Expiration of ARPA health insurance subsidies could lead to huge premium increases

With American Rescue Plan Act healthcare subsidies set to expire at the end of this year, attention has turned to the question of subsidy extensions. Some 13 million people are currently subsidized due to the ARPA, which was designed to ensure Americans could access essential healthcare during the COVID-19 pandemic. As Congress debates extending the subsidies for an additional two years, a new analysis from the nonprofit organization the Kaiser Family Foundation suggests that the expiration of the subsidies could lead to huge increases in premiums for many Americans.

Though exact premiums varied between states, the analysis found that in most states, on average, premiums would be around 53% higher in 2022 without ARPA subsidies. For many enrollees, that’s a difference of thousands of dollars a year – a gap many people might find hard to make up if and when the subsidies expire. 

At the same time, baseline premiums are expected to rise by 10% in 2023, meaning the difference between a subsidized 2022 premium and an unsubsidized 2023 premium could be staggering. In one example scenario, the analysis shows that while someone making $51,521 might currently be paying around 8.5% of their income towards their premium, in 2023 they might pay as much as 24% of their salary.

The analysis suggests that extending the subsidies could help manage the coming affordability crisis, including allowing former Medicaid members to find a source of affordable health insurance when their enrollment ends. Still, unless the subsidies are permanently expanded, it’s a stopgap measure. “Whether subsidies expire at the end of this year or in two or three years, their expiration would result in the steepest increase in out-of-pocket premium payments most enrollees in this market have seen,” the report concludes. Making the subsidies permanent would cost almost $250 billion over the next decade.

The report suggests Congress should make a decision on the enhanced subsidies by August in order to ensure all relevant stakeholders have time to make accurate information available to the public.