Experts Warn of Sharp ACA Premium Hikes and Subsidy Expiry Impact in 2026
Most of the 24 million Americans covered under Affordable Care Act (ACA) health plans face significant financial challenges in 2026 due to projected double-digit premium increases combined with the expiration of enhanced federal subsidies originally introduced during the COVID-19 pandemic. Insurers are requesting median rate hikes of around 15%, a substantial increase compared to previous years, driven by rising medical costs, labor, utilization of high-cost medications such as obesity drugs, and anticipated policy changes affecting subsidy structures. These premium increases reflect uncertainty around whether Congress will extend the more generous COVID-era tax credits, which greatly expanded subsidy eligibility and affordability for consumers.
The enhanced subsidies, initially part of the American Rescue Plan Act of 2021 and further extended by the Inflation Reduction Act of 2022, inflate federal support by raising subsidy amounts and removing income eligibility caps. If these enhancements expire at the end of 2025, federal tax credits will revert to pre-pandemic levels, resulting in higher out-of-pocket expenses for ACA enrollees. Experts suggest premiums could increase by more than 75% on average, with some states potentially seeing ACA premiums double, leading to a probable decline in enrollment and an increase in uninsured individuals.
Insurers also factor in a 4% premium increase linked to potential enrollment declines if enhanced subsidies are not renewed. A smaller, less healthy risk pool may increase insurers' costs further. The combined impact of subsidy expirations, new paperwork requirements, and Medicaid spending changes may reduce ACA enrollment by as much as 57%, according to consulting firms. Consumers are likely to shift toward lower-cost plans with higher deductibles to manage premium hikes.
Congressional stakeholders across party lines are reportedly considering remedies to mitigate abrupt subsidy reductions ahead of the 2024 midterm elections, aware of the political and market implications as over half of ACA enrollees reside in Republican districts. Insurers urge policymakers to extend enhanced tax credits to prevent destabilizing premium spikes and enrollment losses.
This prospective shift in ACA subsidies and premiums marks a significant inflection point in U.S. health insurance markets. It underscores how federal policy decisions and budget considerations influence insurance affordability, market stability, and consumer protection within the ACA framework. The expected premium increases and subsidy rollbacks will require payer and provider entities, as well as insurance brokers and regulators, to closely monitor evolving legislative actions and adjust strategies to navigate anticipated market volatility.