Preliminary filings by insurers on the Affordable Care Act (ACA) exchanges indicate premiums for the coming year will be 15 percent higher over last year, the biggest increase since 2018.
An analysis by Peterson-KFF noted two factors insurers have already cited to justify higher premiums: the elimination of premium tax credits and imposition of tariffs on imports of drugs, supplies, and health care equipment.
“Enhanced premium tax credits that make coverage more affordable will expire at the end of 2025, driving up out-of-pocket premium payments by over 75% on average,” the analysis states. “This is expected to cause healthier enrollees to drop their coverage and create a sicker risk pool.”
Insurers made their forecast of 2026 premiums before the budget reconciliation package, the One Big Beautiful Bill Act (OBBB), was signed into law on July 4, and the Centers for Medicare and Medicaid Services (CMS) issued its Marketplace Integrity and Affordability Final Rule to clamp down on improper enrollment in late June.
Insurers are expected to finalize their rates by September.
Value Test
Rising premiums will force millions of people to decide ACA plans are not worth the money, KFF forecasts, estimating the reconciliation package and CMS rule change will reduce enrollment in ACA plans by 17 million people.
In 2021, the Biden administration enhanced premium subsidies, and marketplace enrollment doubled to 21 million people between 2021 and 2024. As of the end of July, Congress had taken no action to renew the subsidies.
Changes in Medicaid could put further pressure on premium costs for everybody. The OBBB requires able-bodied enrollees to work, or disenroll and find an alternative that could have a larger impact.
“When people lose Medicaid, they are more likely to end up in the emergency room,” wrote Dylan Scott in Vox. “That requires more costly care than they’d get if they were insured. Those increased costs to hospitals are passed on to insured patients when providers negotiate their payment rates with health insurance plans.”
The projected drop in ACA enrollment is an indication of “just how brittle the ACA exchange system still is,” says Josh Umbehr, M.D., a pioneer in direct primary care (DPC) who recently launched Atlas Direct, a supplemental insurance program for DPC users.
Short-Term Solution
Umbehr says Congress or the president should take fast action to help those who feel they need to drop their private plan at the risk of exposing themselves to financial ruin.
“Restore renewable, three-year short-term plans,” said Umbehr. “They’re affordable and flexible, exactly what healthy families need when full-price insurance doesn’t make sense.”
Short-term plans cost less than Obamacare plans because they have fewer government mandates on them, says Michael Cannon, director of health policy studies for the Cato Institute.
“Obamacare regulations cause health insurance premiums to double or triple for many consumers,” said Cannon. “Congress can provide immediate relief to those consumers by freeing them from those regulations.”
Regulatory Relief
Congress should immediately codify Trump’s short-term plan rules from 2018, says Cannon,
“Give U.S. residents access to [current] Obamacare-free plans in U.S. territories, or exempt part of the individual market from those regulations,” said Cannon. “States can give every individual consumer and employer within their borders immediate relief from Obamacare regulations by recognizing health insurance policies that U.S. territories license for sale.”
Indemnity Option
States can take the lead in offering more indemnity-style insurance, which holds down costs by paying a predetermined cash benefit in the event of hospitalization, surgery, or other medical service up to a certain amount and time frame, says Umbehr.
“States can do this on a ‘file and use basis,’ so new options launch in weeks, not quarters,” said Umbehr. “It’s not about perfect coverage; it’s about real protection people can afford now. If we don’t act, we’re going to see the health insurance bubble pop—leaving the middle class exposed.”
Trump and Congress should also allow DPC to be paired with indemnity coverage, says Umbehr.
“With Atlas Direct, we’ve seen that families can skip deductibles and surprise bills, get same-day care, and still come out ahead financially,” said Umbehr.
“We don’t need another bailout,” said Umbehr. “We need to fix health care to restore the middle class. People need affordable, usable options they can sign up for today—not just coverage that checks boxes but fails them when they’re sick.”
Umbehr also recommends the restoration of association plans through small businesses and professional groups. “ERISA rules already support this—just open the gates,” said Umbehr.
Limited-Benefit Plans
Another possible alternative to high-cost Obamacare plans is “limited-benefit” plans, says Merrill Matthews, a health policy analyst and columnist for The Hill.
“There was once a thriving market for limited-benefit plans,” said Matthews. “They were usually marketed by associations, but they weren’t ‘association plans.’ The National Association of the Self-Employed used to be one of those groups. I have been on the board of another one of those groups, the Heartland Alliance Association.”
People would join the association and buy a plan with limited coverage, a popular option for those without employer-provided insurance before the ACA was enacted, says Matthews.
“It wasn’t comprehensive coverage, but it provided some coverage, and it wasn’t expensive,” said Matthews. “We don’t have many members anymore.
“I think most of those associations have closed,” said Matthews. “The ACA killed that business model. It’s at least possible that some of those associations might come back.”
AARP is another “association” that offers insurance, “only much more successfully,” says Matthews.
“And Blue Cross in California and Colorado offered its limited-benefit plans, called Tonik,” said Matthews. “There were three versions, they were only for younger people, under age 30, they were very affordable and popular for a while.”
AnneMarie Schieber ([email protected]) is the managing editor of Health Care News.
AnneMarie Schieber is a research fellow at The Heartland Institute and managing editor of Health Care News, Heartland’s monthly newspaper for health care reform.
