Administration’s ACA Marketplace Rule Will Raise Health Care Costs for Millions of Families

Millions of people will pay higher premiums, deductibles, and other health costs starting in just a few months under a rule the Trump Administration has finalized for the Affordable Care Act (ACA) marketplaces.^[1] While the details are technical, the result is not complicated: the changes will raise the annual cost of health coverage by hundreds of dollars for most of the 23 million people who get coverage through the ACA marketplace by reducing premium tax credits and letting insurers raise out-of-pocket charges.^[2] These higher costs will come at a time when families are concerned about inflation and the direction of the economy.^[3] And they will come on top of the dramatic spikes in premium costs that nearly all marketplace enrollees will face due to the pending expiration this year of premium tax credit enhancements, which the recently enacted Republican megabill failed to extend.^[4]

Because of the new rule, many marketplace enrollees will be unable to afford needed medical care or will accumulate additional medical bills that they can’t afford to pay. Others will lose coverage altogether. The impacts will be especially harsh for people with chronic conditions or other costly illnesses or injuries, who will be exposed to higher out-of-pocket costs because of the rule’s increase in how much each enrollee can be required to pay in deductibles, co-payments, and coinsurance each year.

This paper discusses only some of the many changes in the final rule; other provisions will reduce eligibility, make it harder to enroll in and maintain coverage, impose financial penalties for some enrollees who automatically renew coverage, and block coverage for certain essential health benefits.^[5]The Centers for Medicare & Medicaid Services (CMS) estimates that the rule will cause 750,000 to 1.8 million people to lose marketplace coverage in 2026, with the coverage loss expected to be concentrated in Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Utah. By causing healthier people to drop coverage, the provisions could also worsen the risk pool, further increasing total premium costs.

Change in Insurance Payment Formulas Will Raise Premiums, Out-of-Pocket Costs

The new rule will change how the ACA’s “applicable percentages” and “maximum out-of-pocket” limit are adjusted each year.^[6] The applicable percentages determine the share of income that families are expected to pay for benchmark health coverage (the second-lowest-cost silver plan) on the marketplace. The maximum out-of-pocket limit establishes the maximum amount that people can be required to pay in cost sharing, including deductibles, co-pays, or coinsurance. It applies to nearly all private plans, whether offered through employers or in the individual market.

The rule will increase both the share of income that people pay for premiums (after tax credits) and the maximum out-of-pocket limit. Specifically, the applicable percentages will be 2.7 percent higher in 2026 than they would have been without the rule, and the maximum out-of-pocket limits will be between 4.3 and 4.5 percent higher.^[7]

People Will Face Immediate Premium Increases

Premiums will rise in 2026 for most of the 22 million people who receive premium tax credits (PTCs) to help them buy coverage in the ACA marketplaces in 2025.^[8]

This will make coverage less affordable for millions of people. For example, a family of four making $85,000 will have to pay an additional $197 in premiums for coverage in 2026. (See Table 2 for impacts on various family types and income levels.)

According to the Administration’s analysis, these premium increases will cause 80,000 people to drop marketplace coverage. In addition to the direct impacts, the Administration acknowledges that this rule may cause enrollment among healthier enrollees to decline disproportionately, worsening the marketplace risk pool and causing sticker-price premiums (premiums before tax credits) to increase.

People Will Incur Hundreds of Dollars More in Out-of-Pocket Costs

The rule will also increase limits on total out-of-pocket costs for millions of people, including millions who are enrolled in employer-sponsored plans with out-of-pocket limits at or near the maximum.^[9] A family of two or more people on the same plan could face an additional $900 in medical bills if a family member is seriously ill or injured in 2026, and an individual enrolled in self-only coverage could face an additional $450 in medical bills.

People with low incomes who enroll in plans with cost-sharing reductions on the ACA marketplace, which reduce deductibles and other out-of-pocket costs under mid-level silver plans, will also face higher out-of-pocket maximums. For example, a family of four making $66,000 a year could have to pay an additional $700 in medical bills if a family member is seriously ill or injured in 2026. (See Table 2.)

This change will particularly impact people with pre-existing health conditions, those who are newly diagnosed with a serious illness, and those who suffer a serious injury, all of whom are more likely to reach their plans’ out-of-pocket limits. For example, a mother who is diagnosed with breast cancer might face hundreds of dollars more in medical bills for necessary treatment, or a young adult might have to decide whether to stretch their insulin supply because of rising medical bills.

Cost Increases Rest on Flawed Logic

The arguments for the rule’s changes to payment formulas are flawed. The ACA requires applicable percentages and the maximum out-of-pocket limit to rise each year based on premium growth from 2013 forward.^[10] The rule will increase people’s costs by measuring premium growth based on all private plans (excluding Medigap and property and casualty insurance); the current metric includes employer plans only and excludes individual market premiums.

The new measure is problematic because it incorporates the one-time increases in individual market premiums that occurred from 2013 to 2018 as insurers adjusted to the ACA and as the ACA’s temporary reinsurance program phased out.^[11] Thus, it makes people responsible for trends resulting from specific policy changes and not from broader market patterns.

The Administration argues that the new measure is better because it captures the private market more comprehensively. But the current measure, which is indexed to employer plans, already reflects premium trends for well over 80 percent of all private market consumers.^[12] Moreover, while the growth under the new measure is estimated to be greater than for the current measure from 2013 to 2025 — thus driving the one-time cost increase — growth is projected to be similar for both measures from 2025 through 2032, likely locking in this cost increase.^[13] This undercuts the Administration’s argument that the new measure is more comprehensive, as the primary impact of this change would likely stem from historical, policy-driven premium increases rather than meaningful future differences in broader market trends.

Change in Insurance Value Requirements Will Raise Premiums, Out-of-Pocket Costs

The new rule will allow individual-market insurers to offer plans with higher deductibles and other out-of-pocket costs than they can now. This will reduce the value of PTCs, resulting in higher premium costs for enrollees.

Plans have an “actuarial value” (AV), which is the portion of medical costs that the plan typically covers, as opposed to the costs enrollees pay through co-pays, deductibles, and coinsurance. For example, in a silver plan with an AV of 70 percent, the insurer picks up 70 percent of a standard population’s costs for covered benefits, while the enrollee population would expect to pay the other 30 percent of costs out of pocket.^[14]

To help people understand and compare plans, marketplace health plans are tiered by AV: 60 percent (bronze), 70 percent (silver), 80 percent (gold), and 90 percent (platinum). Insurers are allowed to offer plans with AVs that are lower by a small or “de minimis” amount — ranging from 0 to 2 percentage points depending on the plan tier, under prior rules — and still meet their AV standards.

The rule will change de minimis amounts to let plans have AVs further below the standard values. People with cost-sharing reductions (CSRs) — who have lower incomes and are thus eligible for versions of mid-level silver plans with higher AVs — will see their minimum AV drop by as much as 1 percentage point.^[15] People with non-CSR silver plans will see their minimum AV drop by as much as 4 percentage points, and people with bronze or gold plans will see their minimum AV drop by as much as 2 percentage points.

Eroding the Value of Benchmark Coverage Will Increase Costs for Enrollees

By allowing ACA marketplace silver plans with lower AVs than the current minimums, the rule will reduce PTC amounts. That’s because the PTCs that enrollees receive to help pay for marketplace plans are based on the cost of the second-lowest-cost silver plan in the local area, known as the “benchmark” plan.^[16] With less generous (and thus lower-cost) benchmark silver plans, the calculated value of PTCs will fall lower than they otherwise would be, even for enrollees who buy plans that are not in the silver tier.

For enrollees who want to purchase a plan with the same value of coverage they have today, PTCs will cover less of the premium costs, leaving them to pay more of the premium out of pocket. Alternatively, enrollees could enroll in a lower-value plan to maintain their same premium, but the lower AV means that they would face higher out-of-pocket expenses when they get health care.

For example, suppose a family of four making $85,000 is purchasing the benchmark plan with 70 percent AV in their local area on the ACA marketplace. The benchmark plan currently has a gross (or sticker-price) premium of $19,068 per year (the 2025 national average),^[17] and the family’s 70 percent AV plan is the lowest silver-plan value offered on the marketplace under current rules.^[18] If the value of the benchmark plan available to this family fell 4 percentage points to 66 percent AV, as would be permitted under the new rule, the family’s expected out-of-pocket costs would increase by $714 if they remained in the benchmark plan.^[19] (See Table 3 for impacts on different family types and income levels.) The family would be left with hard choices, either of which would result in higher expected costs:

1. Remain in the benchmark plan and pay the same premium cost but face $714 more in expected out-of-pocket costs (in the form of deductibles, co-pays, and/or coinsurance) due to the decline in the plan’s value.
2. Pay higher premiums to buy a plan that maintains the same value to avoid an increase in other expected out-of-pocket costs.

Cost Increases Rest on Flawed Logic

The Administration has argued that changing the AV de minimis amounts will increase participation among insurers and improve coverage options but has provided no evidence for these claims.^[20] In reality, marketplaces offer more options than ever under current policies, with record-high participation among insurers, record-high enrollment, and premiums that have grown more slowly than employer-based coverage.^[21] Instead, the AV changes are likely to worsen coverage options by making marketplace coverage more expensive for enrollees. And the changes, together with other provisions of the rule, likely will greatly reduce enrollment, worsen the risk pool, and weaken market stability.

Rule Will Significantly Raise Health Care Costs for Millions of Enrollees

Taken together, the changes to payment formulas and plan value requirements will substantially raise premiums and other out-of-pocket medical costs for millions of enrollees. Moreover, these large cost increases will coincide with dramatic premium hikes already set to occur if Congress fails to extend the tax credit enhancements that are scheduled to expire in late 2025.

For example (see Tables 1 and 2):

• A 45-year-old individual making $42,000 (268 percent of the poverty level) — close to the median salary of an emergency medical technician — who is enrolled in benchmark coverage could face an increase in annual costs of $351 under the final rule, including $99 from the payment formula change and $252 from the change in de minimis AV. In addition, their plan’s annual limit on out-of-pocket costs will increase by $450.

  These cost increases will come on top of the $1,694 increase in premium costs that this individual will face if the tax credit enhancements expire.

• A family of four making $85,000 (264 percent of the poverty level) — about the median salary of a power plant operator — enrolled in benchmark coverage could face an increase in annual costs of $910 under the final rule, including $197 from the payment formula change and $713 from the change in de minimis AV. In addition, their plan’s annual limit on out-of-pocket costs will increase by $900. (See Figure 1 for examples of a family of four at different income levels.)

  These cost increases will come on top of the $3,463 increase in premium costs that this family will face if the tax credit enhancements expire.

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