Economists: Rural Uninsured Rates Likely to Rise if ACA Premium Tax Credits Expire

The number of rural residents who aren't covered by health insurance is likely to rise if the premium tax credits associated with the Affordable Care Act expire at the end of 2025.

Researchers with the Urban Institute and the Robert Wood Johnson Foundation found that those who opt to continue to carry health insurance even after the tax credits expire would see their premiums skyrocket, in some cases more than doubling.

For residents in rural communities across the country, those rising prices could mean not having access to health insurance anymore.

"Research continues to show the profound health and economic fallout that will occur if Congress allows these tax credits to expire in 2025," said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation. "At a time of persistent elevated prices and tight household budgets, allowing the credits to expire will further force families to make difficult choices between healthcare coverage, housing, food, and transportation."

The 10 states where farmers are the highest share of the labor force had the highest enrollment rates in the ACA and Medicaid, Hempstead said in an interview with the Daily Yonder. Rural communities also have higher healthcare costs, making insurance more important, she said.

"The three most expensive states in the country (for healthcare) are Alaska, Wyoming, and West Virginia," she said.When insurance is really expensive, then the tax credits become super important."

President-elect Donald Trump promised to repeal the ACA on the campaign trail. Now, as the Trump Administration prepares to take office, he and Speaker of the House Mike Johnson have signaled that the program that provides tax credits in the form of premium assistance is on the chopping block.

Originally passed in 2009 during President Barack Obama's administration, the ACA lowered the cost of health insurance by increasing subsidies available for eligible people to buy insurance in a nationwide health insurance marketplace. For some people with lower incomes, the tax credits reduced net premiums to zero.

In 2022, enhanced tax credits for households making 400% of the federal poverty level were part of the Inflation Reduction Act. Officials estimate that more than 20 million people have purchased health insurance through the ACA's marketplace.

If those tax credits are allowed to expire in 2025, the study released December 9 found that enrollment is expected to decrease by 7.2 million people. For those who opt to remain enrolled, premiums would likely increase significantly.

The analysis found that allowing the credits to expire would increase out-of-pocket healthcare spending in every state, in every income group, in every age group and for every ethnicity.

Those increases would vary per state, however. For people with incomes below 250% of the federal poverty level (roughly $37,000 per year), the average increase would be $587 per year, ranging from $193 per year in New Mexico to $924 per year in Alaska. For those making more than $37,000 per year, premiums would increase an average of $727 per year, ranging from $119 per year in West Virginia to $1,434 in California.

"Incomes tend to be lower in rural areas, so it's unlikely they'd be able to absorb that change," said Tim McBride, economist and co-director with the Center for Advancing Health Services, Policy & Economics Research at Washington University in St. Louis. "I would expect that you would have a bigger impact on the number of people enrolled in rural areas."

The premium increases would be higher for those making more than 400% of the federal poverty level, or roughly $60,000 per year for an individual or $125,000 for a family of four. If the enhanced PTCs expire, the individual or family will lose all subsidies and households would have to pay the entire premium instead of a maximum 8.5% of their income. While the premiums would vary by age and location, the average family would see their premiums go up by more than $2,900 per person annually, the study found.

And the premiums would go up substantially for older adults. The study found that the average Marketplace enrollee who is 60 with an average premium and an income of $60,241 per year would have to spend 20% of their income on health insurance premiums, or roughly $11,832 per year, up from $5,120 per year with the enhanced taxcredits.

Before the ACA was enacted, McBride said, about a quarter (24%) of rural residents did not have health insurance. Now, just over a dozen years later, that number has dropped to just over 12%, he said.

"Rural people are much less likely to be covered by employer-provided insurance, and they are probably going to have lower wage jobs. So increases in the premiums will be pretty unaffordable if they don't have the (tax credits)," McBride said.

However, the impact won't just hit consumers, but insurance companies will feel it as well, McBride said.

"If you think about an industry losing 7 million paying customers, that's significant," he said. "I can't imagine them not lobbying to stop the cuts."

Fewer rural residents with health insurance would negatively impact rural hospitals, too.

"These enhanced PTCs are saving rural enrollees an average of $890 per year, about 28% more than their urban counterparts according to a recent study by (the Department of Health and Human Services)," Carrie Cochran-McClain, Chief Policy Officer for the National Rural Health Association, wrote in an email interview with the Daily Yonder. "Despite decreases in uninsured rates among rural adults, rural areas continue to have higher uninsured rates than urban areas, meaning expiration of the enhanced (tax credits) would have a disproportionate impact on rural areas throughout the country.

"Rural Americans, who already navigate some of the most challenging access barriers, will be significantly impacted by the expiration of the (enhanced tax credits)," Cochran-McCLain continued, "meaning that rural areas will once again contend with soaring premiums and limited choices, as hospitals close and provider networks thin out in vast stretches of the country."

She added that the NRHA's member hospitals are concerned about the impact to their bottom line.

"Given that 50% of rural hospitals across the country are operating on negative margins, NRHA members are extremely concerned about the potential loss of coverage for their patients if Congress does not act to extend the (tax credits)," she said. "Tools like the premiums tax calculator both at the state/district and personal level are powerful tools to capture the impact on the individuals and families impacted by the change."

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