Inflation, weight loss drugs drive ACA premiums higher

Premiums for Affordable Care Act (ACA) health plans will increase 7% on average across 324 insurers next year. This increase is on par with premium increases for 2024, according to Peterson-KFF’s Health System Tracker.

Proposed premium changes for 2025 range from a decrease of 14% to an increase of 51%, although most premium changes fall between 2% and 10% increases for 2025. Fifty of the 324 ACA insurers proposed decreasing premiums, while 85 insurers requested premium increases greater than 10%.

Insurers attributed the increased premiums to growth in health care prices, inflation and the increasing use of weight loss and other specialty drugs, 

In most years, medical inflation, the growth in cost and utilization of health care services and medication, outpaces general economic inflation, but through much of 2021 to 2023, inflation in the rest of the economy was so high that it was outpacing growth in medical prices. However, by mid-2024, general economic inflation was cooling, and medical inflation has picked up to the point it now exceeds the growth of non-medical prices. 

In their filings with state regulators, some ACA insurers noted general economic inflation has put pressure on their staffing costs as well, increasing their overhead expenses and pushing premiums higher. In addition to the pressure from general economic inflation, hospital market consolidation and workforce shortages are also having an inflationary impact on health insurance premiums in 2025, the tracker found. This has led to increased pricing for services and a willingness to let contracts expire.

The growing demand for GLP-1 drugs like Ozempic and Wegovy, which are used for diabetes treatment and weight loss, is having an upward effect on prescription drug spending. ACA Marketplace insurers employ a variety of strategies including prior authorization, step therapy and quantity limits to manage utilization of Ozempic and other GLP-1s that are approved for diabetes but have potential for off-label use to lose weight. New gene therapies are also becoming more prevalent and more costly, which is driving premiums upward.

Related: Medical stop-loss premiums rise 11.5% for self-funded plans

Pandemic-related costs and unwinding of Medicaid continuous enrollment beginning in April 2023 are not playing much of a role in ACA premium increases, according to the study. At least 23 million people had been disenrolled from Medicaid as of June 2024, and several million of those had transitioned into the ACA marketplace, but many insurers say the impact on premiums has been negligible. In addition, most insurers say the impact of COVID-19 on their 2025 premiums is zero or near zero, suggesting a steady state relative to the base period.