How the GOP budget bill will affect the cost of California health insurance

Heather Altman quit her corporate job and opened an environmental consulting business in 2014 when the Affordable Care Act made it possible for her to afford independent health insurance. Her monthly premium for a platinum plan was $356.

Today, Altman has downgraded to a gold plan and pays $1,147 per month. That's a 222% increase over the past decade for less comprehensive coverage. Medical inflation has always outpaced general inflation, but early analyses project premiums will increase even more dramatically as a result of the reconciliation budget recently signed by President Donald Trump, and Altman is worried she won't be able to pay for health insurance any longer.

"Since the Senate passed this monstrosity I've been trying to figure out how I can land on my feet," Altman said.

Altman is one of nearly 2 million people in California who rely on the Affordable Care Act marketplace, commonly known as Obamacare or Covered California. Many own their own businesses like Altman or work for small employers that don't provide insurance.

The majority of enrollees are lower- to middle-income earners making $60,240 or less as individuals or $124,800 or less as a family of four. Nearly 800,000 people in California make half that amount.

Trump's budget bill made significant changes to Covered California that experts and insurers say will increase out-of-pocket costs for consumers.

This includes more complicated enrollment and verification procedures; eliminating automatic re-enrollment; prohibiting people who sign up outside the end-of-year open enrollment period from qualifying for financial assistance; prohibiting certain immigrant groups — including legal refugees — from receiving financial assistance; and requiring people who inaccurately predict their income to repay all subsidies received, a change from when previous repayments were capped based on income.

The biggest hit to consumers came by omission: Trump's budget bill did not extend enhanced subsidies, which will expire at the end of this year. Those subsidies were enacted during the COVID-19 pandemic to ensure more Americans could afford health insurance.

As a result, premiums fell for all income levels and enrollment doubled nationwide from 12 million to 24 million people between 2021 and 2025.

In California, nearly 90% of enrollees receive federal subsidies.

Some of these changes, including the expiration of subsidies, will go into effect next year, which means consumers will see higher prices as soon as November when open enrollment starts. Other changes, such as who can enroll and when, will start in 2028.

Cost will rise significantly

In California on average, premiums are expected to increase by 66%, or $101, per month starting next year without subsidies, according to projections from Covered California. Lower-income people will see even higher increases because they receive more subsidies.

Those making less than 400% of the federal poverty level (about $60,240 per year for an individual) are projected to pay an average of $191 more monthly, according to Covered California data.

More than 170,000 middle-income enrollees will lose financial assistance entirely. Some federal subsidies will still be available, but they are less comprehensive than the enhanced subsidies, and fewer people qualify.

Congress could still decide to extend the enhanced subsidies before year's end, but without further action costs will jump. The nonpartisan Congressional Budget Office estimates that nearly 4 million people nationwide would drop coverage because of cost increases if the subsidies expire.

That puts people like Altman in a bind

Altman said even without any changes to the Affordable Care Act marketplace, the regular annual premium increases are "almost unsustainable." Most years, she makes too much money to qualify for subsidies, but health care costs are still a drain on her finances.

On average over the past decade, Altman's premiums have increased by more than 11% annually, according to data she shared with CalMatters. In comparison, the Consumer Price Index, a measure of inflation, increased an average of 2.7% annually during the same time period, according to U.S. Bureau of Labor Statistics data.

"If this is what I knew the situation would be when I started my business, I never would have done it," Altman said. About one in four Covered California enrollees is self-employed. Altman is contemplating asking a colleague to hire her without salary just for the benefits, she said.

That type of thinking is common right now, said Janae Trevillion, a long-time human resources consultant who works with small businesses. She said some of her clients, like Altman, are trying to get corporate jobs just for the benefits.

"There's a lot of movement happening," Trevillion said.

600,000 could drop Covered California

The enrollment changes that will take effect in 2028 will also cause people to get rid of their Covered California insurance, Trevillion said. As the paperwork and verification processes get more complicated, fewer people will be willing to go through the sign up process, she said.

"People get frustrated easily," Trevillion said. "People are going to say 'I'm not interested,' and people are not going to want to participate in having a marketplace plan."

Between added enrollment complexities and higher out-of-pocket costs, Covered California estimates that 600,000 Californians will drop their insurance.

"We have tried for our entire existence to make the process easier, to minimize administrative barriers, to simplify … to remove this friction from the system," said Covered California Executive Director Jessica Altman, who is not related to Heather Altman. "We know that it matters, and so anything that goes the other way is going to result in less people covered."

About 70% of Covered California enrollees are automatically re-enrolled each year, a process that will end under the new policies implemented by Trump's budget reconciliation.

As more people drop out, costs will increase even further, said Edwin Park, a research professor at Georgetown University and a leading expert on Affordable Care Act expansions.

"Any time you have big reductions in enrollment, the ones who are most likely to be disenrolled … are the healthiest, lowest cost people, so that means a sicker risk pool, which in turn means higher premiums for those inside the marketplace," Park said.

In recent years, California has consistently had one of the lowest-risk insurance pools in the country because Covered California has successfully attracted younger and healthier people to sign up for insurance, Jessica Altman said.

The Congressional Budget Office estimates that premiums for Affordable Care Act benchmark silver plans, the second-to-lowest-cost silver plan in each state, will increase by an additional 7.9% as risk pools become sicker.