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What evidence exists on ARP's short-term vs long-term effects on insurer participation and marketplace premiums?
Executive summary
The American Rescue Plan’s (ARP) enhanced premium tax credits sharply reduced net premiums and boosted Marketplace enrollment in the short run—about 21 million people enrolled with roughly 93% receiving subsidies by early 2024–25, and studies project coverage and premium benefits would reverse substantially if enhancements expire after 2025 [1] [2] [3] [4]. Insurers and analysts say the short-term effect has been lower consumer premiums and improved risk pools; longer-term effects are conditional and contested: modelers project large premium and enrollment shifts if enhancements end, while insurers report rate‑setting uncertainty that could prompt market exits or higher 2026 rates [5] [6] [3].
1. ARP’s short‑term impact: big premium relief and large enrollment gains
ARP’s subsidy changes immediately lowered what enrollees pay and expanded eligibility (capping contributions and eliminating the 400% FPL cliff), producing large, measurable short‑term effects: CMS and administration accounts say most Marketplace buyers saw lower premiums and more generous assistance; by 2024–25 nearly all purchasers benefited and enrollment reached record levels (about 21 million enrolled; 92–93% receiving subsidies) [7] [8] [2] [9]. Independent analysts (Urban Institute, NASHP, Oliver Wyman summaries) and state reporting attribute much of the enrollment spike and reductions in average net premiums directly to ARP/IRA enhancements [4] [10] [11].
2. How ARP changed insurer economics in the near term
Enhanced subsidies increased the share of premiums paid via advance tax credits (APTC), lowering the amount consumers pay and increasing the effective coverage subsidy (CMS reports the APTC share rose from about 72% pre‑ARP to nearly 86% in 2025), which improved affordability and — according to analysts — strengthened the nongroup risk pool because higher takeup brought in more, including healthier enrollees [2] [5]. States and carriers saw enrollment and premium base shifts that reduced the need for some state reinsurance programs while changing insurers’ revenue mix [12].
3. Evidence and projections on long‑term effects if the enhancements lapse
Modeling studies and policy analyses warn that reverting to pre‑ARP rules would reverse many gains: Urban Institute and others project millions could lose coverage (Urban projects up to ~4 million become uninsured) and higher premiums overall; the Conference Board/ Peterson Institute/KFF summary cites insurers projecting a median 18% increase in gross premiums for 2026 under expiration scenarios [4] [6]. Oliver Wyman and CBO‑style projections also report higher long‑run federal cost if extended permanently but show that extension would sustain higher enrollment and lower premiums relative to a sunset [11] [5].
4. Insurer behavior: participation, rate filings, and uncertainty
Insurers are explicitly flagging policy uncertainty as a market stressor. Filings and regulators note carriers built 2026 rates under competing assumptions (extension vs. expiration), and some insurers submitted alternative scenarios accounting for PTC expiration—language in rate filings and KFF reporting shows insurers are concerned that sunsetting subsidies will push them to raise 2026 rates or reconsider participation in some areas [3]. Healthinsurance.org state guides also document insurer entry/exit patterns in 2025 that correlated with ARP effects, though overall insurer counts were fairly steady in many states [13] [14].
5. Mechanisms linking subsidies to insurer participation and premiums
Two mechanisms explain the linkage: [15] demand / risk mix effects — larger subsidies raise enrollment and can improve average risk (bringing in healthier people), which lowers average claims per enrollee and can reduce pure premium pressure (cited in Urban/analyst work) [5]; [16] price signalling and rate‑setting — if subsidies fall, insurers anticipate higher uncovered premiums for consumers and may pre‑emptively raise listed premiums or pull back from high‑cost counties, as seen in insurer filings and state rate scenarios [6] [3].
6. Limitations, disagreements, and what's not settled
Analyses agree ARP produced big short‑term affordability and enrollment effects, but they disagree on magnitude and the persistence of insurer participation reactions. Some modelers (CBO/Urban) estimate substantial long‑term enrollment and premium changes if extended permanently, balanced against fiscal costs [11] [5]. Meanwhile, insurer statements focus on near‑term regulatory uncertainty and scenario planning rather than definitive exit decisions; available reporting documents insurer concern but does not prove widespread market collapse or quantify exact exits tied solely to subsidy policy [3] [13]. Available sources do not mention specific, nationwide insurer attrition causally proven to result solely from ARP’s design beyond the documented 2024–25 participation shifts (not found in current reporting).
7. Bottom line for policymakers and stakeholders
The evidence in current reporting is clear that the ARP subsidies produced large short‑term reductions in premiums and big enrollment gains [7] [8] [4]. For the longer term, modeling and insurer filings indicate substantial risk that ending enhancements would raise premiums, reduce enrollment, and create rate‑setting uncertainty that could affect insurer participation — but the magnitude of market exits or premium changes will depend on how insurers ultimately file rates, state responses (e.g., reinsurance), and whether Congress acts to extend or alter the subsidies [6] [2] [3].