What's at Stake in the Shutdown Fight: Enhanced Premium Tax Credits, Explained
October 27, 2025
By Stephen Nuñez
At the heart of the current federal budget standoff lies an esoteric but consequential policy choice: whether to extend the enhanced premium tax credits (EPTCs) that help millions afford health coverage. But what exactly are EPTCs, and what would letting them expire mean?
The Affordable Care Act (ACA) marketplace was set up to provide individuals the ability to purchase health insurance for themselves and their families. It was part of the ACA’s larger strategy to extend health insurance coverage to as many as possible: expand Medicaid eligibility, require employers of 50 or more to provide adequate and affordable coverage through employer-sponsored insurance (ESI), and provide an individual market option for those not eligible under other categories (e.g., independent contractors, self-employed workers, and employees of small businesses).
The ACA also made important changes to the way insurance companies were allowed to do business. They were no longer allowed to deny health insurance to individuals because of “preexisting conditions,” and they could not charge people more for having those conditions or for “lifestyle” factors like obesity. Of course, insurance companies only make money if they take in more than they pay out, and that is harder to do when they are required to cover everyone and to do so at the same price regardless of risk. So the ACA included a variety of sticks and carrots to encourage younger and relatively healthier people to obtain health insurance. This included the “individual mandate”—a tax imposed on individuals who did not purchase insurance coverage—and the “premium tax credits.”
The premium tax credits are meant to subsidize the cost of purchasing an insurance plan on the ACA marketplace. They are available to people who do not already have adequate and affordable health insurance coverage offered through their employer (whether or not the employer is subject to the mandate). They are fully refundable and in many cases can be claimed in advance and paid by the government directly to the insurer at the time of purchasing insurance on the marketplace. In theory, they should have made quality health insurance affordable for consumers and profitable for insurers to offer. However, things didn’t go as planned for the ACA.
https://rooseveltinstitute.org/blog/enhanced-premium-tax-credits/