Enhanced APTC expiration: The impact on ICHRA and the individual market

Most Americans with individual health insurance coverage rely on premium tax credits (PTCs) to lower their monthly premiums. Since 2021, enhanced PTCs have made coverage even more affordable by expanding access to millions more Americans through the public Marketplaces. However, unless Congress acts, these enhanced credits will expire at the end of 2025.

Lawmakers introduced an amendment¹ to the 2025 Federal Budget Reconciliation Bill, commonly known as the “One Big Beautiful Bill Act,” seeking to extend these enhanced tax credits. However, a vote in the House Ways and Means Committee struck it down in May 2025.

Without any legislative action to extend these credits for millions of Americans, many wonder about the impact these expiring tax credits will have on the individual market. By extension, that includes impacts on employee benefits that encourage workers to enroll in marketplace coverage, like the individual coverage health reimbursement arrangement (ICHRA).

In this blog post, you’ll learn:

• What premium tax credits are and how they’ve changed over time.
• How the expiration of these tax credits might impact the individual health insurance market and ICHRA.
• Why an ICHRA still makes sense if individual health insurance premiums increase.

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Understanding premium tax credits and their role in health coverage

The Patient Protection and Affordable Care Act (ACA) introduced premium tax credits in 2014. These tax credits, which individuals can take as advance premium tax credits (APTC) or as a tax refund, help lower-income individuals and families afford their individual health insurance premiums. These credits are available on public exchanges, like HealthCare.gov and state marketplaces. They aren’t available for off-exchange plans.

According to KFF, 92% of Marketplace enrollees received premium tax credits in 2025. That’s 22 million Americans². 

Originally, only those with annual household incomes between 100% and 400% of the federal poverty level (FPL) were eligible for these premium subsidies. You also had to be ineligible for affordable coverage through an employer’s group plan, Medicare, or Medicaid.

However, in 2021, Congress passed the American Rescue Plan Act, which expanded access to premium tax credits. As of 2025, anyone who would otherwise pay more than 8.5% of their household income for a benchmark plan can qualify for a subsidy. These enhanced credits were set to expire at the end of 2022, but Congress renewed them in the Inflation Reduction Act. 

Now, these enhanced credits are set to expire at the end of 2025. If they expire, eligibility reverts to the original rules based on the FPL.

What’s the potential impact on the individual market?

So, what might happen if Congress doesn’t extend these enhanced premium tax credits?

The Congressional Budget Office estimates³ that if Congress extends the enhanced premium tax credits, about 3.8 million more people would have health insurance coverage by 2034. If Congress doesn’t extend these enhanced credits, the CBO projects that 4.2 million more people will be uninsured in that same timeframe⁴. 

Unless Congress extends these credits, individual premium amounts are likely to increase. The Peterson-KFF Health System Tracker expects increases in net and gross premiums for 2026⁵. Net premiums are what individuals and families pay after factoring in any subsidies. If enhanced premium tax credits disappear, these could increase by as much as 75%. 

Those who don’t rely on premium tax credits aren’t safe from increased premiums, either. The CBO expects gross benchmark premiums to increase as healthier individuals leave the individual market due to losing their tax credits. 

Washington’s Health Benefit Exchange anticipates that 80,000 enhanced PTC recipients in the state will leave the individual market if Congress allows the subsidies to lapse⁶.

What early 2026 state rate filings are telling us

We’re already starting to see the potential impacts on the individual market as carriers submit their rate filings for 2026. While only a handful of states have released filings, these early figures may show what’s to come.

The following states have posted initial rate filings for 2026 individual health plans:

Based on the early rate filings, premiums are expected to climb whether enhanced PTCs are extended or not. Increasing prescription drug and healthcare costs are the primary drivers of these higher-than-usual rate increases. However, coupling this with the projected expiration of enhanced PTC drives the requested rate increases even higher.

It’s also important to note that these are requested rate increases for 2026. State insurance departments can still approve a slightly lower rate. It’s not uncommon to see a difference of four or five points between requested and approved rates.

Group health plan costs are rising, too

Much of the recent focus has been on the steep proposed rate increases for individual plans. But, individual health plans aren’t the only ones impacted by increasing healthcare costs. It’s important not to mistake silence from the group market as stability. Group health insurance plans will also see rate increases in 2026.

Historically, traditional group plans have seen much larger rate increases over the past decade than individual plans. Medical inflation and high-cost claims all impact employer-sponsored health coverage. According to KFF’s 2024 Employer Health Benefits Survey, the average employer-sponsored family coverage premium has increased by 24% since 2019 and by 52% since 2014¹⁵.

While individual plans may see steep rate hikes in 2026, group plans aren’t immune to the primary drivers (like prescription drugs). They may simply be lagging behind, and their rates will catch up.

Based on the early rate filing data, here’s a sample of rate filings for the small group market for 2026:

• Oregon: 11.5% increase
• New York: 23.6% weighted average rate increase
• Washington: 9.51% weighted average increase

Moreover, in many states today, individual plans remain more affordable to employers than group plans¹⁶. This includes Georgia, Kentucky, Indiana, Ohio, Washington, and more. Even if individual premiums rise in 2026, they may still undercut group rates in the same markets. 

We expect that the individual market will stabilize from the expiration of enhanced PTCs within a year or two. While there may be an initial exodus of healthy individuals from the market, benefits like the individual coverage health reimbursement arrangement (ICHRA) will continue to introduce healthy people to the market.

This means one thing for benefits decision-makers: don’t assume group coverage is the safe harbor. Rate hikes may be delayed, but they’re not off the table.

What is the potential impact on ICHRA?

Employees participating in an ICHRA can’t use premium tax credits. However, the expiration of these enhanced tax credits will impact the benefit.

With rate increases on the individual market, employees may be paying more for their plans. This could mean that employers will need to offer higher allowances to ensure they continue to meet ACA affordability thresholds. Employees might also choose to enroll in lower-cost plans to save money if premiums for more robust plans cost more than their ICHRA allowance amount. 

Despite these potential adjustments, ICHRA remains a compelling option for employers for several reasons:

• Lower costs, even with individual rate increases: Many of our customers come to us after facing double-digit rate increases with their group health plans. Even with these potentially steep individual rate increases for 2026, organizations can still save money with an ICHRA. We can conduct a custom health benefits analysis to determine if an ICHRA makes financial sense for you or your client.
• Employees choose the plans that best fit their needs: Even if employees shift toward lower-cost options, they retain the freedom to select plans that match their budget, network preferences, and specific healthcare needs.
• Flexibility and customization: Employers can segment their workforce and offer different contributions to employees by employee class, like rating area, and by age and family status. Traditional group plans don’t offer this additional flexibility and customization.

While the potential expiration of enhanced PTCs may create short-term challenges, ICHRA is still an excellent long-term solution. With much of the rate increases coming from rising healthcare costs and not potential PTC expiration, group plans aren’t immune to similar rate increases. ICHRA still provides a more predictable and customizable path forward.

What should employers and brokers do right now

The potential expiration of enhanced premium tax credits is already sending ripples through the individual market. Proposed rate filings in several states suggest significant increases that could impact employees’ out-of-pocket costs and the affordability thresholds employers must meet under ICHRA. While this introduces new considerations, it doesn’t eliminate the value of ICHRA as a strategic alternative to traditional group health insurance.

As group plan premiums continue to rise, ICHRA remains a strong solution. But, it may not be the answer for every group. Brokers and employers should consider both scenarios: one with enhanced PTCs in place and one without. But you don’t have to weigh your options alone.

Remodel Health helps organizations confidently transition to an ICHRA. Contact us for a custom ICHRA analysis to determine whether an ICHRA is the right fit for you or your client, even as the health insurance landscape evolves.

Sources:

1. NBC News – Republicans face new pressure to extend expiring Obamacare tax credits
2. KFF – Health provisions in the 2025 Federal Budget Reconciliation Bill
3. Congressional Budget Office – Budgetary outcomes under alternative assumptions about spending and revenues
4. KFF – How will the 2025 Budget Reconciliation affect the ACA, Medicaid, and the uninsured rate?
5. Peterson-KFF Health System Tracker – Early indications of the impact of the enhanced premium tax credit expiration on 2026 Marketplace premiums
6. Washington Health Benefit Exchange – Federal enhanced premium tax credits
7. Health insurance rates for 2026 – Connecticut
8. Maryland Insurance Administration – Health carriers propose Affordable Care Act premium rates for 2026
9. Massachusetts Division of Insurance – 2026 health insurance rates
10. New York Department of Financial Services – 2026 individual and small group requested rate actions
11. Oregon Division of Financial Regulation
12. ACASignups.net – 2026 rate changes – Tennessee
13. ACASignups.net – 2026 rate change project
14. Washington Office of the Insurance Commissioner
15. KFF – 2024 Employer Health Benefits Survey
16. Ideon – Individual vs. small group premiums

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