level generally pay nothing for health insurance coverage, while those with income of $60,240 or more pay no more than 8.5% of their household income for health insurance premiums.
These enhanced premium tax credits were extended through 2025 via the Inflation Reduction Act of 2022.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about whether Congress should act to extend the enhanced premium tax credits.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Bloink: These enhanced premium tax credit amounts are set to expire after Dec. 31. Failure to extend the credits means that millions of Americans would likely become uninsured after facing sharp increases in their marketplace health insurance premiums. That’s a situation that we should seek to avoid entirely — as we all know that when uninsured individuals require medical care and can’t pay, those costs are passed on to others via increased health care costs.Byrnes: The enhanced premium tax credits are COVID-era benefits that are simply no longer necessary. Employees who lost their jobs due to government-mandated shutdowns often had no choice but to turn to the health insurance marketplace to purchase coverage at a time when Americans were struggling across the board. At the time, the increased PTCs made sense as a stopgap measure to help Americans keep health coverage during a time of crisis.
Bloink: We can't pretend that it's only those uninsured Americans who will feel the effects of allowing the enhanced PTCs to expire. If the enhanced PTCs aren't extended beyond 2025, the value of the credits would fall by roughly $26 billion, affecting everyone in the health care industry. It's estimated that total economic output would decline by roughly $57 billion. That’s not a risk that we should be willing to take during these precarious times of economic uncertainty.
Byrnes: Again, not every COVID-era tax benefit should be extended. Americans are no longer faced with the types of challenges that they experienced during the pandemic due to no fault of their own — so the challenges these enhancements were designed to address no longer exist. These credits should be allowed to expire so that we can focus on more pressing budget matters.
Bloink: When insurance companies aren't collecting the increased PTCs, they'll likely cut payments made to hospitals and medical facilities. Those providers will, in turn, likely be forced to cut jobs — with the end result that health care services become less accessible to everyone. Lost jobs also harm the economy as a whole, which is struggling enough under the weight of uncertain conditions created by President Donald Trump.
Byrnes: We need to focus on finding ways to trim the federal budget so that we can extend the 2017 tax cuts for the benefit of all Americans. Most Americans are struggling under the weight of increased costs for basic necessities. Extending the 2017 tax cuts should absolutely be the top priority — and we must acknowledge that cuts will be necessary to make that a reality.
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