Cuts to Affordable Care Act subsidies highlight a troubling trend in health care costs.
The Affordable Care Act (ACA) was implemented in 2014 to control rising health care costs, providing insurance coverage to millions of Americans – but key subsidies of the law expired at the end of the year.
As open enrollment began, consumers buying insurance through ACA plans saw premiums rise by up to 59%. While the absence of government subsidies is exacerbating costs, the march towards sky-high premiums is decades in the making.
For decades, health insurance premiums have been increasing. What’s going on?
There have been pieces of legislation, like the Hospital Cost Containment Act and the Medicare Prospective Payment System, that have attempted to reduce insurance rates, but it has been challenging to control health care spending. This is because of prices, not quantity. It’s not that people are using health care services more often than they were previously—we’re not going to the hospital or the doctor more, and, in most cases, we’re not using more pharmaceuticals. The prices for those services keep going up, which increases insurance premiums.
What role does the Affordable Care Act play in addressing rising costs?
About 30 million Americans are on ACA plans right now. These are people who, typically, do not have employer-based insurance—they work in the gig economy, at small firms that don’t offer insurance, or are self-insured. In the past, most people had employer-based insurance, but that is increasingly disappearing. More people work independently and need some kind of insurance to cover their health care needs, which is what was created by the Affordable Care Act.
For someone with an employer-sponsored insurance plan, the employer pays a significant portion of the insurance premium. Something similar happens for people receiving insurance under the Affordable Care Act because of government subsidies. Before that program existed, if you wanted to get health insurance, a company would look at you and say, “Are you sick? If you’re sick, we’re not going to cover you.” The Affordable Care Act put both healthy and sick people into one bucket, which made insurance premiums much more affordable. And the government paid part of the premium, which was the subsidy.
Why are insurance costs going to be even higher in 2026?
If you are on an ACA plan, you may now have to pay the full rate of insurance, meaning your premium goes up by 25%–30%. This happens not because the premium is going up by that much, but because the subsidies—your cost-sharing with the government – are being reduced, eliminated, or expiring.
But in the United States, every market is different. What’s going on in Baltimore is not necessarily the same as what’s going on in San Francisco or in rural Kansas. It all depends on what type of insurance you have. Under some insurance plans, like the Affordable Care Act plans, premiums are rising rapidly, while other plans are not going up very much, and some are not going up at all.
How would these changes to the ACA impact Americans?
It would be a step backwards. There’s a concern that many people – typically young, healthy people – will be priced out of their plans and drop out. That creates what, in economics, is called the “death spiral,” where you get more and more older and sicker people into your health insurance plan and prices continue to rise.
At large, self-insured companies, the average premium is about $25,000 to $27,000 a year. If you’re making $100,000 a year, after paying taxes, you keep about $70,000. And now, $25,000 – essentially a third of your income – is going toward health insurance coverage. Most people can’t afford to pay that much for health insurance when they have to pay rent and buy food and clothes. People without these subsidies are going to have to make a really difficult choice.
The increases have implications just beyond what the individual seeking care is facing. They will also affect hospitals, physicians, drug companies, and everybody else in the health care system. If you’re a medical provider, you want to get paid for providing care. And if you’re treating people without health insurance, you’re not likely to get paid.
How will this impact people who lose their jobs and their employer-sponsored insurance plans?
If you’re insured through your employer and you lose your job, there’s something called Continuation of Health Coverage (COBRA), which allows you to maintain your health insurance coverage for a certain period of time. You wouldn’t be sent into the ACA plans immediately. But ultimately, if you don’t get another job with an employer that offers health insurance, then you will likely have to get an ACA plan, and the premium will probably be much higher than what you paid when you had a job where your employer paid a significant portion of the bill.
What would it take to build a better health insurance system in the U.S.?
We’re probably never going to have a very robust and healthy system. It all comes back to a decision by the IRS in 1943 to provide tax subsidies to employer-sponsored insurance plans. Most Americans get health insurance coverage through employers, which are typically large, self-insured companies. Those companies are not likely to give up the idea of providing health insurance to their workers because it’s a very attractive option for them in recruiting employees.
These employers are the ones paying very high premiums compared to what Medicare pays for the same services. These companies may be concerned about rising health care costs, but they are not actively trying to control costs. Until they are so upset with the status quo to make a change, we won’t have fundamental changes to the insurance system.
Written by: Rachel Walsh, Public Health on Call
Thanks for blogging with us!
Please visit www.LouisianasMarketplace.com for some great options in potentially reducing your Health coverage cost. Or better yet, call Kevin directly at 985-778-0072 to explore alternative solutions that just might save a bunch of moula!
•More Options •Better Alternatives •True Health Coverage for Less