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ARPA Subsidy Expiration May Result in Large Premium Increases

08/04/2022 | PCI HR Consulting Practice

The American Rescue Plan Act (ARPA) health care subsidies are set to expire at the end of 2022. According to a recent analysis from the Kaiser Family Foundation, the expiration of ARPA subsidies may result in large health care premium increases for many individuals who purchase their own health coverage on the Affordable Care Act health insurance Marketplaces. The analysis found that without ARPA subsidies, premiums for enrollees would be 53% higher in most states.


The ARPA was designed to ensure access to health care during the COVID-19 pandemic. It currently subsidizes approximately 13 million Americans. If the U.S. Congress extends ARPA subsidies, premiums would probably remain the same for enrollees in 2023, which could help address the anticipated affordability crisis. If ARPA subsidies are not extended, enrollees would likely experience a drastic increase in their premiums, and enrollees with incomes over four times the poverty line would no longer qualify for subsidies. Congress is currently considering extending ARPA subsidies for two years. However, unless Congress extends ARPA subsidies permanently, enrollees will face a steep premium increase whenever subsidies do end.


Insurers are expecting to set 2023 premiums in August. If Congress fails to act before then, insurers will be forced to factor in their own assumptions about ARPA subsidies into their 2023 premiums. Some insurers may factor in additional premium increases because they expect ARPA subsidies to expire. Baseline premiums are already estimated to rise by 10% in 2023. As a result, many individuals may experience a drastic increase in their health care premiums in 2023, especially if Congress decides not to extend ARPA subsidies.


What This Means

Health care premiums are expected to rise in 2023 due to health care inflation, increased utilization and other factors. Whether Congress extends ARPA subsidies will likely have the most significant impact on how much enrollees will have to pay out of pocket for their health care premiums. While the exact amounts varied between states, ARPA subsidies equaled thousands of dollars in premiums for many. This gap would be difficult for many enrollees to close if Congress decides not to extend ARPA subsidies.


We will keep you apprised of any notable updates on this issue.