Over 50 million Americans have been able to access affordable health insurance through enhanced tax credits provided by the Affordable Care Act (ACA). But with subsidies set to expire at the end of 2025, a new bill—the Healthcare Affordability Act—seeks to make this support permanent.

Let’s dive into what this legislation could mean for the future of health insurance and how plans can prepare for the changes ahead.

The Current State of ACA Subsidies

Since its enactment in 2010, the ACA has created a system of tax credits, or subsidies, that reduce the cost of premiums for Americans based on income levels, ensuring that healthcare coverage is within reach for qualifying individuals.

In response to the economic challenges brought on by the COVID-19 pandemic, these subsidies were enhanced through the American Rescue Plan (ARP) in 2021. These enhancements expanded eligibility, allowing individuals and families earning up to 400% of the federal poverty level to receive support.

But these enhanced subsidies are set to expire in 2025, which would result in sharp premium increases that make healthcare simply unaffordable for millions of Americans. The Healthcare Affordability Act aims to combat this by making subsidies permanent.

Implications of Permanent Subsidy Expansion

If the Healthcare Affordability Act passes, the permanent expansion of subsidies will have far-reaching effects for health plans.

Permanent subsidies will drive sustained enrollment growth by significantly expanding the size of the insured population. We saw this after the ARP enhanced ACA subsidies when 2.8 million more Americans received subsidies, leading to a 21% overall increase in ACA enrollment by 2022. If subsidies are made permanent, we can expect similar growth trends, providing health plans with a stable and growing pool of insured members.

On the other hand, a larger, more stable market encourages increased competition. It will be critical for health plans to adjust their strategies to capture a broader base of potential enrollees, which new market entrants are likely to enter the scene, eager to join this growing marketplace.

What Happens if Subsidies Aren’t Extended?

If ACA subsidies are not made permanent, millions of Americans would lose health insurance coverage. Without these tax credits, premiums would rise sharply—by more than double in at least 12 states—causing many to drop coverage, undoing years of progress in expanding affordable healthcare access.

For health plans, this drop in membership could mean significant revenue loss, particularly for plans that rely on a robust insured population to sustain their offerings. Star Ratings will also suffer, which depend heavily on member satisfaction and outcomes. With fewer members in the marketplace, particularly younger and healthier individuals, the risk pool would shift and drive-up costs for those who remain insured.

Additionally, the expiration of subsidies could have wider economic impacts for the country. Part-time and gig workers who rely on ACA subsidies may seek more traditional employment that offers healthcare coverage, leading to shifts in the labor market. This could also result in additional revenue losses for health plans that rely on a diverse member base to remain competitive.

Strategic Considerations for Health Plans

As the 2025 expiration date for subsidies approaches and there is no definitive answer on the Healthcare Affordability Act, health plans should be preparing for both scenarios—whether subsidies are made permanent or disappear.

Here’s what our team of experts recommends:

• Evaluate internal staffing and resources.
  Assess whether your current team has the right expertise to navigate any potential changes, including specialists in pharmacy, benefits administration, care management and regulatory compliance. If gaps exist, consider whether hiring a full-time employee or engaging a third-party vendor would be more cost-effective and efficient.
• Review your current plan portfolios.
  Conduct an impact analysis on existing plans to determine what changes are required based on potential outcomes and how these changes will affect other benefits in your portfolio. You should also consider how to minimize disruption for members and how to make sure changes can be made in time for submission deadlines.
• Assess pricing and product impacts.
  It’s critical to analyze how potential subsidy changes would affect pricing for both plans and members. If subsidies are removed, is it possible to transition members into alternative insurance products or plans? You may also consider building new products to address any gaps, including Individual Coverage Health Reimbursement Arrangements (ICHRA) or Qualified Small Employer Health Reimbursement Arrangements (QSHERA).

As the ACA marketplace faces great uncertainty, it’s essential for plans to stay informed, flexible and ready to adapt to whatever changes may come. Whether subsidies are made permanent or allowed to expire, organizations that anticipate potential outcomes, evaluate their internal resources and prepare for pricing and portfolio adjustments will be best positioned to navigate these changes successfully. Now is the time not only to mitigate risks but also to seize new opportunities emerging in the shifting health insurance landscape.