Expiration of ACA tax credits strains pocketbooks

Lester Johnson did some worrying in 2025.

He’d read about federal lawmakers failing to extend enhanced Affordable Care Act premium tax credits, which would make health insurance more expensive for federal marketplace customers.

“With all the narrative behind the subsidies not being renewed, that was … a lot of months of just being stressed out about what could happen,” says Johnson, co-owner of Richmond soul food restaurant Mama J’s.

Johnson’s family receives their health insurance through Virginia’s Insurance Marketplace, the state-based health benefit exchange for ACA plans. Last year, the family of three paid about $700 a month for coverage. This year, costs rose to nearly $1,000.

“My daughter has asthma, and so we really don’t have an option of going without,” he explains.
Johnson isn’t the only Virginian paying more for health insurance.

Gross premiums through Virginia’s Insurance Marketplace increased by more than 20% from 2025 to 2026, according to data provided by the state.

Nationally, premium payments increased by an average of 58%, from $113 to $178 per month, according to KFF, a California-based nonprofit that provides health policy research.

Experts cite rising healthcare costs and more frequent use as drivers behind the increases, along with the expiration of federal tax credits.

Funded through the American Rescue Plan Act of 2020 and extended through the Inflation Reduction Act of 2022, enhanced premium tax credits provided larger subsidies to households that were previously eligible for tax credits and eliminated the so-called “subsidy cliff.”

In the early days of the federal insurance marketplace, households that earned more than 400% of the federal poverty level did not qualify for government subsidies to help cover the cost of marketplace insurance policies — hence, the subsidy cliff.

However, under the 2020 and 2022 laws, a family of four making more than $132,000 could still qualify for subsidies if their insurance premiums exceeded 8.5% of income. Households earning less than 150% of the federal poverty level often paid little or nothing for marketplace insurance plans.

“When we look at that data, we saw over a 20% increase in enrollment following the increase in subsidies,” says Keven Patchett, Virginia’s Insurance Marketplace director.

But after enhanced premium tax credits expired at the end of 2025, some Americans were priced out of marketplace insurance plans, including Virginians. Health policy research organization KFF forecasts that national marketplace enrollment could fall from 22.3 million in 2025 to 16.5 million or 17.5 million this year.

As of May 22, about 301,000 people were insured through Virginia’s Insurance Marketplace. That’s about a 22.6% drop from the 389,000 Virginians who were enrolled in 2025.

“What we call the net premium — the amount that people actually pay — increased significantly for many Virginians as a result of the expiration of those federal subsidies,” Patchett explains. “And that’s the only thing that really has changed from last year to this year that could account for such a significant impact.”

Most people dropping marketplace coverage are going uninsured, according to Patchett, because they either make too much money to qualify for Medicaid or are too young for Medicare, and they don’t receive employer-sponsored health insurance through work, which impacts small business owners, contractors, freelancers and many people who hold part-time jobs.

“The people who buy their health insurance through Virginia’s Insurance Marketplace generally don’t have anywhere else to go for health insurance,” Patchett says.

Tough choices

Under marketplace plans, policyholders have a 90-day grace period for paying premiums before they’re dropped.

Between the start of the year and May 22, 76,000 Virginia marketplace policyholders were canceled for nonpayment. That’s more than double the number during the same period in 2025.

“A lot of the cancellations that we saw in April and the early part of May were probably those folks who had just stopped paying at the beginning of the year,” Patchett says.

Previously, officials warned as many as 100,000 Virginians could lose coverage if enhanced premium tax credits were not extended. That was considered the worst-case scenario, and right now, “we are pretty close,” Patchett says.

When enhanced subsidies were introduced, the state saw an increase in marketplace coverage, especially among households making less than twice the federal poverty level and those making more than 400%, Patchett notes, and he expected to see a similar pattern in drop-offs this year.

“But, in fact, more of the disenrollment have been in those individuals making less than 200% of the federal poverty level, which [is] an indicator of sort of price sensitivity for those individuals and families,” he says.

At 200% of the federal poverty level, an individual can earn no more than $31,920 annually, while a family of four would need to earn a household annual salary of not more than $66,000.

With a 50% increase in net premiums, Patchett explains, “that forces people to make hard decisions between repairing their cars or making their health insurance premium payments.” In addition to higher premiums, gas, groceries and other costs are rising, according to the Federal Reserve.

Some marketplace customers were able to shift to lower-cost bronze plans, which carry higher deductibles and cover fewer healthcare expenses than silver and gold plans do. This year, 41% of Virginia consumers chose a bronze plan, up from 31% in 2025.

That’s what Roanoke music therapist Catherine Backus did.

In 2026, Backus would have had to pay $177.46 more a month to keep the silver-tier plan covering her and her spouse. Instead, the couple signed up for a bronze-tier plan, which costs $8.61 more each month but has a higher deductible.

“We’re paying more for less,” Backus says.

Broader impact

People who get their insurance through the marketplace aren’t likely to be the only ones paying more for health insurance. The cost of employer-sponsored plans also may rise, experts predict.

“We’re still going to have to wait and see what those impacts are, but your basic insurance principles of fewer people covered means that the overall cost of coverage has to go up,” Patchett says. “The ripple effects of that will continue, I think, to show up for months and perhaps even years to come.”

Industry changes can also prompt insurers to leave the market.

Virginia’s Insurance Marketplace had 10 carriers in 2025, but after Aetna and affiliate Innovation Health exited, it now has eight.

“It became clear we would not be able to provide the same level of value we’ve offered in prior years,” Aetna said in a statement about the decision.

During an earnings call April 30, Cigna announced the company would no longer offer marketplace insurance plans in 2027.

Meanwhile, Sentara Health Plans gained about 50,000 policyholders through Virginia’s Insurance Marketplace this year, according to Aubrey Layne, Sentara Health executive vice president and chief administrative officer.

Covered or uninsured, people still get sick and show up at hospitals and clinics.

“As a nonprofit, we don’t turn anybody away, so we’re anticipating certainly our charity care to go up as we tend to those needs,” Layne says of Sentara, which has 12 hospitals in Virginia and North Carolina.

In May, Layne noted that Sentara had observed an uptick in patients paying for care out of pocket, a signifier that they were not insured.

“When fewer people are covered, that means that there is more uncompensated care in the system,” says Julian Walker, vice president of communications at the Virginia Hospital & Healthcare Association. “It means that people who previously may have had access to primary preventive care … could delay care because they [no longer] have access to primary care. If they delay care, their condition could deteriorate to the point where they do end up in a less efficient place for them to receive care, which is a hospital emergency department.”

In addition to the impact on the state’s healthcare providers, the enhanced tax credits’ expiration may also have ramifications for entrepreneurship and innovation, as fewer people can afford health insurance.

In 2024, the U.S. Department of the Treasury released an analysis showing that 3.3 million small business owners and self-employed workers were covered by ACA marketplace plans in 2022, including many in Virginia.

“One of the things that we saw since those enhanced subsidies were introduced was an increase in the number of enrollees in the 55- to 64-year-old age range, and we attribute that to … people taking an opportunity to retire early, to hang out their own shingle and not be stuck waiting for Medicare to kick in,” Patchett says. “With the loss of all of the subsidies for people making over 400% of the federal poverty level, that’s really going to hit those entrepreneurs, I think, the hardest.”

Before launching Mama J’s with his mother, Velma, in 2009, Johnson was an engineer at Verizon for two decades. With all the worry over increasing health insurance costs, Johnson sometimes thinks how much easier it would have been to not start the restaurant, which he now runs with his wife.

“I didn’t realize how good I had it,” he says of his days at Verizon, where he received employer-subsidized health insurance. “There’s something to be said about being an entrepreneur, but there’s also something to be said about … a situation like that, where you don’t have to get out here and hunt and kill to eat every day.”

A political fight

The temperature of the rhetoric in Washington, D.C., over the expiration of premium tax credits hasn’t cooled with time.

“Senate Democrats have tried repeatedly to pass legislation to undo these cuts, but Republicans have blocked those efforts every time,” U.S. Sen. Tim Kaine, Virginia’s junior senator, said in a statement to

Virginia Business. “We must reinstate the tax credits to keep coverage affordable.”

That said, not all Republicans wanted to zap enhanced subsidies. When the U.S. House of Representatives voted to bring back enhanced premium tax credits in January, 17 Republicans voted in favor of the bill, including U.S. Rep. Rob Wittman, R-Williamsburg.

“Though I do not support government- run healthcare, extending these subsidies would have given Congress time to pursue meaningful, lasting reform,” Wittman said in a statement to Virginia Business.

“We need solutions that do more than just kick the can down the road. I am focused on reforms that increase competition, improve price transparency, expand access to personalized care and give
patients and families greater financial peace of mind.”

With no federal fix in sight, the Virginia legislature is trying to reduce the sting of higher premiums, although as of this article’s deadline, lawmakers were still negotiating budget funding to offset insurance costs. During the regular session of the General Assembly, delegates allocated $79.1 million, while the state Senate backed $200 million, money that could “help at least partially backfill the loss of these federal subsidies,” Patchett says.

“We’re thankful that they put that in there,” adds Layne.

Del. Betsy Carr, D-Richmond, is among the budget conferees tasked with working out differences between budgets passed by the House and Senate before the new fiscal year starts July 1.

Regarding state funding to support rising insurance costs, “I would expect the question to be over what such support looks like rather than whether any support will be included in the budget,” Carr said in a statement. “The governor must also approve the final budget, but I anticipate her to also be hearing the same concerns we are.”

U.S. Rep. Jennifer McClellan, D-Richmond, blames Republicans in federal office for the situation.
“Not only have they hurt individuals’ access to healthcare,” she says, “but they’re blowing a hole in the state budget, and when you combine that with everything else they’re cutting … now the state has to deal with filling that gap and gaps in health safety-net money, in education money and a variety of grants.”

She thinks voters will remember Congress’ failure to extend the premium tax credits come November, as all House seats are up for re-election. “They’re mad about it, and that is going to be a huge issue in the midterms.”