A fiscal cliff looms for millions of Americans as a one-two punch of expiring federal subsidies and rising health insurance premiums threatens to exacerbate affordability issues within the health care continuum.
Certain health insurance federal subsidies called advanced premium tax credits, a lifeline for approximately 19 million individuals who are covered through the Affordable Care Act marketplace, are set to expire at the end of 2025, which represented $125 billion of spending to help certain health care consumers afford health insurance in 2024. These enhanced credits lowered out-of-pocket costs and made insurance accessible to a wider swath of the population. The sunset is poised to shift the financial burden back onto consumers to absorb the full cost of their premiums or forgo coverage entirely.
The looming expiration of advanced premium tax credits may leave 4.2 million Americans without health insurance by 2034, according to projections from the Congressional Budget Office. Additional federal budget cuts targeting programs such as Medicaid could push the total number of uninsured to 16 million within the same timeframe.
Currently, individuals earning less than 150% of the federal poverty level qualify for zero-premium silver health plans. The average monthly premium for the lowest-cost silver plan stands at $486. Without the subsidies, individuals may need to allocate 25% to 33% of their income to maintain coverage, based on 2025 federal poverty level thresholds. Some may opt to forgo insurance altogether, choosing to self-insure instead.
The potential rollback of subsidies carries significant implications for health care providers. Hospitals and clinics could see a rise in uncompensated care as more patients lose coverage, further straining their finances. Nearly half of U.S. adults already report difficulty affording health care, according to a recent KFF survey, a figure that could climb if subsidies lapse. The result could be heightened affordability challenges and reduced access to care for millions of Americans.
The subsidy cliff arrives just as insurers are proposing steep rate hikes for 2026. According to a study by Peterson-KFF, certain plans will raise their rates on average by 18%, the sharpest rise in annual increases since 2018. The surge is driven by a mix of factors, including policy uncertainty, rising medical and labor costs, and an aging population. As consumers grapple with higher premiums and reduced financial assistance, health systems face a new challenge. The risk of patients dropping coverage and opting to self-insure could alter reimbursement models and impact bottom lines for health care providers.
The takeaway
The expiration of advanced premium tax credits, combined with surging insurance premiums, could reverse a decade of progress in expanding health coverage. Millions of Americans could be priced out of affordable coverage, which could strain household budgets and hospital balance sheets alike.
To address this uncertainty, health care providers should invest in a suite of tools to service and assist health care consumers. From population health management platforms, digital front doors and virtual care services, health care providers should act swiftly to continue to bend the cost curve and help consumers find affordable ways to stay healthy, focusing on proactive engagement and education.
Originally published here. Reprinted with permission.
Danny Schmidt
Danny Schmidt is a senior manager in the assurance practice and a health care senior analyst for RSM US LLP. As a member of the Industry Eminence program, Danny works alongside the firm’s chief economist and his fellow senior analysts to understand, forecast and communicate economic, business and technology trends affecting middle market businesses.
