Health insurance premiums are expected to rise significantly for millions of Americans next year. The expiration of enhanced subsidies under the Affordable Care Act (ACA) is likely to result in a sharp increase in out-of-pocket costs for those enrolled in the ACA Marketplace.
Experts, cited by Newsweek, warn that as these temporary tax credits come to an end, many individuals and families will face financial strain, with low-income households at particular risk of being unable to afford their coverage. This change is expected to affect the stability of health insurance markets, leading to potential disruptions in the availability and affordability of healthcare.
Why Premiums Are Set to Surge
For the past few years, the Affordable Care Act’s Marketplace subsidies have been bolstered by COVID-19 relief measures. These enhanced credits have helped millions of Americans afford health insurance by lowering the percentage of income they must pay toward premiums.
However, the extra financial support was always meant to be temporary. Now, as those subsidies are set to expire at the end of 2025, a major price shock is anticipated. Recent analyses suggest that the average increase in premium costs could reach 75%.
Certain states are even projecting higher increases. For instance, in Pennsylvania, officials estimate that premiums could rise by 82% or more. The loss of these subsidies will likely be felt across the country, but especially in states with larger numbers of low-income enrollees.
Impact on Low-Income Households
The expiration of these enhanced credits will hit low-income households the hardest. In Rhode Island, a staggering 88% of enrolled households are expected to see a premium increase. Lower-income households in the state could face an 85% increase in their premiums on average by the time the 2025 premiums take effect. These households are the most vulnerable, as they rely on the subsidies to keep coverage affordable.
Timothy Jost, Professor Emeritus at the Washington and Lee University School of Law, explained the severe impact:
The [advance premium tax credit] cuts are certainly the biggest threat to health care costs and health coverage eligibility at the moment.
The rising premiums could lead to a situation where many families simply can’t afford to maintain their coverage.
What This Means for ACA Marketplace Enrollment
The ramifications of these rising health insurance premiums are profound. Since the introduction of enhanced subsidies, ACA Marketplace enrollment has soared, with the number of enrollees more than doubling, from 11.4 million in 2020 to 24.3 million by 2025.
However, as premiums increase, many of the healthier enrollees may choose to drop their coverage. Experts warn that this will lead to a dangerous cycle: as healthier people exit the marketplace, premiums will rise even higher for those who remain.
According to health economist Benjamin Sommers, 3.7 million people could lose their coverage and become uninsured due to the disappearance of these tax credits. As premiums climb, the number of uninsured individuals will likely increase, worsening the strain on the healthcare system.
The Role of Uncertainty in Price Hikes
One factor that’s adding to the unpredictability of these premium increases is the broader economic uncertainty.
Any time there is uncertainty in an insurance market, most insurers hedge their bets and raise premiums to provide more buffer against that uncertainty – Sommers said.
He pointed to the looming question of whether Congress will extend the enhanced tax credits, which has created a situation where insurers are already adjusting their rates.
This uncertainty isn’t new. Mark V. Pauly, Professor Emeritus at the Wharton School of the University of Pennsylvania, noted that a similar spike in Marketplace premiums occurred in 2018, during the first Trump administration. This surge happened when the administration’s efforts to block cost-sharing reductions caused insurers to raise prices by about 20% on average.
However, the key difference between 2018 and 2025 is that the premium tax credits remained unchanged in 2018, helping to buffer most consumers from the price hikes. In 2025, with the credits set to expire, everyone will feel the effects of the increase.
