ACA Tax Credits Set to Expire: What Californians Face

When lawmakers reached an agreement in November 2025 to end the federal government shutdown, they restored funding for key health programs through January 2026. One major issue was not included in the deal: an extension of the enhanced Affordable Care Act premium tax credits.

These expanded credits remain scheduled to expire at the end of 2025. Without action from Congress, roughly 1.7 million Californians enrolled through Covered California will see higher premiums in 2026. Covered California and national analysts expect sharp price increases once the enhanced assistance ends, raising the risk that many residents could lose coverage or switch to less protective plans.

Why ACA Tax Credits Matter

Premium tax credits lower monthly coverage costs based on income and household size. Before 2021, eligibility ended at 400 percent of the federal poverty level.

The American Rescue Plan changed that rule by increasing the size of the credits and allowing higher-income households to qualify. The Inflation Reduction Act extended those improvements through 2025.

These changes capped what families pay for benchmark plans and removed the steep subsidy cutoff that affected many middle-income earners.

For Californians, the effect has been significant. Research from KFF shows that the enhanced credits lowered monthly premiums by hundreds of dollars for many households. If the enhanced credits expire, premiums could rise as much as 97 percent for some Californians, with an estimated 400,000 individuals at risk of losing coverage.

The Impact on Insurance Premiums if Congress Doesn’t Act

Unless Congress renews the enhanced credits, they will expire at the start of 2026. Covered California projects substantial premium increases across income levels if that happens.

Households slightly above the 400 percent federal poverty level would lose all assistance, since their eligibility came from the temporary expansions.

A drop in enrollment could follow. If healthier members leave due to higher prices, insurers may face a smaller, higher-risk pool. That shift could lead to additional rate increases, reversing progress made in lowering the uninsured rate and stabilizing premiums.

Steps Covered California Enrollees Can Take

While the enhanced credits remain in place for 2025, consumers can start planning now in case Congress does not renew them.

Review income and household size

Estimate your 2026 income early. Even small changes can affect subsidy eligibility. Covered California lets you update income details at any time.

Estimate future premiums

Tools from KFF and Covered California can help you see what coverage may cost without the enhanced credits.

Speak with a certified broker or navigator

Licensed brokers can compare plans, explain premium changes, and help identify lower-cost options if support decreases. Early guidance helps avoid surprises during open enrollment.

Understanding your likely subsidy situation now will give you more control when selecting coverage for 2026.

Broader Policy Context

The funding bill President Trump signed in November extended several health programs, including Medicare telehealth flexibility and support for community health centers. The decision did not include an extension of the enhanced ACA subsidies.

Senate leaders scheduled votes on extending the tax credits, but the proposals did not pass. The House has not committed to a vote. A group of House Democrats is pursuing a discharge petition, which would require a small number of Republican members to succeed.

If Congress does not act before January, consumers will face the old subsidy rules as open enrollment approaches. That timing could lead to confusion and make it harder for families to estimate their 2026 health insurance costs.

How Enhanced ACA Subsidies Improved Access

The enhanced credits under the American Rescue Plan and the Inflation Reduction Act improved affordability in several ways:

• They capped premiums as a share of income
• They expanded eligibility beyond 400 percent of the federal poverty level
• They helped Covered California reach record enrollment levels
• They supported the lowest uninsured rate in state history

These improvements contributed to a more stable and accessible marketplace. Losing them would have the greatest impact on working families who rely on predictable premium costs.

Potential Impacts of Expiring Enhanced Premium Tax Credits in 2026

A family of four earning around 90,000 dollars could see premiums rise by several hundred dollars per month without the enhanced credits. Some may move to plans with higher deductibles, while others may drop coverage.

Rising uninsured rates could increase uncompensated care costs for hospitals and clinics. California’s progress toward broader coverage may slow or reverse.

Covered California plans to increase outreach and education, but state programs cannot fully replace federal support.

How Californians Can Prepare for Possible Changes to ACA Subsidies

As Congress continues to debate the future of the enhanced credits, Californians may face uncertainty about 2026 health insurance costs. Reviewing income, comparing options, and planning ahead can help you stay protected.

At Sackett & Associates, our independent brokers are ready to help you understand your choices and find coverage that meets your needs. If you want to see how potential changes could affect your plan or need help preparing for next year, contact us for personal guidance.