The US Senate has two proposals to deal with the expiring ACA tax credits. The Senate is expected to begin voting on these proposals in mid-December. Both proposals have advantages and disadvantages that may lead to their passage or termination. This article examines the current state of the ACA’s health care subsidies and how these two proposals stack up.
Existing ACA tax credits
The current ACA health care subsidy tax credits are set to expire at the end of 2025. The amount of tax credit a taxpayer is eligible to receive depends on their income. According to the IRStaxpayers must make between 100% and 400% of the federal poverty level. Taxpayers below the poverty line qualify for Medicaid and are not eligible for ACA health care subsidy tax credits.
This amount varies according to the size of the household. For example, in 2025, a single person—defined as someone who is not married and has no dependents—can have an income between $15,060 (100% of the federal poverty level) and $60,240 (400% of the federal poverty level) to be eligible for these tax credits. In contrast, a household size of eight 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 income he must contribute to the health care plan. Those below 150% of the Federal Poverty Level are not required to contribute income to their health care plan, meaning the tax credit is equal to the full plan amount. This increases using a sliding income scale, with taxpayers earning up to 400% of the Federal Poverty Level contributing 8.5% of their income, with the credit covering the remainder.
To illustrate an example, consider a family of four—a married couple with two children—that has an income of $100,000. This income places them at about 350% of the Federal Poverty Level, making the family eligible for ACA health care subsidies. This credit means the family must contribute about 8% of their income to cover health care coverage, or about $667 per month. Assuming health care coverage costs about $1,800 monthly, the current tax credit would equate to a balance of about $1,133 per month.
If a taxpayer’s income is above 400% of the Federal Poverty Level, in 2025, they can receive a subsidy if their health care coverage exceeds 8.5% of their income. However, in 2026, absent legislative action, these taxpayers will no longer receive the health care subsidy tax credit, causing their premiums to skyrocket. In 2025, that family would still receive about $600 in monthly ACA health care subsidy tax credits. However, in 2026, they are no longer eligible for tax credits, leading to an increase in health care coverage of more than 33% of what they pay today.
The Republican plan to deal with the ACA tax credits
The Republican plan, which is titled “Health Care Freedom for Patients Act of 2025,” and sponsored by Senators Mike Crapo and Bill Cassidy, provides $1,000 in HSA funding for taxpayers ages 18–49 with incomes below 700% of the Federal Poverty Level. The plan will then provide people over age 50 with $1,500 in HSA funding.
The goal of this plan is to provide taxpayers with greater choice of the insurance plan that best serves them. The plan would also require states to verify the citizenship of those receiving ACA funds in an effort to prevent illegal immigrants from receiving the subsidies.
While Republicans believe this proposal will lower premiums, others argue that this plan will make insurance less affordable. For example, the Center for American Progress claims the Republican plan would destabilize insurance markets by shifting health care costs to those most vulnerable. They also claim it will push more Americans into high-deductible plans that will bring less value when it comes to managing their health care coverage needs.
Other categories of the opposition from a Forbes The contributor claims the Republican plan simply shifts the blame to insurance companies. These points suggest that insurance companies can adjust how they benefit by providing insurance to those who receive subsidies instead of potentially raising costs for the most vulnerable Americans.
Democrats’ plan to deal with ACA tax credits
The Democrats’ plan to address this health care coverage issue is titled “Lower Health Care Costs Act” and sponsored by Senators Chuck Schumer and Martin Heinrich. This plan would be a simple extension of the ACA health care subsidy tax credits for three years. The goal of this plan is to prevent a coverage cliff, where 24 million Americans will face significantly higher health care premiums if these subsidies expire.
While this plan appears to be stronger in that it maintains coverage for vulnerable Americans, it also comes at a high price. For example, the House Ways and Means Committee estimates that the average annual cost of enhanced health care subsidy tax credits is over $30 billion annually. 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, the 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 through the Senate, elected officials must decide the fate of American taxpayers’ health care coverage costs. Passing nothing could be devastating, not only for health care coverage costs but also for federal government funding, which is only funded through January 30, 2026. Other suggestions from authors at Forbes have proposed less radical fixes, such as fixing the structure of tax subsidies for health care coverage to allow households to take advantage of more cost-conscious options. While this proposal is not being considered by either side of the aisle, it represents the promise that there are alternatives for senators to consider. As the Senate heads to the floor to vote on these plans in December, there is optimism that Americans can begin to gain some clarity about the future of their health care costs.
