ACA Tax Credits In The Balance: Republicans And Democrats Clash

Divided AmericansgettyThe U.S. Senate has two proposals to address the expiring ACA tax credits. The Senate is expected to begin voting on these proposals in mid-December. Both proposals have pros and cons that can lead to their passage or termination. This article discusses the current state of the ACA healthcare subsidies and how these two proposals stack up.Existing ACA Tax CreditsThe current ACA healthcare subsidy tax credits are set to expire as of the end of 2025. The amount of a tax credit that a taxpayer is eligible to receive depends on their income. According to the IRS, taxpayers must make between 100% and 400% of the Federal Poverty Level. Taxpayers below the poverty line qualify for Medicaid and are not entitled to the ACA healthcare subsidy tax credits.This amount varies by household size. For instance, in 2025, a single person – defined as somebody who is not married and has no dependents – can have income between $15,060 (100% of Federal Poverty Level) up to $60,240 (400% of Federal Poverty Level) to be eligible for these tax credits. In contrast, a household size of eight people can have an income between $52,720 and $210,880 to receive the same tax benefits.The taxpayer’s income level also determines the amount of the income that they must contribute toward their healthcare plan. Those under 150% of the Federal Poverty Level are not required to contribute any income to their healthcare plan, meaning that the tax credit equals the full amount of the plan. This increases using a sliding scale across income, with those taxpayers who have income up to 400% of the Federal Poverty Level contributing 8.5% of their income, with the credit covering the remaining amount.To show an example, consider a family of four – a married couple with two children – that has an income of $100,000. This income puts them at about 350% of the Federal Poverty Level, making the family eligible for the ACA healthcare subsidies. This credit means that the family must contribute about 8% of their income to meet healthcare coverage, or approximately $667 monthly. Assuming healthcare coverage costs around $1,800 monthly, the current tax credit will equate to the remaining balance of approximately $1,133 a month.MORE FOR YOUIf a taxpayer’s income is above 400% of the Federal Poverty Level, in 2025, they can still receive a subsidy if their healthcare coverage exceeds 8.5% of their income. However, in 2026, absent any legislative action, these taxpayers will no longer receive healthcare subsidy tax credits, making their premiums skyrocket. In 2025, this family would still receive approximately $600 in monthly ACA healthcare subsidy tax credits. However, in 2026, they are no longer eligible for tax credits, leading to an increase in healthcare coverage of over 33% of what they currently pay.The Republican Plan To Address ACA Tax CreditsThe Republican plan, which is titled the “Health Care Freedom for Patients Act of 2025,” and is sponsored by Senators Mike Crapo and Bill Cassidy, provides $1,000 in HSA funding for taxpayers aged 18–49 with incomes below 700% of the Federal Poverty Level. The plan would then provide those over 50 with $1,500 in HSA funding. This funding is a fixed-subsidy, rather than a subsidy tied to plan premiums. The aim of this plan is to provide taxpayers with a greater ability to choose the insurance plan that works best for them. The plan would also require states to verify citizenship of those receiving ACA funds in an effort to keep illegal immigrants from receiving the subsidies.While the Republicans believe that this proposal will lower insurance premiums, others argue that this plan will make insurance less affordable. For instance, the Center For American Progress claims that the Republican plan will destabilize insurance marketplaces by shifting healthcare costs onto those who are most vulnerable. They also claim that it would push more Americans into high-deductible plans that will bring lower value when it comes to managing their healthcare coverage needs. Other opposition accusations from a Forbes contributor claim that the Republican plan simply shifts the blame to the insurance companies. These points suggest that insurance companies can adjust the way that they profit from providing insurance to those receiving subsidies rather than potentially increasing the costs on the most vulnerable Americans.The Democrat Plan To Address ACA Tax CreditsThe Democrat plan to address this healthcare coverage issue has been titled the “Lower Healthcare Costs Act” and is sponsored by Senators Chuck Schumer and Martin Heinrich. This plan would be a simple extension of the ACA healthcare subsidy tax credits for three years. The goal of this plan is to prevent a coverage cliff, where 24 million Americans would face substantially higher healthcare premiums if these subsidies expire.While this plan would appear to be stronger since it retains the coverage for vulnerable Americans, it also comes at a steep price. For instance, the House Ways and Means Committee estimates that the average cost of the enhanced healthcare subsidy tax credits annually is over $30 billion a year. Given these high costs, many on the other side of the aisle are less interested in seeing the subsidies extended in their current form. Other negatives include market distortions, risk of higher premiums over time, and long-term sustainability concerns related to the growing Federal budget.As the future of the ACA tax credits moves to the Senate floor, elected officials must decide on the fate of American taxpayers’ healthcare coverage costs. Simply not passing anything can be disastrous, not just for healthcare coverage cost but also for funding the Federal government, which is funded only through January 30, 2026. Other suggestions by writers at Forbes have proposed less radical fixes, such as fixing the structure of the healthcare coverage tax subsidies to allow households to benefit from more cost-conscious choices. While this proposal is not being considered by either side of the aisle, it represents the promise that there are alternative options that the Senators can consider. With the Senate heading to the floor to vote on these plans in December, there is optimism that Americans can begin to have some clarity on the future of their healthcare costs.