High angle view of a Japanese female caregiver doing home finance online on a computer together with her worried elderly patient at his home.
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Two recent surveys of employers suggest that employee health insurance premiums are likely to increase by around 6.5% in 2026. This increase comes at a bad time for consumers, as inflation remains above the Federal Reserve’s 2% target and the labor market is weakening. It is also bad news for taxpayers who subsidize health insurance plans bought on the Affordable Care Act (ACA) marketplaces since higher costs mean larger taxpayer subsidies. Fortunately, taxpayers will see some relief if Congress allows the expanded premium tax credits implemented during the Biden administration to expire at the end of the year.
In 2021, Congress expanded the ACA’s premium tax credits (PTC) as part of the American Rescue Plan (ARPA) Act. Passed on party lines with all Republicans voting against it, the ARPA expanded the tax credits in two ways. First, it eliminated the maximum income limit for subsidy eligibility. Second, it reduced and, in some cases, eliminated the individual premium contribution. Democrats originally sold the expanded PTC as a temporary measure to help people cope with the COVID pandemic, but it was later extended by 2022’s Inflation Reduction Act to the end of 2025.
The expanded PTC has cost taxpayers a substantial amount of money. Under the PTC expansion, households earning between 100% and 150% of the federal poverty level are not expected to pay any premiums for their insurance coverage. Prior to the expansion, similar households were expected to have some skin the game, paying between 2% and 4% of their monthly income towards their premium. According to a report from the Economic Policy Innovation Center this requires taxpayers picking up an extra $2,000 per year for a family of four earning 150% of the federal poverty level. Higher income households receive even larger benefits from the PTC expansion: A four-person household earning $96,500, or 300% of the federal poverty level, gets an extra premium subsidy of $3,700 per year.
These household subsidies add up. The Urban Institute estimates that the larger PTCs will cause an extra 7.2 million people to get taxpayer-supported ACA coverage. The Congressional Budget Office (CBO) estimates that a permanent expansion of the PTC would add $383 billion to the federal deficit over 10 years, or nearly $40 billion per year. This is a hard pill to swallow given the country’s already dire fiscal outlook, as the debt-to-GDP ratio is on pace to hit 120% of GDP by 2035, up from 100% today.
In addition to the cost concerns, there is also evidence of fraud in the program. The government gives the tax credits directly to the insurers based on an enrollee’s projected income. During tax season enrollees are supposed to reconcile the income they actually earned throughout the year with the taxpayer subsidies they received, but this does not always happen. According to a report from the Paragon Health Institute, federal law limits the Treasury Department’s ability to recover subsidies if too much money is advanced to the insurer. There is also no repayment mechanism in place for people who misestimated their income to qualify for a subsidy. Paragon estimates that there were 6.4 million improper enrollees in 2025 who received taxpayer subsidies.
There has also been a big spike in enrollees who never make a claim—no doctor visit, lab test, or prescription—which is another sign of fraudulent enrollees. Even though these enrollees do not use any services, taxpayers still pay. In 2024, taxpayers paid insurers $35 billion for people who paid no premiums themselves and never used their plan.
These taxpayer subsidies are not sustainable. The federal government is currently running the largest peacetime deficits in U.S. history—more than $1.8 trillion in 2024 and on pace for a similar amount in 2025. Large deficits crowd out private-sector investment, make things like home and auto loans more expensive, slow economic growth, and contribute to inflation.
What policymakers need to do is find ways to connect people to jobs. If more people had private insurance, they would not need taxpayer subsidies. This means schools and universities that actually teach useful skills to prepare people for meaningful work. We also need to reform our government training programs so they provide a bridge to the market economy. Utah’s one-door model that integrates workforce and safety-net services to help people find jobs is an example other states can learn from.
Finally, we need to reduce the cost of healthcare, not just hide it by pushing it onto taxpayers. Eliminating certificate of need laws that restrict the supply of medical care fosters more competition and helps bring down prices. Reforming scope of practice laws so more nurses and other medical professionals can provide the services they are trained to provide would also help. We could also give people more control over their healthcare spending via universal savings accounts that allow people to save money for healthcare and other expenses tax free. This would encourage folks to shop around for non-emergency care to find the best value.
The Biden-era PTC expansion did not make healthcare cheaper; it just hid the cost. Congress should let the tax credit expansion expire at the end of the year as scheduled. This will save taxpayers hundreds of billions of dollars and encourage federal and state officials to pursue policy reforms that will truly make healthcare more affordable.