The Affordable Care Act created a federally financed subsidy, called the premium tax credit (PTC), to help individuals and families with low or moderate incomes afford health insurance purchased through an Exchange. During the COVID-19 pandemic, Congress temporarily expanded these subsidies by removing the income cap for eligibility and increasing the amount of the credit for all income brackets.

According to the Congressional Research Service, enrollment in subsidized Exchange coverage nearly doubled, rising from 9.2 million in 2020 to 19.3 million in 2024.

With these temporary enhancements scheduled to expire, many employers will feel the impact. Below is a clear summary of what is changing and how organizations may be affected.

Understanding Current Subsidy Eligibility

To qualify for the premium tax credit, an individual must:

• Enroll in health insurance through an Exchange,
• Have household income between 100 percent and 400 percent of the federal poverty level for their family size,
• Not be eligible for government sponsored coverage, and
• Not be eligible for employer sponsored coverage that is affordable and provides minimum value.

The temporary enhancements removed the upper income limit, which allowed more middle and higher income households to access subsidies during the pandemic.

When Will the Enhanced Subsidies End

Unless Congress takes action, the enhanced subsidies will expire at the end of 2025. The recent spending bill that ended the government shutdown did not extend these enhancements, and although the Senate has agreed to vote on the matter in December, the outcome remains uncertain.

If the enhanced credits expire as scheduled:

• Individuals with incomes above 400 percent of the federal poverty level will no longer qualify for subsidies,
• Individuals who still qualify will receive smaller subsidies than they do today, and
• Federal spending on Exchange subsidies is expected to decrease.

These changes could lead to higher premiums in the individual market and an increase in the number of individuals without health coverage.

Potential Impact on Employers

The end of the enhanced subsidies may affect employers differently depending on their workforce and benefit strategy. Key considerations include:

1. Increased interest in employer sponsored coverage

As individual market premiums rise, more employees may shift back to employer plans if coverage is available. Employers may see higher enrollment during open enrollment periods or more inquiries from employees evaluating their options.

2. Job seeking behavior may shift

Employees who do not currently have access to affordable employer sponsored coverage may be more motivated to change jobs to secure it. This can influence retention, recruitment, and competitiveness in certain industries.

3. Possible reduction in ACA penalty exposure

If fewer employees qualify for the PTC, applicable large employers may see reduced exposure to ACA pay or play penalties, since those penalties are triggered when full time employees receive subsidies through an Exchange.

4. Additional considerations for employers offering ICHRAs

Employers that offer individual coverage health reimbursement arrangements may need to revisit their contribution strategies. If premiums rise and subsidies shrink, some ICHRA allowances may no longer meet affordability requirements without adjustments.

What Employers Should Do Now

The approaching expiration of the enhanced subsidies creates an important planning window for employers. Consider reviewing:

• Your medical plan eligibility and affordability strategy,
• How ICHRA contributions are structured if you offer one,
• Your workforce demographics and anticipated plan migration,
• Employee communications about coverage options for 2026, and
• Recruitment and retention considerations tied to health benefits.

Relation is here to help you evaluate the potential impact and prepare a proactive benefits strategy that supports your employees while managing compliance and cost considerations. Click here to locate a Relation Employee Benefits Broker.