Expiration of ACA tax credits may cause heavy job losses

The upcoming expiration of premium tax credits for health insurance could lead to hundreds of thousands of job losses and billions of dollars in reductions to state revenues, according to a new analysis.

The report, released Thursday by the Commonwealth Fund, comes on the 16th day of the ongoing federal government shutdown as congressional Democrats and Republicans have so far failed to agree on a deal to extend the enhanced tax credits from the Affordable Care Act, also known as Obamacare, which were bolstered by later legislation such as the American Rescue Plan Act and the Inflation Reduction Act during the Biden administration. The Trump administration's recent One Big Beautiful Bill Act does not extend those enhanced tax credits and also imposes cuts to Medicaid through work requirements. Democrats see the shutdown as a way to gain some leverage with Republicans in reversing some of these moves.

The analysis finds that if the enhanced tax credits are not renewed, state economies would shrink by $40.7 billion in 2026, roughly 339,000 jobs would be lost, and state and local tax revenues would be reduced by $2.5 billion. 

The report cites an earlier analysis by the Urban Institute estimating that nearly 5 million people would become uninsured beginning in January 2026, and millions more would see their premiums rise. 

Extending the tax credits would help keep health insurance costs affordable, but the push to extend the premium tax credits has become a point of contention on Capitol Hill.

The analysis, led by Leighton Ku and colleagues at George Washington University, used new data to update earlier research that explored the economic impacts of letting the ACA marketplace tax credits expire.

The analysis finds that federal funding for marketplace tax credits will decline by $31 billion unless the enhanced tax credits are renewed. The reductions in funding for health care along with the related downstream impact, will cause state economies to shrink by nearly $41 billion.

Due to these economic losses, nearly 340,000 jobs will be lost in 2026, with slightly less than half in the health care sector. State and local revenues would decline by $2.5 billion.

The states hit hardest by the job losses are mainly in the South, with some of the deepest impacts in red states. Texas would be the state most affected, followed by Florida, Georgia, California, South Carolina, Tennessee, Alabama, Louisiana, North Carolina and Mississippi.

"There is an urgent need to decide whether to extend the ACA tax credits soon; insurance enrollment begins on November 1," said Leighton Ku, professor of health policy and lead author of the report, in a statement Thursday. Not only will health insurance costs soar for millions if the tax credits are not sustained, there will be severe economic consequences and more than 300,000 Americans could lose their jobs."