As inflation continues to climb to pre-2008 recession levels, Americans are being hit in the wallet at the grocery store, the car lot, the housing market, and everywhere in between. But, there is some relief for Americans: the price of health insurance is dropping for millions of people nationwide. A new Urban Institute study has found that the cost of health insurance plans sold on the healthcare.gov marketplace has dropped every year since premiums rose drastically in 2017 and 2018. This study didn’t even consider newly passed subsidies that went into effect in March as part of President Biden’s $1.9 trillion COVID relief bill.
There are a couple of reasons behind the price drops.
The Urban Institute study found that Affordable Care Act (ACA) insurance premiums decreased by an average of:
1.2% from 2018 to 2019
3.2% from 2019 to 2020
1.7% from 2020 to 2021
While these figures don’t seem too staggering, some states are seeing double-digit drops. What’s more, any decrease is considered a dramatic reversal compared to 2017-2018, when premiums rose by nearly 32% nationwide.
During the Trump Administration, the federal government stopped paying insurance carriers to lower some out-of-pocket expenses for low-income policyholders. Insurers responded to this loss of income by increasing premiums. They also raised premiums in response to the uncertainty created by the congressional efforts to repeal the Affordable Care Act during the spring and summer of 2017. With fears that enrollment would plummet, insurers jacked up the cost of marketplace insurance premiums by more than 30% on average in 2018.
Now that President Joe Biden — who served as VP when ‘Obamacare’ was signed into law — is in office, the uncertainty surrounding the program is no longer a concern for insurers. In fact, improving and expanding Obamacare is a key component of Biden’s health care policy.
This stability is bringing all sorts of insurance carriers, from national and regional to Medicaid insurers and startup insurance companies, stampeding into the market. As a result, the number of insurers participating in the healthcare.gov marketplace has increased by 50% over the past three years, and this intensifying competition is helping drive prices down.
One of the most significant changes to the Affordable Care Act is the introduction of new subsidies in the form of tax credits.
The majority of the 11.5 million Americans enrolled in exchange-based plans receive premium tax credits. Now, those individuals or families can recalculate their subsidy, update their healthcare.gov account, and get higher tax credits going forward.
These tax credits can be applied to health plans on healthcare.gov and other exchange-based marketplaces. New measures also limit ACA coverage costs to 8.5% of an enrollee’s income. Before these subsidies, the percentage stood at 10%.
The new subsidies will also eliminate premiums for lower-income policyholders. For the first time, these rules now extend to people earning more than 400% of the federal poverty level. That works out to be around $51,000 for individuals and $104,800 for a family of four.
Based on estimates by the U.S. Department of Health and Human Services, around 9 million Americans could see significant health insurance savings, including:
$1,000/month on premiums for an uninsured couple that earns more than $70,000.
$200/month premium decrease for a family of four with a household income of $90,000.
$0 premiums for an individual who earns $19,000 (average savings of about $66/month).
A Congressional Budget Office report found that this expanded eligibility will result in 1.7 million people getting health insurance through the marketplace — 40% of them were previously ineligible for premium tax credits because their income is above the 400% cap.
Since older adults' premiums tend to be triple what younger adults pay, the savings will have an even bigger impact on older Americans.
As ACA premiums fall, the cost of competing health care plans is actually on the rise, according to the Urban Institute, who found that premiums for employer-sponsored plans rose by about 4% in 2019 and 2020. This means that shopping around for health insurance is more important than ever these days to ensure you are finding a plan that fits your needs and budget. With PolicyScout, you can browse guides, get quotes, and choose from available insurance plans in your area in one convenient spot.