The real cause of rising Obamacare premiums isn't the end of subsidies

During the COVID-19 pandemic, the federal government attempted to cushion the blow of rising health insurance costs with the provision of ‘‘enhanced” subsidies for Affordable Care Act (ACA) enrollees on the federal health insurance marketplace and state-based exchanges, like Georgia Access.

The subsidies, which passed in 2021 as part of the American Rescue Plan Act, were promoted as a way for low- and middle-income Americans to keep their health insurance in a time of economic uncertainty. However, this also included removing the 400 percent federal poverty level threshold for ACA subsidies, making the most affluent households eligible for taxpayer subsidized healthcare as well. Despite the federal public health emergency ending over two years ago, the subsidies have remained in place.

With those credits set to expire on Jan. 1, 2026, many Americans are bracing for sharp increases in their premiums. However, focusing solely on the loss of subsidies ignores how much of the rising cost of premiums is attributable to them, why premiums were climbing in the first place, and why short-term fixes have failed to stop them.

Two recent articles from The Atlanta Journal-Constitution outline some alarming prospects for Georgians participating in the ACA, also known as Obamacare. One article details the price hike shoppers have faced during the ‘window shopping” period for 2026 health insurance on Georgia Access, the ACA’s marketplace exchange in Georgia. These include premium quotes that, for some older, middle-income households, jump from monthly premiums in the hundreds to the thousands and silver plans with deductibles as high as $10,000. This article underscores that these listed prices reflect the scheduled expiration of enhanced subsidies.

Another story amplifies the economic stakes beyond individual households by highlighting a study from George Washington University (with funding from the left-leaning Commonwealth Fund). This study estimated that, if subsidies expire, Georgia could lose roughly 33,600 jobs next year as the health sector and its supply chain face a reduced customer base and rising uncompensated care. Georgia would reportedly rank as one of the hardest-hit states, with the premise that its already limited healthcare infrastructure could be further strained.

These expiring subsidies have become a critical part of a national healthcare debate that has even led to an ongoing shutdown of the federal government. Republicans in Congress have resisted demands from Democrats to extend the temporary subsidies, which according to an estimate from the Congressional Budget Office, would cost taxpayers about $350 billion over 10 years.

Despite their prominence in the political fight, however, expiring subsidies are not the driving force behind rising premiums. A recent article from Paragon Health Institute puts these expirations in per- spective, pointing out that they account for only a 4 percent increase in average premiums in 2026, part of a total expected increase of 20 percent.

Put another way, for the average ACA enrollee (a 50-yearold earning 200 percent of the federal poverty level), the benchmark premium is projected to rise from $8,326 to $9,991. Of that $1,665 increase, only $333 stem from the expiration of temporary COVIDera subsidies.

‘‘In other words,” writes Paragon program manager Gabrielle Kalisz, “the sharp jump in premiums cannot be blamed on the phase-out of the enhanced subsidies. The real drivers are the same structural flaws that have plagued Obamacare since 2014 and rising health care costs.”

Kalisz argues that the subsidies had a distorting effect on the ACA marketplace. By making plans effectively free in many cases, the credits encouraged an ‘‘enrollmentat-any-cost” environment that drew individuals who filed few or no claims, or were altogether ineligible. This made the overall risk pool appear artificially healthy, which in turn helped suppress average premiums and generated strong profits for insurers.

In their public filings, insurers themselves attribute most of the coming increases not to the loss of federal subsidies, but to structural pressures: higher medical utilization, general inflation, healthcare consolidation (a trend the ACA accelerated) and the growing expense of specialty drugs like GLP-1. Insurers also cite workforce shortages, price-transparency requirements and tariffs as secondary cost drivers. While it’s no debate whether premiums are rising, it’s clear that taxpayers, not consumer payments, are overwhelmingly sustaining the ACA marketplace.

It should also be noted that extending what were designed as temporary COVID-relief subsidies into perpetual entitlements is a fiscally unsound and structurally irresponsible mistake. It would gloss over more fundamental drivers of cost increases while committing taxpayers to a growing share of premiums year after year, exacerbating the already-present vulnerabilities in the ACA.

. Thomas Perdue is a policy analyst at the Georgia Public Policy Foundation.