Demetrius Freeman/The Washington Post
- Many Americans' health insurance costs could go up next year.Expanded Affordable Care Act subsidies reduced premiums by 44% for many Americans, but are now expiring.Without subsidies, premiums could rise by 75% for middle-class Americans.
Middle-class Americans have a new cost to worry about next year: pricier health insurance premiums.
A Biden-era policy expanding eligibility for Affordable Care Act subsidies is set to expire at the end of this year, and there doesn't seem to be much legislative appetite to extend it.
Without those subsidies, out-of-pocket premium costs are set to go up by an average of 75% — imposing another financial burden on Americans and potentially leading to some opting out of coverage altogether.
For some Americans, that could mean a $1,000 or more a year increase in health insurance.
An analysis from the Center on Budget and Policy Priorities found that the enhanced ACA subsidies reduced net premium costs by 44% in 2024, with 93% of those enrolled in the marketplace receiving some form of premium tax credits. In 2024, around 19.3 million Americans enrolled in the marketplace received premium tax credits — the subsidy beefed up by both the American Rescue Plan and the Inflation Reduction Act. How much enrollees received depended on their income and the initial costs of their local plans.
Miranda Yaver, an assistant professor of health policy and management at the University of Pittsburgh and a healthcare fellow at the left-leaning Roosevelt Institute, said that the enhanced subsidies were a "game changer" for Americans who earn too much to qualify for Medicaid, but still may struggle to make ends meet. Business Insider has reported on these workers, known as ALICE or asset-limited, income-constrained, employed. They make too much to qualify for robust assistance, but still struggle to pay their bills.
"If you're piecing together some better-than-minimum-wage jobs, but still hourly jobs, this means that health insurance becomes much more accessible, and that means that you can get the care you need and not have to fear as much about getting sick," Yaver said.
Subsidies expanded who was eligible for ACA health insurance
Some GOP legislators have argued that the policy expanded ACA eligibility too much and offered relief to higher earners while remaining costly to the country. A CBO projection found that making the policy permanent would increase the deficit by $335 billion over the next decade and reduce revenues by $60 billion.
"It is particularly concerning that, by removing the income eligibility limit, some of our nation's highest earners are now eligible for government assistance," Reps. Jason Smith and Jodey Arrington, who respectively chair the House Ways and Means Committee and House Budget Committee, wrote in a 2024 letter. "In certain areas of the country, a family making as much as $599,000 in 2023 could qualify for taxpayer-funded subsidies."
Before the subsidies, only Americans earning between 100% and 400% of the federal poverty line qualified, or between $15,650 and $62,600 based on the current cutoff for a single American.
That 400% limit was expanded under the new structure, meaning that some Americans with ACA coverage were newly eligible to have some premium relief, especially older beneficiaries. Those who made above the 400% line, but were spending over 8.5% of their household income on premiums, became eligible for subsidies.
Christen Young, a visiting fellow at the Brookings Institution's Center on Health Policy, said that those newly eligible Americans saw savings of around $10,000 to $15,000 a year on their premiums.
"Those are the people who are facing particularly large increases in premiums when these enhancements expire," Young said.
A 2024 KFF analysis found, for instance, that Americans making $40,000, or 266% of the federal poverty line, could see their annual premiums increase by $1,247 annually.
"If you take a single parent of one child earning $50,000 a year, that family is saving about $1,700 because of the enhanced premiums. They're going to see their premium increase by about 80% next year when the subsidy enhancements go away," Young said. "A family of four with a household income of $130,000, they're saving $8,000 a year with these enhancements, and they'll see their yearly premium increase by about 60 to 70% next year."
When health insurance costs go up, healthy young people tend to drop coverage
With the expiration looming at the end of the year and premiums expected to rise, many younger and healthier Americans may decide to opt out of coverage. This could, in turn, raise costs even more for those who remain on ACA plans.
Without that younger and healthier group, it becomes more expensive to insure the remaining Americans, and costs go up across the board.
"It's insurance companies correcting for the fact that the people who are going to be enrolled in their plans will probably not be as healthy," Yaver said.
A projection from the nonpartisan Congressional Budget Office found that should the measures lapse, 4.2 million more Americans would be uninsured by 2034.
"One of the things that is really critical to health insurance is being able to essentially spread the risk of insuring people so that we can essentially bring younger and healthier people into the insured population," Yaver said.
There is a possibility that Congress could step in and extend the subsidies, although that looks unlikely, as it would have to have bipartisan approval. The potential end of the subsidies also comes as Americans face a mixed economy: The labor market is seeing shifts, but still chugging along. Inflation is creeping higher, and consumer sentiment is looking dreary — albeit not as low as it has been.
"The average American would have a very difficult time accommodating an unexpected $1,000 expense. That could be a medical, dental expense, home repair, car repair, you name it," Yaver said. "It's very easy to end up spending a thousand dollars in the American healthcare system."
Do you have a story to share about health insurance premiums? Contact this reporter at jkaplan@businessinsider.com.
