How enhanced premium tax credits could affect health equity

The American Rescue Plan Act's enhanced premium tax credits for Affordable Care Act enrollees could bring greater health equity in coverage rates in 2025, but only if Congress extends these credits before they expire next year, according to an Urban Institute brief.

Using the Urban Institute's Health Insurance Policy Simulation Model (HIPSM), the researchers assessed the policy's impact on household spending and healthcare coverage for nonelderly adult Americans. They used the model to project the impact on coverage rates if the enhanced premium tax credits (PTCs) stayed in place or expired.

"As a result of enhanced PTCs, Black and Hispanic people account for a larger share of nongroup enrollees, while white people account for a smaller share in 2025, according to our projections," the report stated.

Under the enhanced PTCs policy, nonelderly nongroup plans enrollment would increase 79% nationally for the Black, non-Hispanic community; 61% for Hispanic individuals; and 42% for the white, non-Hispanic population. Moreover, with enhanced PTCs, uninsurance in the Black community would be 9.7%, compared to 11.9% without the tax credits.

The higher enrollment rates were also apparent in the 10 states that have not adopted Medicaid expansion. In these states, 116% more Black people would enroll in nongroup plans due to enhanced PTCs, along with 104% of Hispanic people and 78% of white people. With enhanced PTCs, Black enrollees would make up 20% of the nonelderly nongroup enrollment in nonexpansion states, but without the tax credits their share will be 18%.

The researchers projected that uninsurance will increase in nonexpansion states without enhanced PTCs, especially among the Hispanic population. If the enhanced PTCs expire, uninsurance for Hispanic people in these states will increase from 24.2% to 28.4%. These results align with previous research that found that total Medicaid expansion could improve both health equity and uninsurance rates.

However, in expansion states, the changes in uninsurance will not be incredible. The biggest losses will be in the Black community, where uninsurance will increase from 8.4% to 9.4%.

The enhanced PTCs are set to expire in 2025. If lawmakers allow the policy to fizzle out without renewing it, these enrollment gains will reverse, Urban Institute experts warned.

"In 2025, we project that there will continue to be large and meaningful disparities in the rates of uninsured people by race and ethnicity among the nonelderly population. We also project that enhanced PTCs will play a role in reducing those disparities by disproportionately increasing Marketplace take-up and reducing uninsurance among Black and Hispanic people," they concluded.

They added that the enhanced PTCs do not seek to lower uninsurance in certain populations by design. However, Black and Hispanic populations are disproportionately represented in the low-income bracket. Thus, the enhanced PTCs can be especially effective at reducing care disparities based on race.

Given these results, the population of Americans who receive subsidized Marketplace coverage is expected to swell by 7.2 million Americans in 2025. Additionally, uninsurance could decline by 4.0 million people if the enhanced PTCs stay in place. These results align with the policy's outcomes in 2021, when American Rescue Plan Act subsidies decreased state premiums by 40% and were attributed for higher enrollment and lower uninsurance. However, without these credits, uninsurance could rise and subsidized coverage opportunities will shrink.

Kelsey Waddill is a managing editor of Healthcare Payers. She has covered health insurance news since 2019.