Obamacare Premium Hikes Keep Sticking Taxpayers With the Bill

Millions of Americans purchasing health insurance through the Obamacare exchanges could face another year of double-digit premium increases. While those headlines focus on the cost of coverage, they overlook who ultimately pays for much of those increases. Obamacare's subsidy structure protects many exchange enrollees from rising premiums by shifting most of the added cost to taxpayers.

As benchmark premiums rise, federal premium tax credits rise with them. Instead of reducing the underlying cost of health insurance, the law has increasingly relied on larger taxpayer-funded subsidies to keep coverage affordable for many enrollees. The approach has helped shield consumers from higher premiums while steadily increasing federal spending.

Obamacare's Regulations Continue Driving Premium Growth

Obamacare fundamentally reshaped the individual insurance market through federal benefit mandates, community rating requirements, guaranteed issue rules, and numerous other regulations. Those policies expanded coverage requirements but also increased the cost of insurance.

Since 2014, benchmark Obamacare premiums for a representative 50-year-old earning 200 percent of the federal poverty level have increased by $5,898. During the same period, premiums in the individual market have grown at roughly twice the rate of employer-sponsored health insurance premiums.

The continued gap between the two markets reflects how Obamacare's regulatory framework has made exchange coverage increasingly expensive.

Taxpayers Are Financing Nearly 90 Percent of Premium Growth

Many consumers assume that rising premiums mean exchange enrollees are paying substantially more for coverage each year. For millions receiving premium subsidies, that is not how Obamacare operates.

Premium tax credits are tied directly to the cost of benchmark exchange plans. Every increase in benchmark premiums automatically produces larger federal subsidies.

According to available data, taxpayers have financed $5,279, or 89.5 percent, of the $5,898 increase in benchmark premiums since 2014 for the representative enrollee analyzed.

Congress expanded Obamacare's premium subsidies during the COVID-19 pandemic, further reducing what many enrollees pay out of pocket while increasing the federal government's share of premium costs.

By 2026, taxpayers are projected to cover approximately 80.3 percent of the benchmark premium for a subsidized enrollee earning 200 percent of the federal poverty level. The enrollee pays the remaining 19.7 percent.

Premium increases have continued, but a growing share of those costs now appears in the federal budget rather than in consumers' monthly premium payments.

Higher Federal Spending Has Not Strengthened the Marketplace

Growing taxpayer support has not resolved many of the structural problems affecting the Obamacare exchanges.

Recent research has documented widespread improper enrollment and "phantom coverage," where subsidized exchange plans remain active for individuals who are no longer eligible or are no longer using their insurance. Those improper enrollments inflate marketplace participation while directing billions of taxpayer dollars toward subsidies that should never have been paid.

The Center for a Free Economy has previously highlighted how phantom coverage and improper enrollment have distorted Obamacare enrollment figures and increased unnecessary federal spending.

Taken together, rising premiums, expanding subsidies, and weak program integrity have made Obamacare increasingly expensive while doing little to address the policies that continue driving healthcare costs higher.

Affordability Begins With Lower Premiums

Making health insurance more affordable requires reducing the cost of coverage itself, not simply increasing taxpayer subsidies.

Policymakers should pursue reforms that encourage competition, expand consumer choice, reduce unnecessary federal mandates, and strengthen oversight to prevent improper enrollment and wasteful spending. Those changes would address the underlying drivers of premium growth instead of asking taxpayers to absorb a larger share of the cost each year.

CFE Takeaway

Projected double-digit Obamacare premium increases should concern every taxpayer, even if many subsidized exchange enrollees are insulated from the immediate financial impact. Obamacare's subsidy formula automatically shifts much of each premium increase onto taxpayers, allowing federal spending to grow alongside insurance costs. A sustainable healthcare system should focus on lowering premiums through market-oriented reforms rather than relying on ever-larger taxpayer subsidies to mask rising prices.