Why All the Worry About 2026 Individual Medical Premium Tax Credits?

The government is shut down and the main sticking point is the end of the pandemic-era subsidies at the end of 2025. Here's a look at how the sunsetting will impact people in Washington state.

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​When the Affordable Care Act (ACA) was implemented, the law included a premium tax credit to help lower-income individuals afford their individual medical premiums. The tax credit is based on a sliding scale using a person’s Modified Adjusted Gross Income (MAGI) as compared to the Federal Poverty Level (FPL).  MAGI for most people is simply line 11 of their Form 1040 tax filing.  
 
To qualify for a premium tax credit, the person needed to be a US Citizen, obtain individual medical coverage on the Marketplace (originally called the Exchange), and have a MAGI of less than 400% of the FPL.  In addition, the person could not be eligible for Medicare, Medicaid (in WA called Apple Health), or the Children’s Health Insurance Plan (CHIP).
 
In 2021, the American Rescue Plan (ARP) increased the premium tax credit that the Federal Government was providing toward healthcare premiums. It also removed the requirement that the person must have an expected MAGI of less than 400% of the FPL. This premium tax credit increase/expansion is set to expire on 12.31.2025. Unless Congress acts to extend these ARP-level premium tax credits, they will revert to the pre-2021 ACA-level premium tax credits.
 
The Sliding Scale
Below is a chart illustrating what the Federal Government expects a household to pay for their Marketplace individual medical plan, based on their MAGI as a percentage of the FPL. The 2026 FPL is $15,650 for a single person and increases by $5,500 for every additional person in the household.  For households where the premiums are higher than their cap (per the table), the Federal government picks up that extra premium – paying the insurance carrier directly each month.

How Will Cost Change? Example #1
In 2026, a single person is expected to earn 150% of the Federal Poverty Level (FPL).
150% of the FPL for a single person in 2026 is $23,475.

• Under the current 2025 ARP rules, this person would be required to pay 0% ($0 per month) of their household income toward the premiums forf the second-lowest cost Silver plan available to them.
• Under the expected 2026 ACA rules, this person would be required to pay 4.19% ($82 per month) of their household income toward the premiums for the second-lowest cost Silver plan available to them. 

Let's assume the second-lowest cost Silver plan available to this person costs $764 per month.
Under the current 2025 ARP rules, they would have a subsidy of $764 per month.
Under the expected 2026 ACA rules, they would have a subsidy of $682 per month.
They can purchase any plan on their State's Marketplace and the full premium would be reduced by their subsidy.
 
How Will Cost Change? Example #2
In 2026, a couple is expected to earn 250% of the Federal Poverty Level (FPL).
250% of the FPL for a couple in 2026 is $52,875.

• Under the current 2025 ARP rules, this couple would be required to pay 4% ($176 per month) of their household income toward the premiums forf the second-lowest cost Silver plan available to them.
• Under the expected 2026 ACA rules, this couple would be required to pay 8.44% ($372 per month) of their household income toward the premiums for the second-lowest cost Silver plan available to them. 

Let's assume the second-lowest cost Silver plan available to this couple costs $1680 per month.
Under the current 2025 ARP rules, they would have a subsidy of $1504 per month.
Under the expected 2026 ACA rules, they would have a subsidy of $1308 per month.
They can purchase any plan on their State's Marketplace and the full premium would be reduced by their subsidy.

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​The Bottom Line
In Washington State, roughly 224,000 currently receive Federal premium tax credits that help lower their monthly healthcare premiums. The current ARP premium tax credit levels are set to expire at the end of 2025.
 
Unless Congress decides to extend the ARP premium tax credit into 2026, this will revert to the ACA premium tax credit rules. 33,600 Washingtonians who are currently receiving individual medical coverage at no monthly cost will need to pay a monthly premium as of 1.1.2026; 152,300 will see their required monthly premiums increase (over 85,100 will see them double), and 38,000 enrollees will no longer receive any assistance at all.
 
The expectation is that a majority of the 33,600 who will go from $0 to paying a portion of the premium will drop coverage due to not being able to afford the monthly hit to their budget; and that most of the 38,000 no longer receiving any assistance will also drop coverage – especially those who are older where premiums are well over $1000 a month for a very high deductible plan. So at a minimum, that's at least 71,600 Washingtonians who might not have stable health insurance for the coming year.