Cost Increases for the ACA Plans
Andrew Sprung is my go to guy when I need more information, I know Maggie Mahar would use him too. What you are going to read about is the impact come EOY 2025 or 2026 once the subsidies are eliminated from the Biden presidency. It will become much hard for the a family of 4 and singles to maintain a healthcare policy.
Fortune in simpler language: “A perfect storm of rising health care costs, expensive new drugs, and the scheduled end of enhanced federal subsidies could drive Obamacare’s Affordable Care Act (ACA) Marketplace premiums to their steepest levels in years—and hit more than 24 million Americans in their wallets.”
According to a new analysis of insurers’ 2026 filings by Peterson-KFF’s Health System Tracker, the median proposed premium hike across 312 marketplace insurers is 18%. Most increases range from 12% to 27%, with more than 125 insurers seeking hikes of 20% or more—the sharpest climb since 2018. Final rates will be locked in by late summer 2025.
“Worse than forecast: An updated look at pending cost increases for ACA marketplace enrollees,” xpostfactoid
KFF data and analysis is essential to anyone seeking to understand the U.S. healthcare system. It’s copious, reliable, and clearly presented. But inevitably, it’s not always up to date.
In late 2024, KFF posted a calculator estimating how much more ACA marketplace enrollees at any income, income and family size would pay for coverage in 2026 if the subsidy enhancements created by the American Rescue Plan Act (ARPA) are allowed to expire (they are funded only through 2025). If the ARPA subsidy schedule expires, which appears near-certain at this point, the subsidy schedule will revert to the pre-ARPA formula used through OEP 2021, adjusted by an annual inflation factor.
When the calculator was created, the subsidy schedule for 2026 was unpublished, and KFF used estimates created by CBO and the JCT in June 2024 (see p. 9 here). Last month, the IRS published the subsidy schedule for 2026, and the CBO estimates turn out to have been quite low. At higher incomes, the actual percentage of income required to buy the benchmark (second cheapest silver) plan is more than a full percentage point higher than CBO estimated (e.g., 9.96% of income at an income of 300% of the Federal Poverty Level (FPL) vs. the CBO estimate of 8.65%).
Percentage of income required to purchase a benchmark silver plan at different income levels in Plan Year 2026: Actual vs. KFF/CBO 2024 estimate:
Sources: IRS, KFF, CBO. See note at bottom for the ARPA enhanced subsidy schedule.
The large difference in the applicable percentages as estimated by CBO and as actually implemented must be due in part to a change in the calculation method mandated by Trump’s CMS in its marketplace “integrity” rule, finalized in June. Reversing a Biden-era adjustment, the new rule mandates including individual market premium increases along with employer-sponsored premium increases in the calculation. That rule change resulted in the highest allowable annual out-of-pocket maximum jumping from $10,150 to $10,600, and I would assume that it also increased the applicable percentages for premium payment. When CMS implemented a similar rule change in the first Trump administration, it made the applicable percentages 2.7% higher in 2020 than they would have been without the change, according to CBPP (thanks, Louise Norris).
The application of individual market premiums to the inflation calculation includes all years that the ACA marketplace was in operation, and so is still inflated by the large premium hikes of 2017-2018 (each north of 20%), notwithstanding years of premium stability after 2018. This year, premium increases once again are likely to come in at or near 20% on average* — due in part, as in 2018, to Trump- and Republican-induced market turmoil — ensuring a further large increase in the applicable percentages next year.
KFF’s estimate that the average marketplace enrollee’s premiums will increase by 75% understates the premium increases that subsidized ACA enrollees will experience if the ARPA subsidy schedule expires (the carnage at incomes above the pre-ARPA income cap on subsidy eligibility, 400% FPL, is unaffected by these estimates). In the comparisons below, net-of-subsidy premiums for a benchmark silver plan range from 8% to 15% higher than KFF estimates.
The KFF/CBO underestimate of the applicable percentage table is partly offset by a corresponding underestimate of the annual inflation adjustment for the Federal Poverty Level. That is, the calculator slightly overestimates FPL for Plan Year 2026 at any given income, raising the percentage of income required for the benchmark plan (in the marketplace, the applicable FPL is for the year prior to the Plan Year). For example, the actual single-person income at 200% FPL for PY 2026, $31,300, is deemed 208% FPL in the KFF calculator.
Below, I’ve set the actual cost of benchmark silver for an individual at various incomes against the KFF estimates and the costs under the ARPA subsidy schedule (which does not adjust for inflation).
Monthly net-of-subsidy premium for benchmark silver plan in 2026 if ARPA subsidy enhancements expire: KFF/CBO estimate vs. actual applicable percentage
Single adult, any age. FPL for 2025 (applies to PY 2026)
The full name of the rule for the marketplace finalized in June by Trump-appointed CMS director Peter Nelson is the “Marketplace Integrity and Affordability Rule.” To the extent that the stated aim of “affordability” is not Orwellian, it must refer to “affordability” for taxpayers, since just about every provision affecting costs makes coverage more expensive for enrollees, while numerous new barriers to eligibility and enrollment (e.g., verifying income and immigration status before subsidies can be credited) will degrade the risk pool, as healthier enrollees are less likely to jump through the hoops.
At the same time, CMS just announced that it will pause enforcement of the Biden administration’s imposition of a four-month time limit on lightly regulated, medically underwritten so-called Short-term, Limited Duration (STLD) plans, setting the stage for re-establishing that market as a rival to the ACA-compliant marketplace, as the first Trump administration did. With premium and out-of-pocket costs primed to soar, this administration seems on course to convert the ACA marketplace into a high-risk pool, with unsubsidized and inadequately-subsidized enrollees driven into the STLD market or other alternatives yet to be introduced.
Many insurance brokers are chomping at the bit to sell STLD plans — partly because many have many clients who will lose subsidy eligibility, and partly because commissions are much higher for the lightly-regulated STLD plans, which can have medical loss ratios as low as 45% (vs. a mandatory minimum 80% for ACA-compliant plans). It’s reasonable to infer that Trump 2.0 will be more successful establishing ACA-noncompliant markets than Trump 1.0. While much ink is spilled about the political risks for Republicans generated by jacking up premiums and out-of-pocket costs for 20 million subsidized marketplace enrollees, degrading the ACA marketplace — and then lying about the fallout — seems more in keeping with MAGA priorities and practice than trying to mollify constituents by shoring it up.
Applicable Percentages under ARPA (funded through 2025)
Sources: IRS, KFF, CBO. See note at bottom for the ARPA enhanced subsidy schedule.
The repeal of the individual mandate penalty is a significant problem. For the currently healthy, avoiding the penalty was a large part of the value calculation. As I remember it, the mandate is still notionally in place but the penalty is $0. Since the penalty was a tax per the Supreme Court, the level of the tax was subject to reconciliation in the Senate. As such, I believe Democrats had enough authority in the first couple of years of the Biden administration to reestablish it. They did not and rather offered higher subsidies. A couple of “problems”. First, these subsidies did bring in more volume, but went also to lots of people who were buying subsidized ACA plans already. A really expensive way to boost volume. I might have done a “first-time buyer” back-end rebate with maybe a 3 year requirement. But I don’t think that would have been possible as a law….instant lawsuits probably. Second, for whatever reason these had an expiration date fixed in the law. As for the revised rule, yes anything that makes insurance more expensive will depress volume. But the “new” rule seems to me less of a price distortion than the prior approach. ACA pricing ought to be established considering the broader markets for insurance.
Absent the mandate penalty, there are going to be a lot of “low expected claims” people just passing on this.
Whereas I can argue about the mandate, especially where it regards states that didn’t accept the federal money because they hate poors, (Texas I’m looking at you), what is a more pressing concern is that if/when the ACA raises rates, those same rate increases will also be reflected in corporate and private funded plans.
The other resistance to the uptake of ACA is that many, many doctors will not accept it. I made an appointment today and while I was digging around for my insurance card, the lady asked “It’s not ACA is it?” and I said no and she replied that she had to ask because they were no longer in network with whatever sole provider for ACA exists in Texas.
MissConstrue:
They are not raising rates in the sense of an increase. The subsidy is being removed from when Covid was rampant. No longer will there be subsidies up to 600% FPL. It reverts back to 400% FPL. I do not know of doctors who will not accept the ACA plans as offered by commercial interests. Medicaid is a different beast and doctors do not accept it from time to time.