Health Insurance Premium Increases for Middle-Income Families Post-ACA Subsidy Changes
In January, many individuals purchasing health insurance on the individual market, including Durango resident Paul Kersch, experienced significant premium increases. This surge follows the expiration of pandemic-era enhancements to the Affordable Care Act (ACA) subsidies that had briefly offered financial relief. The change has notably impacted middle-income households, leading to substantial premium hikes.
In Colorado alone, 225,000 people benefited from the enhanced subsidies, as reported by the Division of Insurance. Among those affected, Colin Shadell, a Durango-based carpenter, faced a $400 uptick in his family's monthly premiums when federal financial assistance ended, raising their costs from approximately $500 to $1,800.
The ACA introduced premium tax credits in 2014 to help offset insurance costs, which were expanded during the pandemic to include more middle-income Americans. However, with the expiration of these measures, many have returned to the "subsidy cliff," restricting tax credit eligibility to those earning up to 400% of the federal poverty level—around $62,600 for an individual and $95,000 for a family of four, as explained by Merida Short, owner of J-Short Insurance.
The strict income threshold has led to complex decisions regarding income and employment among some individuals, who fear losing subsidies with minor salary increases. Merida Short advises clients to meticulously calculate the financial impact of potential raises to avoid jeopardizing their benefits, as the current system may deter some from pursuing higher-paying positions.
During the recent open enrollment period, challenges arose as many faced the abrupt cessation of subsidies, according to Short. Shadell, identifying his family as middle class and slightly above the subsidy cutoff, struggles with balancing necessary expenses without the previous financial aid, illustrating the challenges middle-income families face due to the changes in subsidy structures.
Some have transitioned to alternative arrangements like health-focused cost-sharing programs. Paul Kersch and his wife opted for CrowdHealth, which offers a subscription-based model to manage medical expenses, providing a financially feasible solution compared to traditional insurance plans.
A significant number have completely opted out of the conventional insurance market due to increasing premiums, with estimates suggesting that as of early January, 1.5 million people have dropped their coverage. However, the effect on the overall insurance market remains to be seen, with Josh Neff, CEO of CommonSpirit Mercy Hospital, noting no significant shifts in patient patterns yet. These developments underscore the financial strain on middle-income families and the evolving dynamics of the insurance market.