What impact did the 2023-2024 subsidy changes have on marketplace enrollment and premiums?
Executive summary
Enhanced premium tax credits (PTCs) introduced by the American Rescue Plan and extended by later laws drove marketplace enrollment from roughly 12 million in 2020 to a record above 21 million by 2024 and 24+ million by 2025, while cutting average annual after-subsidy premium payments from an estimated $1,593 to $888 in 2024 — a reduction of about 44% and roughly $705 per enrollee [1] [2]. Models and CBO estimates show that letting those enhancements sunset would sharply raise out-of-pocket premiums and cause millions to lose coverage: CBO and other analysts project between roughly 2.2 million and 4.0 million+ people could become uninsured or lose marketplace coverage in 2026 if the enhancements expire [3] [4] [5].
1. A subsidy-driven boom: enrollment and affordability rose together
When enhanced PTCs were implemented (ARPA) and then extended, the marketplaces saw historic growth: plan selections rose from about 12.0 million pre-enhancements to 21.4 million in 2024 and continued to record highs into 2025 [4] [2]. Analysts credit two mechanisms: larger tax credits that reduced after-subsidy premiums and rule changes (like fixing the “family glitch”) that expanded eligibility — both made more plans effectively free or very low-cost for low- and middle-income consumers and drove most of the enrollment gains [6] [1].
2. The math: how much cheaper did coverage get?
KFF’s and related analyses quantify the change: in 2024 the average annual premium payment among subsidized enrollees would have been $1,593 but was instead $888 because of enhanced subsidies — a $705 average annual saving, roughly a 44% reduction [1]. Other KFF calculations show premium payments would have been 75–93% higher in some comparisons absent the enhancements, depending on the metric and geography [7] [8]. These are average effects; savings vary sharply by income, age, state, and plan choice [1].
3. What happens if the enhancements expire: large premium spikes and coverage loss
Multiple reputable sources model heavy fallout if enhancements sunset after 2025. The Congressional Budget Office projected millions would lose coverage; one CBO-derived report cited 2.2 million consumers losing insurance in 2026 and an average annual loss of about 3.8 million per year over 2026–2034 under baseline assumptions [3] [9]. Urban Institute and CBPP estimates forecast 3.8 million to 4 million-plus people becoming uninsured or losing marketplace coverage in 2026 without extensions [4] [5]. States and KFF show that monthly/annual out-of-pocket premiums would rise sharply for most enrollees if the enhancements lapse [8] [1].
4. Distributional effects: who benefits most and who’s at risk
Enhanced PTCs disproportionately helped low- and moderate-income enrollees: increases in enrollment were concentrated among those under 250% of poverty and those eligible for cost‑sharing reductions, with low-income groups driving about 83% of enrollment growth from 2020–2024 [1] [2]. Middle-income households above 400% FPL also became newly eligible if benchmark costs exceeded 8.5% of income, so those households face outsized premium increases if enhancements end [5]. State-level impacts vary: some states (including large non‑expansion states) would see particularly big enrollment declines [4].
5. How premiums and insurer behavior interact
Analysts warn the subsidy change doesn’t only affect direct consumer costs; it can alter the composition of the risk pool. Higher after-subsidy premiums could prompt healthier enrollees to drop coverage, producing a sicker, costlier pool that could push insurers to raise rates further — a feedback loop that helped drive 2023 rate increases when subsidies were uncertain [10] [11]. KFF and CBPP note that the benchmark-plan tie to subsidy amounts means premium changes and plan switching can shift subsidy values and enrollment behavior [11] [1].
6. Policy responses and mitigation: state programs and administrative changes
Some states have created supplemental subsidies or cost-sharing programs to blunt federal cuts, but analysts say state dollars are unlikely to fully offset a federal rollback at scale [12]. CMS, insurers, and marketplaces have also used operational tools — extended SEPs, auto‑renewal flexibilities, and proposed rules that adjust auto‑renewed subsidies — which affect how changes play out in practice; these administrative levers have sparked debate and legal challenges [6] [13] [14].
7. Limits of current reporting and competing perspectives
Sources agree on broad direction — subsidies increased enrollment and lowered net premiums — but differ on magnitudes and timelines. KFF emphasizes large percentage reductions in out‑of‑pocket premiums and scenario maps [1] [8], while CBO-based reporting highlights specific enrollee losses and fiscal impacts [3] [9]. Analyses vary because they use different baselines, enrollment assumptions, and whether they model behavioral responses like disenrollment or insurer rate reactions [7] [1]. Available sources do not mention post‑2026 Congressional fixes beyond scenario discussions in these reports.
Bottom line: the 2023–2025 subsidy enhancements materially expanded who could afford marketplace plans and drove record enrollment and large average premium savings [2] [1]. Analysts and federal models uniformly show that allowing those enhancements to expire would sharply raise out‑of‑pocket premiums and risk millions losing coverage, though exact counts and state impacts differ across studies [3] [4] [5].