What factors drove changes in ACA subsidy costs during COVID-19?

1. Policy changes during COVID that directly raised subsidy bills

Congress temporarily expanded subsidy rules in 2021 (American Rescue Plan) and extended them in 2022 (Inflation Reduction Act), removing the 400% FPL cap for some households and lowering the maximum share of income required for benchmark premiums — effectively increasing the size of premium tax credits and covering full benchmark premiums for certain low‑income groups ^{[5] [6]}. Those changes are the clearest, immediate driver of higher federal outlays tracked in multiple analyses ^{[1] [2]}.

2. Enrollment growth magnified the fiscal effect

More generous subsidies made plans more affordable, boosting marketplace enrollment from about 12 million in 2021 to roughly 24 million in 2025; rising enrollment multiplied the per‑enrollee subsidy effect and helped push projected gross federal costs from past levels into the tens of billions annually — CRFB cites growth to an estimated $138 billion in 2025 ^{[1] [2]}.

3. Insurer pricing, market expectations, and premium trends

Insurers set 2026 rates taking into account rising health‑care costs and uncertainty over whether enhanced subsidies would lapse; analysts say carriers priced for the possibility of subsidies ending and for higher underlying cost trends, which in turn influences projected marketplace premiums and taxpayer exposure ^{[7] [3]}. KFF and other observers note both rising unsubsidized premiums and administrative rule changes can increase net subsidy outlays ^[3].

4. Who benefits and why that matters for cost accounting

Most of the spending goes to middle‑ and lower‑income households: the Joint Committee on Taxation estimated that 85% of federal spending next year would go to those earning $150,000 or less if enhancements were extended ^[8]. But partisan narratives emphasize different points — advocates stress coverage gains and lower out‑of‑pocket costs ^[2], while critics argue the temporary boost subsidizes higher earners and creates perverse incentives ^{[9] [4]}.

5. Disputed claims: fraud, “phantom” enrollees, and crowd‑out

Some groups allege large improper enrollment counts and so‑called zero‑claim enrollees that inflate costs; Paragon and allied commentators argue enhanced subsidies encourage fraud and crowd out employer coverage, estimating billions in improper payments ^{[4] [10]}. Independent outlets and fact‑checking show wide disagreement about the scale of improper payments and caution that zero‑claim enrollees aren’t definitive proof of fraud (available sources do not mention an authoritative government estimate confirming the Paragon figures).

6. Fiscal projections and partisan framing of long‑term costs

The Congressional Budget Office and Joint Committee on Taxation project substantial long‑term costs if enhanced credits are made permanent (CBO estimates cited at roughly $350 billion over a decade in multiple outlets), a figure conservatives use to argue against extension while proponents say the coverage and affordability gains justify the expense ^{[7] [8]}. Critics also contend ongoing subsidies could “pad insurers’ profits” or crowd out private coverage; proponents counter that subsidies reduced uninsured rates and out‑of‑pocket burdens ^{[10] [2]}.

7. Practical impacts if enhancements lapse — enrollment, premiums, and politics

Analysts warn that if the COVID‑era enhancements expire, many enrollees would face much higher premiums (KFF’s analysis shows average net premium payments would more than double for subsidized enrollees absent enhancements), and CBO projects several million could become uninsured — outcomes that have shaped urgent political fights over extension ^{[3] [11] [12]}.

8. Caveats, open questions, and what reporting doesn’t settle

Available reporting converges on the main drivers — policy expansions, higher enrollment, and underlying health‑care cost growth — but disagrees on magnitude and secondary effects like fraud, employer behavior, and insurer profit capture ^{[1] [4] [10]}. Not found in current reporting: a definitive, nonpartisan audit quantifying improper enrollment claims at the scale alleged by some advocacy groups.

Bottom line: COVID‑era legislative changes are the proximate cause of higher ACA subsidy costs, amplified by increased enrollment and premium dynamics; partisan differences remain sharp on whether those costs represent necessary coverage policy or unsustainable, distortionary spending ^{[1] [2] [7]}.