ACA Health Insurance Premiums Proposed to Rise 15% in 2025 Amid Cost and Subsidy Uncertainty

Health insurance premiums in the Affordable Care Act (ACA) marketplace are set to rise significantly in 2025, with insurers proposing a median increase of 15%, the highest in five years. This marks a notable jump from the 7% median increase proposed for 2024. The upward pressure on premiums is attributed to rising medical costs and utilization, along with uncertainty over the continuation of COVID-19-era ACA tax subsidies scheduled to expire at the end of 2025.

Several factors are driving these proposed premium hikes. Medical cost inflation, partly due to the increased use of costly obesity medications, is expected to contribute around an 8% increase. Additionally, most insurers are incorporating a 4% surcharge reflecting the potential loss of enhanced tax credits if Congress does not extend these subsidies. Tariffs on drugs, medical equipment, and supplies are also influencing costs, potentially adding about 3% to premiums.

The enhanced ACA tax subsidies, initially introduced under the American Rescue Plan Act of 2021 and extended by the Inflation Reduction Act of 2022, have been instrumental in expanding health coverage by increasing the affordability of ACA plans. These subsidies raised the amount of financial assistance available based on income and local premium costs and removed caps that previously excluded higher earners from partial assistance. Their expiration could affect coverage affordability for millions of Americans and contribute to premium increases.

Insurers filed initial premium proposals across 19 states and the District of Columbia, which state insurance commissioners will review and potentially modify before final approval. Premium rates will ultimately vary by geographic location, plan type, and insurer.

Consumers participating in the ACA marketplace will learn their finalized premiums during the fall open enrollment period beginning November 1, 2024, when they can also shop for the most cost-effective plan. The market continues to navigate the balance between controlling medical inflation and maintaining coverage affordability amid evolving subsidy policies and regulatory frameworks.