10 Strategies to Prepare for the Expiration of Enhanced Premium Tax Credits
The enhanced Premium Tax Credit (PTC) was introduced in 2021 as a temporary measure to help Americans access healthcare during the COVID-19 pandemic. However, with the expiration of these subsidies looming, millions of people who rely on them to afford health insurance are left wondering what’s next.
The Financial Impact on You
The expiration of the enhanced Premium Tax Credit (PTC) will likely lead to a significant increase in your monthly health insurance premiums. Here’s how it could impact you:
- Premium Increase: You can expect your monthly premiums to rise substantially.
- Loss of Savings: The enhanced PTC has been saving families an average of $800 per year in lower premiums. With its expiration, you’ll lose these savings.
- Income-Based Impact: The exact increase in your premiums will depend on your income level, location, and the type of plan you have.
10 Strategies to Prepare for PTC Expiration
Don’t let the PTC expiration derail your financial plans – follow these 10 steps to stay on track.
Step 1: Review and Compare Plans
Carefully evaluate different health insurance options available in your area. Research and compare plans to find the most cost-effective option that meets your healthcare needs. Consider factors such as premium costs, deductibles, copays, and out-of-pocket expenses.
Step 2: Maximize HSA Contributions
If eligible, contribute the maximum amount to your Health Savings Account (HSA). HSAs offer triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. This will help you save for future healthcare costs and reduce your taxable income.
Step 3: Explore Employer-Sponsored Plans
If available, compare your employer’s health insurance offerings with Marketplace plans. Employer plans may become more cost-effective after the PTC expiration. Take advantage of any employer contributions or discounts that can help reduce your premium costs.
Step 4: Adjust Your Income
If possible, consider ways to reduce your Modified Adjusted Gross Income (MAGI) to potentially qualify for higher subsidies. This could include increasing retirement contributions, taking advantage of flexible spending accounts, or adjusting your income through tax-loss harvesting.
Step 5: Reassess Your Coverage Needs
Evaluate if you’re over-insured and if a plan with less comprehensive coverage might suffice. Consider downsizing to a more affordable plan or exploring alternative insurance options, such as short-term health insurance or health share ministries.
Step 6: Look into Professional Associations
Some professional organizations offer group health insurance plans to members at competitive rates. Research and explore these options to see if you can find a more affordable plan.
Step 7: Explore Medicaid Eligibility
Depending on your income and state, you might qualify for Medicaid, which typically offers lower-cost coverage.
Step 8: Build Your Emergency Savings Fund
Begin setting aside extra funds to cover the anticipated increase in healthcare costs. Aim to save 3-6 months’ worth of expenses, including the projected increase in premiums.
Step 9: Diversify Your Income Streams
Consider developing additional income sources to offset increased healthcare costs. This could include starting a side hustle, investing in dividend-paying stocks, or pursuing alternative sources of income.
Step 10: Invest in Your Health
Focus on preventive care to reduce long-term healthcare costs. Adopt a healthier lifestyle to potentially lower insurance premiums and out-of-pocket expenses.
Conclusion
By following these 10 proactive steps, you can shield your finances from the impact of the enhanced Premium Tax Credit expiration and take control of your health insurance premiums.