Expiration of ACA Tax Credits Could Cost Healthcare Sector $32 Billion in 2026

If Congress allows the Affordable Care Act’s (ACA) enhanced premium tax credits to expire, hospitals, physicians and other providers could lose more than $32 billion in revenue in 2026.

According to new research from the Urban Institute, supported by the Robert Wood Johnson Foundation, it’s projected that the expiration of these tax credits would also trigger a $7.7 billion increase in uncompensated care—which are services delivered but not reimbursed by insurers or patients.

Enhanced premium tax credits, approved by Congress in 2021, lowered the premiums people pay for Marketplace coverage and expanded eligibility to more households. Without them, approximately 7.3 million people could lose subsidized coverage, while 4.8 million more adults would become uninsured.

“The negative effects of allowing these tax credits to expire couldn’t be more stark,” Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, said in a news release. “Millions of people will lose coverage, and providers will face the one-two punch of losing revenue and increasing uncompensated care. Healthcare institutions are often the economic engines of entire communities. If the credits expire, the ripple effects will be felt for years to come.”

The Urban Institute analysis found that total spending on healthcare services would decline by $32.1 billion, representing roughly 1.3% of total non-elderly healthcare spending. Hospitals would see the largest losses, with $14.2 billion less in spending, followed by $5.1 billion for office-based physicians, $6.9 billion for other healthcare services and $5.8 billion for prescription drugs.

Fred Blavin, principal research associate at the Urban Institute, stressed the significance of these policy suggestions.

“If these subsidies expire, it will be important for federal, state, and local policymakers to consider the potential adverse effects on healthcare access and affordability, as well as revenue losses for providers of all types,” Blavin said.

Uncompensated care costs, which are distributed across hospitals, clinics and prescription services, are expected to rise by $7.7 billion. Hospitals alone could absorb $2.2 billion of the increase, while physician offices would see $1 billion, other services $3.1 billion, and prescription drugs $1.5 billion. These additional burdens could worsen financial pressures on providers, especially smaller or rural hospitals already operating on thin margins.

According to an Urban Institute researcher, the $32 billion projected loss reflects several coverage shifts.

“Facing higher household premiums under a return to standard PTCs, many households will drop the nongroup coverage they would choose with enhanced PTCs,” the researcher said in an email to MHE. “We estimate 7.3 million people. Because the people dropping coverage are somewhat healthier than people who remain, premiums for people in unsubsidized nongroups would rise as well. We estimate this would cause an additional 400,000 people to drop nongroup coverage.”

An estimated 400,000 children who would otherwise be enrolled in Medicaid if their parents had nongroup coverage, are expected to lose access to the program, the researcher added.

Some who lose subsidized coverage are expected to shift to employer-sponsored insurance, which typically reimburses providers at higher rates and may increase their healthcare use. However, those who become uninsured will spend less on medical care and will rely more heavily on uncompensated care, contributing to the net decline in total healthcare spending.

Losses are predicted to be more severe in states that have not expanded Medicaid because residents who rely on Marketplace coverage would not have alternative coverage options.

State-level differences are significant. Health spending for nonelderly populations is projected to drop by as much as 4.8% in Florida, Georgia and Texas, while uncompensated care demand could increase by 27% or more in Mississippi, South Carolina and Tennessee. The analysis suggests that financial pressures may be particularly acute for rural communities and Southern states that have not adopted Medicaid expansion.

Although the Urban Institute study does not model the direct effects on patient outcomes, past research shows that being uninsured is associated with delayed or forgone medical care, higher unmet health needs, increased financial burdens and poorer health outcomes. The expiration of enhanced tax credits could therefore exacerbate these challenges for millions of Americans.

Researchers also noted that declines in healthcare revenue could force hospitals to reduce staffing, limit services, or, in some cases, close, particularly in financially vulnerable areas.

“These increases in financial pressure could ultimately lead to cuts in staffing and services and potentially lead to hospital closures, especially for at-risk hospitals in rural areas,” the researchers said.

They also warned that more uninsured patients could strain emergency departments and affect the quality of care for those who remain insured.

As Congress continues to debate whether to extend, make permanent, or allow the enhanced PTCs to expire, the Urban Institute analysis underscores the stakes for both healthcare providers and the millions of Americans who rely on subsidized coverage.