Rising Premiums and Subsidy Changes Impact Affordable Care Plans
Next year, around 24 million individuals who rely on Affordable Care Act (ACA) health plans are facing a challenging scenario defined by increasing premiums and decreasing federal subsidies, which many consumers depend on to afford their coverage.
Insurance companies are pushing for higher premiums. This is, in part, because of rising health care costs and increased usage. They’re also attempting to adjust their proposals for the 2026 rates, likely to account for the effects of changes being implemented by the Trump administration and a Republican-majority Congress. A significant concern emerging is the uncertainty regarding whether the enhanced COVID-era ACA tax subsidies will continue past December.
As Joan Faulk, co-director of Georgetown University’s Center for Health Insurance Reform, mentioned, there is a palpable eagerness to understand how health insurance reforms might unfold.
Immediate financial implications will arise for healthcare consumers, especially as ACA premiums are set to rise. Other changes, such as stricter documentation requirements and Medicaid funding cuts, will not have an immediate effect but will surface in the following year. With major midterm elections on the horizon, increased scrutiny and potential resistance regarding ACA premium hikes is anticipated. Some members of Congress are already seeking methods to mitigate the subsidy cuts.
Joshua Brooker, an insurance broker from Pennsylvania, noted he’s heard from numerous Republican lawmakers regarding the legislative steps being explored to address these issues.
In an initial proposal, insurers across the country are requesting an increase in median rates. This means that half of the proposed increases are lower, and half are higher. An analysis by the Peterson KFF Health System Tracker highlighted that rates will indeed vary, influenced by state-specific dynamics. These premiums have seen a notable increase over recent years. For instance, the proposed rate increase for 2025 was around 7% on average.
Chris Bond, a spokesperson for Ahip, the insurance industry’s lobbying group, mentioned in an email that insurers are doing their utmost to shield consumers from the uncertainties linked to market fluctuations, heightened care costs, and policy changes. They are urging Congress to act and extend the medical tax credit to prevent significant cost surges for many individuals heading into 2026.
At this stage, it’s important to note that these numbers are preliminary, and state insurance commissioners may adjust their requests before any formal approvals. Cynthia Cox, ACA’s Vice President and Director of the Program, remarked that this is the largest increase seen in five years.
Premiums can differ drastically based on geographical location, selected plans, and the insurance providers. For example, in Maryland, insurers are looking to raise rates between 8.1% and 18.7% for the upcoming year. Contrastingly, New York appears to have wider variations, with one provider proposing a rate increase of less than 1%, while another aims for a steep 66% raise. The data indicated that if the ACA’s enhanced tax credits were maintained, the average statewide increase in Maryland would drop from 17.1% to 7.9%.
Many insurers are targeting a rate increase of about 10% to 20%. They attribute this to several factors, including escalating medical costs, notably from the rising use of expensive obesity medications, contributing roughly 8% to next year’s premiums. Additionally, insurers are contemplating the effects of what they might have charged without the renewed tax credits, adding another 4% to their projections.
That said, rising premiums represent just part of a larger picture. A key factor affecting consumers is if Congress will choose to continue the more generous tax credits initiated during President Biden’s administration as part of the 2021 American Rescue Plan, which were subsequently sustained through the Inflation Reduction Act in 2022.
These laws enhanced the subsidies available to people based on household income and local premium costs, and removed previous limits that excluded higher earners from partial subsidies. However, qualifying for some subsidies still required meeting certain thresholds.
While more substantial subsidies have aided many—particularly low-income policyholders—they have also incurred significant costs. Ongoing extensions of these subsidies may cost around $335 billion over the next decade, as estimated by the Congressional Budget Office.
A failure to extend the subsidies means tax credits could revert to previous, less favorable levels by year-end. This could result in two significant outcomes: consumers might pay more for premiums with reduced federal support, and those with household incomes surpassing four times the federal poverty level—$84,600 for couples, and $128,600 for families of four—would see no subsidies at all.
If these subsidies disappear, analysts predict average premium costs could soar by over 75%, with some states potentially experiencing doubled ACA premiums.
Josh Schultz, a strategic engagement manager at a New York consulting firm, noted a looming “sticker shock” for consumers. Enrollment could plummet significantly. Estimates suggest that a combination of expired tax credits, new requirements from the Trump administration, and other factors might decrease ACA enrollment by as much as 57%.
KFF has indicated that insurers might raise premiums by about 4% just to cover the loss of enhanced tax credits. Such conditions, coupled with the likelihood that less healthy individuals are more prone to enroll, could leave insurers managing a risk pool primarily consisting of sick members.
Interestingly, some analysts pointed out how the tariffs imposed during the Trump administration could play a role in increasing drug costs, potentially adding up to a 3% premium hike. Consumers won’t see finalized premium rates until later this fall, just as ACA open enrollment starts on November 1.
There’s still time for Congress to act, with ongoing discussions, according to broker Brooker. Some lawmakers are consulting with the Congressional Budget Office regarding the financial implications of different scenarios, particularly those surrounding the potential lack of subsidy extensions. Suggestions include offering subsidies to households with income levels even further above the poverty threshold.
However, any such moves could face significant resistance. Some conservative think tanks argue that increased subsidies have contributed to various abuses, like individuals inflating their incomes to qualify for assistance. Yet, others emphasize that many consumers—across political lines—have come to rely heavily on this additional support, making withdrawal potentially politically perilous.
The potential expiration of enhanced subsidies could also reshape the insurance market. According to Brooker, some individuals might lose coverage entirely, while others could switch to cheaper plans that come with higher deductibles. Notably, one recent change in tax law allows those on lower-tier ACA plans to access health savings accounts for tax-free spending on health expenses.
Brooker summed it up well: as premium rates continue to rise, consumers may inevitably be drawn towards more cost-effective options.
