As many as 371,000 Alabamians could see insurance costs increase if Congress doesn’t pass a law extending enhanced health insurance subsidies provided under the 2022 Inflation Reduction Act (IRA).
Affordable Care Act (ACA) subsidies were increased as part of the 2021 American Rescue Plan Act (ARPA) and extended by the IRA have significantly made health insurance affordable for hundreds of thousands of Alabamians who have enrolled in health insurance through the ACA marketplace.
But the subsidies are set to expire at the end of 2025. If they expire, Alabamians’ annual health insurance premium costs could increase by an average of 93%, or $612 annually.
According to a Center for American Progress analysis, 96% of people who selected a health insurance plan through the ACA marketplace in Alabama received a subsidy.
Debbie Smith, campaign director for Arise’s Cover Alabama, which advocates for Medicaid expansion, said the enhanced subsidies have been a lifeline for people to get health insurance in states that have not expanded Medicaid. If subsidies expire, she fears people may forgo getting coverage, which could lead to an increase in uninsured people in Alabama.
“I don’t think it’s an exaggeration to say that it would be catastrophic,” Smith said.
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ARPA, passed in March 2021 as part of a program of COVID-19 relief, expanded eligibility for ACA health insurance subsidies to those purchasing their own health care through the marketplace across income levels, decreasing their annual health insurance payment by $705 annually on average. For example, enrollees just above poverty must pay about 2% of their income for a benchmark silver plan without enhanced subsidies. With enhanced subsidies, most near-poverty enrollees can get benchmark silver plans for free.
Those who earn more than 400% of the federal poverty level, $103,280 for a family of three, also benefit and have their health plan costs capped at 8.5% of income. Without the enhanced subsidies, they would have to pay full price.
The statute also significantly increased the amount of financial support for those with lower incomes already qualified under the ACA. The Inflation Reduction Act xtended the subsidies through 2025.
Over 386,000 Alabamians chose a 2024 health insurance plan through the federally-run marketplace, according to a final report from the Centers for Medicare and Medicaid Services. That was an increase of about 128,000 people from the previous year — a near 50% jump — when around 258,000 Alabamians selected a plan through the federally-run marketplace.
Jared Ortaliza, a research associate for the ACA program at KFF, a nonprofit health research organization, said that while the enhanced subsidies are still available through 2025, the conversation around their expiration is already underway. Health insurance companies will begin setting their rates for 2026 as early as the summer of 2025, needing clarity on the future of these subsidies.
“The enhanced subsidies are set to expire at the end of next year, but the marketplace premiums are actually set in advance. That’s going to happen in summer 2025, so insurers will want to know whether the enhanced subsidies will expire ahead of time, so that way they can set their rates accordingly,” Ortaliza said.
He said that if it’s uncertain whether enhanced subsidies will be extended by next spring or summer, insurers may raise rates as they did in 2022, risking financial losses if they misprice.
Blue Cross Blue Shield of Alabama (BCBS), Alabama’s dominant health insurer, sells their plans on the marketplace. Messages seeking comment were left with BCBS.
Smith said they will start an educational campaign to inform both the public and policymakers about the impact these subsidies have had in Alabama.
Alabamians who earn between 18% ($4,475) and 100% ($24,860) of the federal poverty rate for a family of three typically fall into this coverage gap. Subsidies for insurance plans under the Affordable Care Act are only available for those making between 100% and 400% of the poverty line, leaving those who earn less ineligible.
She said that the number of people in the coverage gap has decreased significantly, which could be due to people who no longer qualify for Medicaid going to the marketplace. Estimates of people in the coverage gap shrank from about 300,000 Alabamians in a 2022 Public Affairs Research Council of Alabama report down to 101,000 in a 2024 KFF analysis.
Smith said that if the subsidies go away, many will not be able to afford coverage and probably go without it, even though they still need health care.
“So they may show up at the emergency room department to get their care, where it’s more expensive, and those costs will be shifted onto the hospitals in the area and potentially worsen our rural healthcare crisis,” Smith said.
