Alabama Obamacare enrollment drops 23% after tax credits expire

Affordable Care Act (ACA) enrollment in Alabama dropped by 95,000 — about 23% — after  enhanced premium tax credits expired, leaving many uninsured or paying for private insurance. 

The decline in enrollment is part of a nationwide trend where 49 states saw similar declines. Without enhanced premium tax credits, which were passed by Congress in 2021 and were intended to be temporary, enrollees were faced with double- or triple-digit increases in their premiums, according to KFF Policy Analyst Matt McGough.

“This is sort of like the last best option for them, and being priced out of the ACA marketplaces is a potential effect of the enhanced premium tax credits,” he said.

The enhanced ACA subsidies lowered insurance costs and made those making more than 400% of the federal poverty level – $132,000 per year for a family of four or $86,500 per year for a family of two – eligible for tax credits through the marketplace.

According to a KFF report from late July, the nonprofit health policy research, polling and news organization found that premiums increased 58% on average without the tax credits. A March KFF poll found that 17% of returning enrollees were not confident they could afford their 2026 premiums.

“The expiration of the enhanced premium tax credits for marketplace enrollees feels like a compounding of this affordability crisis that they feel like they’re in,” McGough said. “Even for people who may not be enrolled in ACA marketplace plans, this may feel like just something else that’s happening in the world that is putting a cost on people’s wallets.” 

The extension of the tax credits was a condition for congressional Democrats during last fall’s government shutdown, but the credits were not extended. New Mexico used its own money to supplement lost federal dollars and was the only state not to see a decline in ACA enrollment.

McGough said that ACA plans are a “last best option” for healthcare. Most enrollees, he said, are small business owners and employees who have multiple jobs that do not offer insurance and retirees who are not old enough for Medicare.

“This is a group of people who, just by the nature of their work, don’t have health insurance benefits,” McGough said. “Every other potential door in our fragmented health insurance system is closed to them, so they turn to the ACA marketplaces where they’re eligible for potentially some subsidized health insurance premiums to be able to afford health insurance coverage.”

Medicaid expansion

ACA enrollees, especially in Alabama, are also those that fall in the Medicaid coverage gap, McGough said. Alabama is one of ten states that has not expanded Medicaid coverage, despite calls from advocacy groups and Democratic lawmakers and politicians. While Alabama House leaders have signaled openness to a public-private hybrid approach to expansion, the Senate has been hostile, and removed a provision from a 2024 gambling bill that could have provided money for the program. 

Expanding the program would allow anyone making up to 138% of the poverty level – $22,025 a year for an individual and $37,702 for a family of three – to get coverage under the program. Medicaid in Alabama almost exclusively covers children, the elderly and those with disabilities. Able-bodied childless adults almost never qualify, and adults with qualifying children can only receive Medicaid if they make 18% of the poverty level – $5,940 a year for a family of four.

Debbie Smith, director of Alabama Arise’s initiative Cover Alabama, said in a phone interview last week an uninsured population impacts more than the uninsured.

“What that means is more people are going to the ER without health insurance coverage,” she said. “The hospital has to pick up that cost, and that makes it more likely for that hospital to not be able to absorb it, and possibly have to get rid of services at that hospital, or even shut down.”

Hospitals in Alabama are struggling financially, and some have closed in the last year, even with state charity and federal tax programs aiming to prevent closures. Jackson Hospital in Montgomery was set to close in July after filing for bankruptcy before reaching an agreement with Blue Cross and Blue Shield of Alabama on Monday to keep its doors open.

Without the tax credits, Smith said Alabamians should look into other healthcare.gov plans that may be a lower tier than what they had before. That also means they could be lower coverage, higher deductible plans. 

“This was a policy choice by Congress to let these extra tax credits expire. People have been really struggling with health insurance affordability and just affordability in everyday life and being able to afford to go to the doctor, put food on the table,” she said. “For Congress to just let these tax credits expire and allow that many people to lose their health coverage, they knew in advance that this would cause a lot of people across the country and here in Alabama to lose their health insurance.”

McGough said that while the enhanced tax credits may not return in their original form, they will continue to be part of the conversation in the midterm elections.

“It’s really hard for the government to offer a benefit to someone and then actually take it away,” he said.