Millions of Americans are facing soaring health insurance premiums and rising out-of-pocket costs. Advocates warn large numbers of people will be priced out of coverage as a result, straining the broader health care system.
More than 20 million people enrolled in Affordable Care Act marketplace plans are seeing monthly premiums double or more after enhanced federal subsidies expired at the start of the year. Early data show about 1.4 million people have already dropped coverage or downgraded their plans. Analysts predict 3 million more could follow in March after a grace period for paying premiums ends.
“On average, it is over a doubling of their premiums. And in many cases, it’s a tripling or a quadrupling,” said Anthony Wright, executive director of Families USA, at a recent American Community Media news briefing.
Sticker shock
Many low-income consumers who previously paid little or nothing for coverage will now pay hundreds of dollars a month. Older Americans in particular are facing massive sticker shock.
Enhanced premium tax credits for people who get their care through the Affordable Care Act were rolled out in 2021, amid the Covid-19 pandemic. The credits were set to expire in three years, but Democrats in Congress fought hard to keep the subsidies, noting the protections they offered to low-income consumers.
The credits expired on Dec. 31, 2025. Many families are now forced to choose between paying for health insurance or other basic needs, Wright said.
“Some may have felt a sticker shock and have already dropped coverage, while others dropped down to lower tiered coverage with sky high deductibles, paying more and getting less,” he said. “We expect many will try to pay their premiums of hundreds or thousands of dollars more in the next few months and forego other necessities, but some may end up uninsured over the next several months.”
The ripple effects extend beyond households. Wright warned that rising uninsured rates could destabilize insurers and providers alike.
Cascading impact for all consumers
“If people fall off coverage, that means that the insurers are covering a smaller and sicker pool,” he said. “That means premiums will rise as a result as well. So this has a cascading impact on increased costs and on decreased services for everybody, not just those who are directly impacted.”
Health care costs are also consuming a growing share of the U.S. economy. Stanford University economist Neil Mahoney said health spending has risen from about 8 percent of gross domestic product several decades ago to about 18 percent today, more than any other peer country.
“The most important driver is the prices are too high,” Mahoney said. “For everything from drugs to hospital care, we pay higher prices than almost everybody else in the world.”
Those prices show up in premiums, deductibles and copays that increasingly strain families and employers. Mahoney said the average annual cost of family coverage is now about $27,000.
“For $27,000, you can get a decent car,” he said. “That is a huge amount of money.“
Impact to the labor force
”And if you are a small business owner or you are a firm trying to make it in a difficult environment, providing that health insurance, even if you think that’s hugely important to your employees, is a huge weight on your bottom line,” said Mahoney, the inaugural George P. Shultz fellow at the Stanford Institute for Economic Policy Research.
As employers absorb higher insurance costs, workers often feel the impact through lower wages or fewer jobs, Mahoney said.
“When health care costs rise for businesses, they do one of two things,” Mahoney said. “They lower the wages they provide to workers, or they lay off workers or don’t hire.” Conversely, the one area of growth in the currently stagnant labor market are jobs in healthcare, he noted.
Can’t afford meds
Patients also face rising costs at the pharmacy counter. Merith Basey, executive director of Patients for Affordable Drugs, said one in three Americans cannot afford their prescription medications.
“Americans are paying between four and eight times what patients in other high-income countries are paying for the very same brand name drugs,” Basey said. “The reason is that it’s pharmaceutical corporations who are setting those launch prices and controlling the market through their monopolies.”
Basie said drug companies routinely use patent strategies to block competition and keep prices high.
Profits over patients
“When a generic medicine enters the market, you can reduce the price of a drug by about 39 percent on average,” she said. “If you have five or six competitors, you’re going to see a reduction by about 95 percent. So a lot of the practices you see from the pharmaceutical industry are to prevent those generics from hitting the market.”
Speakers at the briefing said the affordability crisis is not inevitable and outlined policy solutions to address rising costs and coverage losses.
Wright said Congress could still mitigate the damage by extending enhanced premium tax credits, even retroactively.
“These major premium increases were entirely preventable,” he said. “A majority of both the House and the Senate have now voted to extend premium tax credits for three years. There is broad public support for this affordability assistance.”
Expanding Medicare
Mahoney emphasized broader reforms to address underlying cost drivers, including expanding the health care workforce, strengthening competition and building on successful public programs.
“The Medicare program is an incredibly strong program,” he said. “Increasing access to Medicare, for example by allowing people over 50 to buy into Medicare, or revisiting the idea of a public option, are important steps.”
Mahoney also said policymakers should reduce cost sharing for necessary care, noting that high copays discourage patients from seeking treatment.
“When you expose people to costs, they cut back not only on care, which may be of questionable merit, but on things they need,” he said. “There should be an important policy agenda to removing cost sharing from really any of the necessary medical care that people need.”
Negotiating drug prices
On prescription drugs, Basey pointed to recent reforms allowing Medicare to negotiate prices as a major step forward.
“For the very first time, the costliest and most commonly used drugs now have negotiated prices,” she said. “The new prices went into effect at about 63 percent less expensive than they would have been previously.”
Ten drugs were rolled out in the first phase of negotiations. They include commonly used blood thinners (Eliquis, Xarelto), diabetes medications (Jardiance, Januvia, Farxiga, NovoLog), a heart failure drug (Entresto), an autoimmune drug (Enbrel) and a cancer drug (Imbruvica). A second phase will roll out in 2028.
More reforms are needed to curb monopolies and lower launch prices, but public support is strong, she said.
“Nine out of 10 Americans want Congress to do more to lower drug prices,” Basie said. “Drugs don’t work if people can’t afford them.”
– American Community Media. Edited for style.
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