Subsidies Drive Individual Health Insurance Marketplace Enrollment

Enrollment on the individual health insurance marketplace has grown with most enrollees finding their health plan through the Affordable Care Act marketplace, according to enrollment data compiled by Mark Farrah Associates in a Kaiser Family Foundation (KFF) policy watch.

The research showed that these gains were largely the result of enhanced subsidies.

“With Marketplace enrollment at a record high, the upcoming open enrollment period could be among the busiest yet,” the policy watch from KFF explained. “In addition to Marketplace enrollees renewing coverage, uninsured people and those buying individual coverage off-Marketplace may want to check if they are eligible for expanded subsidies under the recently passed Inflation Reduction Act.”

There were approximately 16.9 million individual health insurance marketplace enrollees in the first quarter of 2022.

Enrollment has not returned to the heights that it achieved in the initial years after implementation, when the number of Americans on the individual health insurance marketplace climbed to 19.2 million in 2016 and 19.8 million the year prior.

Nevertheless, the first quarter of 2022 enrollment was the highest level that it has been in the last five years since the first quarter of 2017. Moreover, it by far boasted the highest share of on-marketplace subsidized enrollment since the Affordable Care Act’s implementation.

Individual health insurance marketplace enrollment jumped almost five percent between 2020 and 2021, from 14.1 million enrollees to 14.9 million enrollees.

The researchers found that the subsidies did not just draw enrollees to the Affordable Care Act individual health insurance marketplace enrollment—or on-marketplace enrollment—from the off-marketplace plans. Individual health insurance marketplace enrollment as a whole grew after the subsidies took effect, rising 20 percent from 2020 to 2022.

Approximately three-quarters of all enrollees on the individual health insurance marketplace are subsidized. This is the highest share of individuals with subsidies since 2015 and the first increase since 2019. In 2019, 2020, and 2021 the share of subsidized enrollment remained stable at 65 percent.

Meanwhile, the number of individuals in short-term health plans and non-compliant plans has continued to drop. In mid-2015, 5.7 million individuals were in such plans, but by mid-2021 that number had fallen to 1.3 million. Researchers expected that the number in non-compliant plans continued to decline in 2022 but that data is not yet available.

The researchers pointed out that enrollment data trends have followed marketplace premium fluctuations, with the years when premiums were lowest being the years that marketplace enrollment was highest.

Since prices are likely to increase in 2023 for unsubsidized premiums, the policy watch projected a continued drop in off-marketplace enrollment.

“However, unlike when premiums rose in past years, the Inflation Reduction Act’s enhanced subsidies could shield the vast majority of individual market enrollees from increases, even those with higher incomes. In fact, some people who aren’t subsidized in 2022 may find premium increases in 2023 make them newly eligible for subsidies (if their benchmark premium rises above 8.5% of their income). But, to take advantage of subsidies, they would need to shop on the Marketplace during open enrollment,” the researchers concluded.

The American Rescue Plan Act implemented enhanced subsidies which resulted in lower premiums on the Affordable Care Act marketplace. Additionally, the Biden Administration invested in outreach for the Affordable Care Act marketplace during enrollment season, which is thought to have contributed to more Americans successfully navigating to an Affordable Care Act marketplace health plan.

The Inflation Reduction Act aimed to continue what the American Rescue Plan Act started by extending the enhanced subsidies through 2025. Payers largely affirmed the Act when it passed in August 2022.