It’s hard to find a federal law that polarized the American public as much as the Affordable Care Act(ACA), better known as Obamacare. Proponents argue that the bill has done precisely what it promised: holding down the spending rate on medical services.
But after the ACA was implemented, opponents of the law fumed over early sky-high premiums. So which side was closer to the truth? Here's a look at the earlier years of premium prices and how Marketplace premiums look in 2023 and beyond.
Key Takeaways
- The Affordable Care Act created a marketplace designed to make healthcare more affordable for everyone.
- After it was implemented, the marketplace offered sky-rocketing prices, which then appear to have cooled over time.
- Marketplace healthcare prices have continued to increase but at a much lower rate than in the past.
- Overall, the ACA has accomplished what it was designed to do, make healthcare available for more people.
A Shakeup in the Market for Individual Plans
While the ACA created new regulations for employer-based health plans, its biggest impact is undoubtedly on policies bought outside the workplace. The law fundamentally reshaped the market for these individual plans, on which more than 35.7% of Americans relied in 2021 for their health coverage (as of the latest report from the Census Bureau).
First, the ACA created online exchanges where consumers could, for the first time, shop for comparable plans with relative ease. In addition, the law established a mandate to purchase health insurance, theoretically bringing more healthy young people into the market and putting downward pressure on healthcare costs.
The bill also included several provisions aimed at bolstering the quality of individual plans. For example, insurers were required to cover policyholders with pre-existing medical conditions and to provide certain “essential benefits,” such as maternity and mental health coverage. In theory, these components of the ACA could have pushed premiums higher. However, the policies Americans are buying today offer greater benefits—including a cap on out-of-pocket expenses—than those purchased before the ACA.
The Early Effect on Premiums
In the second year of the online exchanges (2015), the Kaiser Family Foundationfound that price increases were fairly small. Nationwide, premiums for exchange-based plans with a medium level of coveragerose by a modest 2%—and that’s without tallying the effect of subsidies that reduce out-of-pocket expenses for some individuals and families. The study examined the second-lowest-cost silver plan in the marketplace; plans are divided into bronze, silver, gold, and platinum levels.
A separate source, the McKinsey Center for the U.S. Health System Reform, revealed a somewhat larger jump from 2014 to 2015. It concluded that gross premiums (those before subsidies) climbed by an average of 6% for the least-expensive plans on the exchange.
The Commonwealth Fund, another nonpartisan research organization, studied the three-year period before the passage of the ACA—from 2008 to 2010—and found that premiums on the individual market were rising by 10% or more per year nationwide.
More Recent Effects on Premiums
In 2018 and 2019, the ACA's marketplaces experienced considerable turmoil, resulting in huge premiums swings. In October 2017, the administration stopped directly reimbursing insurers for cost-sharing reductions. The ACA required marketplace insurers to reduce out-of-pocket costs for people with incomes below 250% of the federal poverty level, so insurers increased their premiums (typically silver marketplace premiums ) to cover the additional cost. There were also concerns about the marketplaces’ stability and long-term viability, and these fears were reflected in the 2018 premiums.
In 2018, the lowest silver marketplace premium offered in each rating region increased sharply by 29.7% on average. Twenty-eight states increased their average lowest silver premium by more than 29%.
In 2019, many insurers realized that they had overreacted, and increases for the lowest silver premiums averaged -0.4% nationwide, and, in many states, premiums decreased. In 2020, continued stability caused premiums to fall across all states by an average of 3.5%. According to the Urban Institute, 31 states had lower premiums in 2020 than in 2019.
In 2021, ACA Marketplace premiums stabilized, according to the Urban Institute. The national average benchmark premium fell again in 2021, following decreases in 2019 and 2020—remarkable because it contrasts with premium increases in the employer-sponsored insurance market over the same period.
ACA Prices Increased Slightly in 2022
The ACA made premium tax credits available to people purchasing health coverage on the marketplaces but only when their incomes fell between 100% and 400% of the federal poverty level. As a result, millions of uninsured people are eligible for subsidized coverage.
The Inflation Reduction Act of 2022 enabled those with incomes of 100% to 150% of the poverty level to be eligible for free or nearly free silver plans. But even with the subsidies provided by the act, Silver plans increased by 4.1%. Bronze plans increased in price by 4.0%, and Gold plans by 2.2%.
Are Premiums Still Rising for ACA Plans?
Yes, but the rise has been attributed to increased healthcare costs and plan use—likely due to the coronavirus and increased demand for medical services.
Will ACA Premiums Be Lower for 2024?
It's difficult to predict, but the Kaiser Family Foundation expects that most marketplace healthcare enrollees will experience a decrease in premiums in 2024.
What Are the Income Limits for ACA Subsidies in 2023?
The income limits are based on your income and how it compares to the Federal Poverty Level. Generally, you're eligible if you make between 100% and 400% of the Federal Poverty Level.
The Bottom Line
Any law as extensive as the 906-page Affordable Care Act is likely to have provisions worthy of legitimate debate. Nevertheless, its impact on healthcare premiums becomes more apparent as time passes.
While the results vary from state to state, the overall numbers suggest that post-ACA premium increases have fluctuated but have been modest compared to those before ACA implementation.
