State-Based Marketplace Premiums to Increase Without ARPA Expansion

If federal officials do not extend the enhanced premium subsidies under the American Rescue Plan Act (ARPA), state-based marketplace enrollees will face higher premiums and may lose coverage in 2023, according to data from the National Academy for State Health Policy (NASHP).

The Biden administration passed the American Rescue Plan Act in March 2021, which increased premium tax credits for individuals receiving healthcare coverage on the Affordable Care Act marketplace. The bill also expanded tax credit eligibility to more middle-income individuals.

However, the ARPA subsidies currently expire on December 31, 2022.

To understand how the enhanced premium subsidies have impacted enrollees on the state-based marketplace and the potential consequences enrollees will face if the policies expire, NASHP gathered data from the State Health Exchange Leadership Network—a group of leaders and staff that operate state-based marketplaces.

If policymakers let the ARPA enhancements expire, millions of state-based marketplace enrollees will face premium increases, the report found.

“ARPA’s enhanced subsidies enable greater financial security and health protections for marketplace consumers,” Hemi Tewarson, president and executive director of NASHP, said in a press release. “Expiration of the enhanced subsidies will lead to market disruptions and premium increases for millions of consumers, resulting in an increase in the uninsured across the country.”

State-based marketplaces estimated that the average premium spending for enrollees would increase by anywhere from 15 percent to 70 percent. Residents in Connecticut, Minnesota, and New York may spend more than $1,300 per year in additional premium costs.

Rising premiums could push individuals to disenroll and seek coverage elsewhere or not all, leading to an increase in the uninsurance rate, according to NASHP. State-based marketplace leaders estimated that thousands of enrollees might leave their health plans.

As more individuals disenroll from state-based marketplace plans, the market dynamics and risk pools will likely change, resulting in even higher premiums for existing enrollees.

For enrollees who do not disenroll, the higher costs could force them to change their coverage option to a plan with more minor benefits and fewer financial supports.

Conversely, when ARPA subsidies were first introduced, state-based marketplaces said that hundreds of enrollees chose plans with better coverage. For example, 18,000 consumers in Maryland and 10,000 in Washington changed plans to enroll in higher-tiered plans.

NASHP emphasized that federal officials must act soon to expand the enhanced subsidies, as payers have already started setting rates for 2023. The open enrollment period begins November 1, 2023, meaning state-based marketplaces must start executing changes as early as May.

State-based marketplace plans are currently negotiating 2023 premium rates and planning operational changes, including adjustments to eligibility systems, websites, and marketing strategies. If Congress does not extend the ARPA enhancements soon, payers will have to assume they are expiring, leading to premium increases for 2023.

Health plans will send enrollees renewal notices with any changes listed in September and October, but most states will finalize and publicize premium rates starting in July, the report noted.

ARPA lowered healthcare spending and expanded access to coverage for more than 4.2 million Americans enrolled in the state-based marketplace.

More than 600,000 individuals enrolled in state-based marketplace coverage for the first time in 2022. California, Colorado, Connecticut, Maryland, Minnesota, New Jersey, Pennsylvania, and Washington reported record-high enrollments.

ARPA tax credits led to premium savings in state-based marketplaces ranging from seven percent to 47 percent, with eight states reporting that at least 20 percent of enrollees were paying less than $25 per month.

ARPA premium subsidies also helped expand healthcare coverage access to people of color, young adults, and older adults.

In addition to individuals losing coverage access with ARPA enhancement expirations, millions of individuals may also lose Medicaid coverage when the public health emergency (PHE) ends and states redetermine Medicaid eligibility.

These individuals may choose to enroll in marketplace coverage after the PHE. ARPA subsidies offer low-income consumers the ability to qualify for a zero-dollar benchmark plan, which could help previous Medicaid beneficiaries make a smooth coverage transition to the marketplace.

However, if Congress does not expand the tax credits, these consumers might have to pay up to $70 per month for a marketplace plan, which many cannot afford, the report said.