Expiring ACA subsidies and rising insurance premiums leave health care consumers at a crossroads
A fiscal cliff looms for millions of Americans as a one-two punch of expiring federal subsidies and rising health insurance premiums threatens to exacerbate affordability issues within the health care continuum.
Certain health insurance federal subsidies, a lifeline for approximately 19 million individuals who are covered through the Affordable Care Act marketplace, are set to expire at the end of 2025, which represented $125 billion of spending to help certain health care consumers afford health insurance in 2024. These enhanced credits lowered out-of-pocket costs and made insurance accessible to a wider swatch of the population. The sunset is poised to shift the financial burden back onto consumers to absorb the full cost of their premiums or forgo coverage entirely.
The subsidy cliff arrives just as insurers are proposing steep rate hikes for 2026. According to a study by Peterson-KFF, certain plans will raise their rates on average by 18%, the sharpest rise in annual increases since 2018. The surge is driven by a mix of factors, including policy uncertainty, rising medical and labor costs, and an aging population. As consumers grapple with higher premiums and reduced financial assistance, health systems face a new challenge. The risk of patients dropping coverage and opting to self-insure could alter reimbursement models and impact bottom lines for health care providers.
The takeaway
Health care providers will need to invest in a suite of tools to service and assist health care consumers. From population health management platforms, digital front doors and virtual care services, health care providers should be acting swiftly to continue to bend the cost curve and help consumers find affordable ways to stay healthy, focusing on proactive engagement and education.
Learn more about what’s happening in health care in our industry outlook.
