State-Based Tax Credit Relief Limited
- After failed Senate votes late last year and no subsequent bipartisan agreement, the enhanced premium tax credits expired as of January 1.
- SBMs have the versatility under the Affordable Care Act to offer additional state-based subsidies on top of federal premium tax credits to further lower monthly premium payments for...
- New Mexico has advanced two measures that would backfill the lost enhanced premium tax credits in their entirety for all consumers in 2026.
After failed Senate votes late last year and no subsequent bipartisan agreement, the enhanced premium tax credits expired as of January 1. Some states, particularly those operating state-based Marketplaces (SBMs), have been preparing for this possibility for months and are moving to blunt the impact on consumers by implementing their own state-funded subsidies and implementing other programs aimed at stabilizing the cost of unsubsidized premiums.
State-Specific Subsidies
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SBMs have the versatility under the Affordable Care Act to offer additional state-based subsidies on top of federal premium tax credits to further lower monthly premium payments for Marketplace enrollees.A few SBMs have enacted their own supplemental premium subsidies to maintain affordability and enrollment now that the enhanced premium tax credits have lapsed.
New Mexico has advanced two measures that would backfill the lost enhanced premium tax credits in their entirety for all consumers in 2026. BeWell, New Mexico’s Health insurance Marketplace, will backfill all of the lost federal tax credits for enrollees wiht annual incomes up to 400% FPL. Additionally, for enrollees making above 400% of poverty, New Mexico financial assistance will cap premium payments for a benchmark plan at 8.5% of their household income, mirroring the structure of the enhanced premium tax credits.
Other states have moved to fully backfill the expired tax credits for a portion of enrollees. Maryland, for example, adopted a single-year state premium assistance programme that replaces 100% of the lost federal subsidy for enrollees below 200% of the federal poverty level (FPL) ($31,300 for an individual signing up for coverage in 2026) and partial replacement of the lost enhanced tax credit for those with incomes above 200% up to 400% FPL. However, there is no additional state assistance to replace tax credits lost by people with annual incomes above 400% FPL, who are now fully ineligible for any tax credits with the rei
Millions of Americans could see their health insurance premiums rise in 2026 if the enhanced premium tax credits enacted under the American Rescue Plan Act are not extended. However, several states are taking steps to lessen the impact on their residents, offering state-specific subsidies and reinsurance programs to help keep coverage affordable.
State-Specific Subsidies
Vermont, Massachusetts, and New Jersey have established state-level financial assistance programs independent of the federal tax credits.These subsidies will continue irrespective of whether the enhanced federal credits are renewed. New York and Oregon also offer basic health plans – programs providing coverage to low-income residents who might otherwise qualify for Marketplace plans – with lower premiums and cost-sharing, unaffected by federal policy changes.
Reinsurance Programs
Several states are utilizing section 1332 reinsurance programs. These programs work by reimbursing insurers for a portion of high-cost claims, which helps to stabilize premiums. While they don’t replace lost federal subsidies, they can reduce the premiums some consumers will pay in 2026.
These programs are particularly critically important for individuals and families with incomes above 400% of the Federal Poverty Level (FPL). These consumers will become ineligible for financial assistance if the enhanced tax credits expire,facing the full cost of coverage and what experts are calling the “subsidy cliff.”