Affordable Care Act Insurers Propose Double-Digit Premium Hikes for Second Consecutive Year Amidst Rising Costs and Policy Shifts

For the second year running, a significant number of insurers participating in the Affordable Care Act (ACA) marketplace are signaling substantial premium increases, with preliminary filings indicating a median rate hike of 14% for 2027. This trend, driven by a confluence of escalating medical expenses and policy decisions enacted by both Congress and the Trump administration, is poised to place a considerable financial strain on consumers seeking health coverage.

An in-depth analysis of preliminary rate filings from 16 states and the District of Columbia, conducted by the Peterson-KFF Health System Tracker, reveals that if these proposed rates are ultimately approved by state regulators, 2027 would mark the second-highest annual increase in ACA marketplace premiums since 2018. This projection arrives on the heels of already elevated premiums in 2026 and the expiration of more generous tax credits at the close of last year, which previously helped to offset a portion of these costs for many individuals.

Cynthia Cox, a senior vice president and director of the Program on the ACA at KFF, characterized this scenario as a "triple whammy" for consumers. The combination of rising base premiums and the diminished financial assistance from the expiring enhanced subsidies creates a particularly challenging environment for those relying on the ACA for their health insurance.

A Shifting Landscape: Policy Changes and Their Repercussions

The current trajectory of ACA premium increases is deeply intertwined with policy shifts that have occurred over the past several years. President Joe Biden’s administration had initially sought to strengthen the ACA, often referred to as Obamacare, by implementing more substantial tax subsidies. These enhanced subsidies were designed to lower out-of-pocket expenses for consumers and played a significant role in driving ACA enrollment to over 20 million Americans.

However, under the Trump administration, legislative efforts were made to curtail taxpayer support for ACA coverage. A key consequence of these efforts was the expiration of the enhanced subsidies that had been in place during the Biden administration. This policy reversal has had a tangible impact on the ACA marketplace, contributing to the current surge in proposed premium rates.

As of February, ACA marketplace enrollment had experienced a notable decline of approximately 3 million individuals compared to the same period in the preceding year. While experts like Cox attribute this decrease primarily to increased costs that have led individuals to reconsider their need for insurance, the Trump administration has asserted that a significant portion of the enrollment growth observed under President Biden was the result of fraudulent activity. This differing perspective highlights the ongoing political and ideological divisions surrounding the ACA.

The Primary Drivers: Medical Costs and Evolving Healthcare Demands

At the core of the proposed premium increases for 2027, as has been the case in many preceding years, lies the persistent rise in the cost and utilization of medical care. The Peterson-KFF report underscores the growing demand for expensive specialty medications, a category that consistently drives up healthcare expenditures.

Furthermore, the burgeoning popularity and utilization of weight-loss drugs, specifically those belonging to the GLP-1 class, are also cited as a significant factor contributing to increased medical costs. These medications, while offering therapeutic benefits, represent a substantial financial outlay for healthcare systems and, consequently, for insurers.

The Impact of Subsidy Expiration on Market Dynamics

Beyond the direct medical costs, the expiration of the enhanced ACA subsidies is estimated to account for approximately 4 percentage points of the proposed premium increases. Insurers anticipate that as younger and healthier individuals, who are more price-sensitive, opt out of coverage due to higher premiums, the remaining pool of enrollees will skew older and sicker. This demographic shift, in turn, leads to a higher average cost of care for the insurer, necessitating higher premiums to maintain solvency.

"It’s likely that the people who dropped their coverage were also the healthier people, because sicker people were probably going to try to make it work however they could, to stretch their budget to keep their health insurance," explained Cox. This dynamic illustrates a fundamental challenge in insurance markets: adverse selection, where the risk pool becomes concentrated with individuals who have a greater need for services.

Policy Ripples: Trump-Era Regulations and Their Lingering Effects

In addition to the expiration of enhanced subsidies, some insurers have also pointed to policy changes implemented during the Trump administration as a contributing factor to their proposed premium hikes. These regulatory shifts are believed to have created a more challenging environment for certain individuals to enroll in ACA plans.

UnitedHealthcare, in its rate filing with New York state, specifically noted that these policy changes, when combined with the expiration of larger subsidies, account for a significant portion of their requested rate change. According to the Peterson-KFF report, this combined effect accounts for "12.7% of the requested rate change."

A White House spokesperson, Kush Desai, responded to these assertions by stating, "It is not surprising insurance conglomerates that profited massively off of Biden-era fraud are complaining about efforts to clean up the program." He further emphasized the administration’s commitment to holding "big insurance companies accountable" and its refusal to replicate "predecessors in giving out taxpayer funded subsidies to big insurance companies through the form of fraudulent and corrupt policies." This statement underscores the administration’s stance on its predecessor’s policies and its commitment to a different approach to managing ACA funding and oversight.

Emerging Factors: AI and the Intensification of Care

Another increasingly cited driver of higher premiums is the observed trend of claims submitted on behalf of patients being for more intense and costly levels of care. This escalation in the severity of care can be attributed to several factors. One possibility is that patients are indeed presenting with more complex or severe health conditions. However, the report also raises the possibility that healthcare providers may be utilizing artificial intelligence (AI) to identify and apply billing codes that maximize their reimbursements.

The use of AI in optimizing billing practices is not confined to the ACA marketplace. A report by the consulting firm PwC indicates that this trend is also contributing to the rising cost of employer-sponsored health coverage. PwC forecasts that the cost of caring for individuals with job-based coverage will increase by 9% in 2027, mirroring the upward pressure seen in the ACA market.

Who Bears the Brunt of These Increases?

The impact of these proposed premium increases will not be uniformly distributed across all ACA enrollees. Individuals with incomes just above 400% of the federal poverty level, which for an individual amounts to approximately $62,600 this year, are likely to feel the most significant financial pinch. This is because they are no longer eligible for subsidies following the expiration of the enhanced tax credits and will be directly responsible for the full brunt of the premium hikes.

For individuals whose incomes fall below the 400% poverty line, tax credits will continue to help offset their monthly premiums. The amount of these subsidies is determined by their income and the cost of a benchmark ACA plan in their geographic area. As premiums rise, so too will these subsidies, effectively shielding many consumers from the immediate impact of escalating prices. However, this also translates to an increased financial burden on the federal government.

Navigating the Marketplace in 2027

As the open enrollment period for 2027 coverage approaches in October, individuals may need to carefully evaluate their options. Matthew Fiedler, a senior fellow at the Brookings Institution, advises that consumers may need to "shop around" for different plans. Depending on the specific premium of their current plan, individuals might find it necessary to switch to a different provider or plan to maintain a similar premium cost. This proactive approach could be crucial for mitigating the financial impact of the proposed rate increases.

The coming months will be critical as state regulators review these proposed rate increases. The final approved premiums will have a significant bearing on the affordability and accessibility of health insurance for millions of Americans who rely on the ACA marketplace.

KFF Health News senior correspondent Julie Appleby contributed to this report.

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