Heritage Targets ACA Cost Hike as Subsidy Extension Battle Looms

Costs associated with individual health coverage have increased in the decade since the implementation of the Affordable Care Act while access to providers has decreased, a conservative think tank argued in a new analysis of the economic impacts of enhanced premium subsidies set to expire next year.

The study, authored by the Heritage Foundation and set to be released Friday, draws its conclusions from data from the Centers for Medicare & Medicaid Services, HIX Compare, and the Kaiser Family Foundation.

The report found the average cost of individual market health insurance coverage increased by 133%, from $244 to $568 per member per month between 2013—the last year before the implementation of Obamacare—and 2022. This growth outpaced the 44% increase over the same period seen in the large-employer insurance market, which grew from $363 to $524 per month, the report said.

People in low-to-moderate income households can get subsidies—in the form of an advance tax credit—to buy health insurance through Affordable Care Act marketplaces, a provision Democrats expanded in 2021. The following year, Democrats extended the expansion through the end of 2025. President Joe Biden has called for making the expanded tax credit permanent to avoid driving up insurance premium costs that could increase the number of people in the US going without health coverage.

Heritage laid out its position paper as an opportunity for lawmakers weighing whether to extend the enhanced premium credits to revisit the subsidy structure of the ACA, the group told Bloomberg Law, since the report argues that the effect of enhanced subsidies led to higher health-care costs under individual plans.

Edmund F. Haislmaier, senior research fellow in Heritage’s Center for Health and Welfare Policy and author of the study, said the reason why prices under marketplace plans have increased relative to employee plans could partly be explained as an adaptation by insurers to a higher risk pool of beneficiaries.

“The risk pool is skewed heavily towards what I would call lower-income people who are marginally attached to the workforce,” he said in an interview. “They may not have full-time jobs, but they may be working a bit.”

Haislmaier faulted the implementation of the ACA for favoring coverage over costs, with continuous open enrollment contributing to inconsistent coverage that often results in over reliance on emergency care.

“These people tend to go in and out” of coverage, “and to the extent that they don’t have regular providers, they’re more likely to abuse emergency rooms,” Haislmaier said.

The report also said that deductibles have risen as a trade-off for insurers working to keep premiums down. It pointed to data from Kaiser Family Foundation’s 2023 Employer Health Benefits Survey that showed the average deductible for high-deductible “bronze” plans on ACA exchanges increased 40% between 2014 and 2024, reaching $7,144 for self-only coverage and $14,310 for family coverage.

By comparison, the KFF’s survey reported that the average deductible for self-only coverage among beneficiaries enrolled in employer-sponsored high-deductible plans was $3,552 in companies with fewer than 200 workers and $2,317 in those with more than 200 workers, the report said.

Concerns of a Subsidy ‘Cliff’

Still, groups like the Center for Budget and Policy Priorities say failing to extend the tax credit could lead to higher out-of-pocket costs for beneficiaries and 3.8 million more uninsured.

In 2024, 92% of marketplace enrollees, or 19.7 million people, qualified for the ACA’s enhanced federal subsidies. These tax credits provide up-front financial assistance to help people afford the individual or family health insurance plans offered in their state through the ACA marketplaces, CBPP says.

The Biden administration has touted the expanded premium tax credit as a benefit that saves the average American $800 per year. Those making between 100% and 150% of the federal poverty level enrolled in silver-level plans often pay no premiums under the program.

If Congress fails to extend subsidies, the CBPP estimates monthly marketplace premiums for single individuals making up to $21,000 could rise from $0 to $66—an annual increase of as much as $792. Those making up to $30,000 would see their monthly premiums rise from $55 to $168, or $1,350 per year.

Targeting New Narratives

With some public opinion polling showing as much as 61% of the public holding favorable views of the ACA in the run-up to the coming Capitol Hill debate over the looming subsidy cliff, the Heritage report zeroed in on data that pointed to the gradual “narrowing” of provider networks.

The report noted that the number of bronze plan designs with restrictive provider networks increased from 51% to over 76% in 2024. Silver plans experienced the same effect, shifting from 53% of plan designs having more restrictive networks in 2014 to 80% in 2024.

Haislmaier said the move to restrict access to providers came as a response by insurers to control the escalating costs of claims under ACA marketplace plans.

“In the subsidized ACA exchange coverage, the rules take away a lot of the tools that insurers normally would use to influence enrollee behavior,” Haislmaier said

“Restricting access directly through tighter networks and more precertification is the way that they’ve gone” to control costs, he said.

“Without change,” Haislmaier wrote in the report, “these trends are likely to continue into the foreseeable future.”