Understanding the Expiration of Enhanced Premium Tax Credits: What Employers Need to Know

As part of the temporary pandemic-era relief, many Americans have benefited from enhanced premium tax credits (PTCs) under the Affordable Care Act (ACA). These enhanced subsidies significantly lowered premiums for individuals purchasing coverage on the Marketplace. However, Congress recently reached an agreement to end the government shutdown, and the deal did not extend these enhanced PTCs. As a result, they are scheduled to expire at the end of 2025 unless new legislation is enacted.

For employers, this raises an important question:

What Happens if Employees Lose Eligibility for These Subsidies?

Employees who currently rely on the enhanced subsidies may see their Marketplace premiums increase substantially beginning January 1, 2026. This may lead some employees to reconsider their coverage options and seek to move onto their employer-sponsored health plan outside of open enrollment.

Employees may believe that losing financial help is a qualifying event, but under current federal rules, it is not.

Loss of Enhanced PTCs Is Not a Permitted Mid-Year Election Change

For employers offering pre-tax premium deductions under a Section 125 cafeteria plan, the ability to change an employee’s health plan elections mid-year is strictly limited to IRS-approved events.

Section 125 Rules

Under Section 125 rules:

• The loss of affordability

• The expiration of PTCs

• A change in the cost of Marketplace coverage does not create a permitted election change.

  
  

This means employers cannot allow an impacted employee to newly enroll in the plan or switch plans mid-year simply because their Marketplace coverage becomes more expensive.

No HIPAA Special Enrollment Right Applies

HIPAA special enrollment events are also limited. They include:

• Loss of other health coverage

• Marriage, birth, adoption, or placement for adoption

• Loss of Medicaid/CHIP eligibility or gaining premium assistance

  
  

The loss of financial assistance on the Marketplace does not meet any HIPAA special enrollment criteria. Therefore, employees do not have a right to enter an employer plan mid-year on this basis.

How Employers Should Respond to Employee Requests

As 2026 approaches, employers may see an increase in questions or requests for off-cycle enrollment. Here is how you should prepare:

1. Reiterate Your Plan’s Mid-Year Election Rules

Communicate early and clearly:

• Elections generally remain in place for the full plan year.

• Only IRS-permitted events allow mid-year changes.

• Loss of subsidies is not one of those events.

  
  

Clear communication reduces confusion and protects the employer from compliance errors.

2. Prepare Your Team

Consider a brief FAQ or prepared script covering:

• What the PTC expiration means

• Why it “is not” a qualifying event

• When employees can make changes

  
  

This ensures consistent messaging across supervisors and HR staff.

3. Monitor Legislative Updates

Congress could still act to extend or amend the subsidies. Employers should stay tuned for regulatory guidance from:

• IRS

• CMS

• HHS

• DOL

  
  

If the law changes, employee rights may also change.

The Importance of Proactive Communication

As we approach the expiration of enhanced PTCs, proactive communication is essential. Employees may feel anxious about their health coverage options. By providing clear information, you can help alleviate their concerns.

Understanding Employee Concerns

Many employees may not fully understand how the expiration of these subsidies affects them. They might worry about increased costs and the potential loss of coverage. It’s crucial to address these concerns head-on.

Offering Support and Resources

Consider providing resources that explain the implications of the PTC expiration. This could include:

• Informational sessions

• Written materials

• Access to HR representatives for one-on-one discussions

  
  

By offering support, you can help employees feel more secure in their choices.

Key Takeaway

The expiration of ACA enhanced premium tax credits will create financial impacts for many employees, but it does not create a right to mid-year enrollment in an employer-sponsored plan. Employers should maintain compliance with Section 125 and HIPAA rules, communicate proactively, and guide employees to open enrollment as their opportunity for coverage changes.

For support on these topics and more, reach out to OmniaHR today.