Enhanced Tax Credits: What They Are and Why They Matter

Health insurance is not just complicated – it is deeply personal. It often feels confusing, yet it plays a crucial role in helping families stay covered, cared for, and financially stable when the unexpected happens.

At OakBend Medical Center, our mission goes beyond care delivery. We are committed to helping our community understand the systems that shape access to that care. In a recent Cup of Joe conversation, OakBend CEO Joe Freudenberger and Chief of Staff Ashley Bellew explored one of the most timely and often misunderstood topics in healthcare today: enhanced tax credits. Their discussion offered insight into what these credits are, how they work, and what their expiration could mean for patients, hospitals, and communities.

Understanding Enhanced Tax Credits

Health insurance subsidies were first introduced through the Affordable Care Act (ACA) in 2010, designed to help lower-income Americans afford coverage through the ACA marketplace. These subsidies come in the form of tax credits, which reduce the monthly cost of insurance premiums.

During the COVID-19 pandemic, as millions of Americans lost income or jobs, Congress expanded these subsidies to reach more people in need. These are now referred to as enhanced tax credits. Joe explained the motivation behind this expansion, noting that “people were becoming bankrupt due to their medical debt,” and something had to be done. “The government enacted these enhanced tax credits to reduce the cost of health insurance down to an affordable level.”

The change was not just about policy. It was about providing a safety net during a time of widespread crisis, when so many were left without options.

How the Subsidies Work

Enhanced tax credits lower monthly insurance costs based on household income. While employer-sponsored plans often shield people from the full cost of their coverage, purchasing a plan on the ACA Marketplace can be a very different experience. “A family of four could be paying $1,500 a month for a Silver plan,” Joe shared. “That is $18,000 a year. If you are making $60,000 to $100,000 a year that is a huge burden.”

These credits help close that affordability gap. Depending on income, they can reduce premiums to just a few hundred dollars or even less. Ashley explained that even for households earning between 200 percent and 400 percent of the federal poverty level, “subsidies go down, but you still get them.” And to help ensure fairness, Joe emphasized that “no one should be spending more than 8.5 percent of their adjusted gross income on health insurance,” which has become a key policy goal behind the enhanced credit structure.

There is flexibility, too. Consumers can either receive the credit upfront, which lowers their insurance bill each month, or apply it during tax season as a refund. But most people choose the monthly option. As Joe put it, “Nobody waits until tax time. Why would I wait until next year to get my tax credit when I can get it up front?”

Who Benefits and What Is at Risk?

These enhanced subsidies are particularly crucial in states like Texas, which did not expand Medicaid. In many states, low-income adults qualify for Medicaid automatically. But in Texas, Joe explained, “it does not matter how poor you are. If you are between the ages of 21 and 65, not disabled, and not pregnant, you do not qualify for Medicaid.” That makes these tax credits one of the only options available for affordable coverage.

Without them, many Texans could be priced out of coverage completely. That impact is already measurable. Joe noted that “before the ACA, almost 30 percent of our ER population was uninsured. Today, it is around 20 percent. If these enhanced credits go away, we expect that number to climb back up.” That rise could begin as soon as January 1 if the credits expire at the end of the year, as currently scheduled.

The concern extends beyond hospital statistics. The ripple effects could hit families, workplaces, and local economies. “A working individual becomes uninsured, gets sick, and becomes permanently disabled,” Joe explained. “They go from being a taxpayer to a tax recipient. That is lost income taxes, property taxes, sales taxes. It is a ripple effect.”

Affordability vs. Access

One common question people ask is why they even need insurance at all. Can they not just go to the ER when something serious happens? Ashley raised this concern during the conversation, and Joe offered a clear answer. Emergency rooms are not a substitute for long-term care. “ERs are required to treat emergencies, not chronic conditions,” he said. “If you come in coughing blood and we diagnose lung cancer, which is not an emergency once identified. We discharge you, and you are on your own to find treatment, and that could mean hundreds of thousands of dollars in costs.”

This lack of insurance often delays care, leading to worse outcomes. As Joe explained, “Uninsured individuals live, on average, 20 years less than those with insurance. And when people do not have insurance, they do not get checkups. They skip the $250 cardiologist visit until it becomes a heart attack.”

Looking Ahead

As Congress debates the future of these enhanced tax credits, the stakes are high. These are not just numbers on a spreadsheet. They are a lifeline for many families. If the credits are not renewed, the consequences could hit hard and fast.

Joe captured it best. “We should not get too lost in the terminology. It is a subsidy. It helps people afford insurance. That is the bottom line.”

If you have questions about your own insurance options or need help navigating coverage, OakBend’s team is here to help. Stay tuned for more Cup of Joe conversations, where we break down complex healthcare topics in clear, everyday language to keep our community informed.

Editor’s Note:

This blog is intended to provide factual information and context around enhanced tax credits as discussed in the Cup of Joe conversation. OakBend Medical Center does not endorse or oppose any specific legislation or political position. Our goal is to help our community stay informed and prepared when it comes to health coverage and access to care.