Rising ACA Marketplace costs and Dropping subsidies: FAQs

And how the U.S. health insurance system is like a hamburger

The Affordable Care Act subsidies are still looming on Congressional to-do/wish lists, particularly with news of insurers raising premiums 26% and average increases of 114% for enrollees who used to be subsidized. Not to mention these subsidies were at the heart of the longest government shutdown in U.S. history. What’s at stake and where do they fit in the healthcare landscape? I have answers to all these burning FAQs!

What was the goal of the Affordable Care Act/Obamacare?

The primary goal of the ACA was to increase U.S. health insurance coverage. You may encounter discussion of miscellaneous other things (taxing tanning salons!), but the core components all attacked the problem that uninsurance rates ranged between 17% and 14% before the ACA was passed.¹ After the ACA’s passage, between 2013 and 2016, the uninsured rate dropped by nearly half, to only 8-9%. Clearly, some of the ACA’s provisions were successful in this goal.

Back up, why does the U.S. have such a high rate of uninsurance compared to, say, Europe?

Most European health insurance systems have rates of less than 1% uninsured. This is because the U.S. and Europe started at different places historically. The first European health system was set up by Bismark in 1883, as a nationalized system.² (Ironically, it was a bribe to entice voters to his political party and away from his socialist opponents.) In the U.S., the beginnings of large-scale insurance offerings sprung from wage controls during World War II. Since employers couldn’t raise wages, but faced labor shortages, employers began offering health insurance coverage to entice workers away from their competitors. Neither of these systems started with grand long-term, well-planned schemes, but the different origins led our systems to diverge.

What IS the U.S. health insurance structure?

Since it’s not a nationalized system, U.S. health insurance is really several systems. Think of the health insurance landscape as a series of layers, something uniquely American: say, a hamburger!

The top and the bottom, the hamburger bun, is government-provided insurance. On top is Medicare, federally funded health insurance for those 65 and older. This insures about 65 million older adults in the U.S. These folks were fine before the ACA and are fine after (where I define “fine” as “having insurance coverage”).

The bottom of the hamburger bun is Medicaid, federal and state funded insurance coverage intended for low-income groups. It focuses primarily on pregnant women, children, and low-income families. The ACA tried to increase the number of people insured from the bottom up by expanding Medicaid, now accomplished in 41 states. Medicaid expansions raise the income threshold and include more single adults. (Note this layer is also not as large and tasty-looking as Medicare…but that’s for another post.)

The U.S. Health insurance system is as American as a hamburger. But we can’t all agree on the best fillings!

The meat of the burger, what’s driving it all, is the most populous layer- Employer-Sponsored Insurance (ESI). This is about 164 million people (100 million more than covered by Medicare), or about 60% of the working age population.³ Here insurance coverage is provided by your employer, whatever plans and providers it selects. The ACA tried to increase coverage using this layer with an employer mandate requiring companies with more than 50 full-time workers to offer health insurance or face a penalty. This mandate didn’t matter so much, since 98% of firms with 200 or more workers and about 80% of firms between 10 and 199 workers offered it anyway. Health insurance attracts better workers and since it’s a historical norm, a business is less competitive if it doesn’t offer ESI.

The problem layer is above low-income government insurance but below ESI: “not lucky enough for ESI” and “not poor enough for Medicaid.” This layer includes many self-employed workers or those working for small businesses, part-time or gig workers, or workers in the service industry, such as hotel and construction workers. Service industry jobs are historically less likely to offer ESI. The people in this layer, about 27.2 million of them, need to find insurance on their own, often at a price disadvantage as an individual and without their employer covering part of the costs.

Before the ACA, individuals in this layer also faced “pre-existing condition” clauses from insurers, where an insurer could charge higher rates based on individual health history. This never was true for ESI, Medicare, or Medicaid. The ACA made pricing on health history illegal, but you can understand why insurers might not like this—now they can’t charge a higher price to a higher cost individual. The ACA’s answer to insurers’ concern was the “individual mandate.” A requirement that everyone in the U.S. would have to purchase health insurance somehow or pay a tax penalty. This was to make everyone, both sick and healthy, buy into insurance so average costs would be lower.

The individual mandate was struck down by the Supreme Court and the tax penalty is now $0. Thus, the mandate is essentially repealed. However, to help people in this uninsured layer purchase the mandated health insurance, the ACA created the Insurance Marketplaces. The Health Insurance Marketplaces are now formal markets with insurers chosen annually by state governments and three tiers of standardized plans- Gold, Silver, and Bronze.

Has the ACA fulfilled its goal?

Treating the problem layer of the individual insurance market is much like trying to choose the best hamburger topping. It’s not the biggest part of the puzzle, ESI and Medicare/Medicaid cover about 85% of Americans, but we all have opinions on what would be best for the last bit.

The ACA did reduce the uninsurance rate from around 15% to 8%. The Marketplace Exchanges are generally functioning as accessible places to purchase plans without “pre-existing condition” rates. The new Marketplace plans are standardized in three tiers and listed online at a regional level, searchable via your zip code.⁴ Plans are no longer priced based on individual health history. All this is less confusing and some may consider it more “fair” than the fractured individual market that existed pre-ACA.

What about these Marketplace Exchanges- are they working?

The Marketplace Exchanges still face the problem that:

Who likes insurance best?

Sick people!

When only sick people enroll, costs start rising. As such, the premiums on the Exchanges are quite high and areas with sicker people often have few insurers willing to participate. Premiums are so high, in fact, that during the pandemic we attempted a bandaid fix and subsidized premiums. Thus, our current political dilemma.

Since the pandemic-era subsidies were enacted, the number of enrollees in the Marketplace Exchanges doubled from 11 million to 24 million. This is a standard demand curve: when price gets lower, demand is higher. Since 2023, approximately 90% of the enrollees on the Exchanges are subsidized in some way.⁵ The subsidies currently under debate cover enrollees with income up to 400% of the Federal Poverty Level and index their premiums to be a fixed percentage of their income, while the federal government picks up the rest.

So, should we extend the subsidies?

First, let’s talk about premiums. Premiums are expected to rise substantially in the Insurance Marketplaces when the subsidies expire, but there are several reasons for this. When the pandemic enhanced premium subsidies expire, this will reduce the amount of assistance for those enrollees with incomes less than 400% of the Federal Poverty Level and will eliminate subsidies for enrollees above this threshold.

However, insurance premiums charged to the government are also rising. Health insurers are requesting the largest rate increase on the Marketplaces since 2018, with an average increase of 26% in premiums. In states that run their own Marketplaces, the average benchmark (second-lowest cost) silver premium, on which the tax credit calculation is based, is rising 17% next year. In states that use Healthcare.gov, these premiums are rising an average of 30%.⁶

Premiums that enrollees see will rise both because they will be footing more of the bill but also because of economic fundamentals. Three reason why the exchanges have high prices are: 1. Adverse selection from (who likes insurance?…) sicker enrollees 2. A lack of price incentives for insurers because enrollees don’t face the true premiums when subsidized and 3. Health care prices have been rising faster than inflation in all layers of the U.S. health insurance burger.

This third reason is problematic for more than just the Marketplaces. In the U.S., we have come to treat “healthcare” and “health insurance” as synonymous. Health insurance is merely the go-between the patient and the larger health care market. As premiums rise, this also reflects general price levels of the health care system. Price is a signal. Focusing merely on controlling or subsidizing premiums doesn’t address the underlying problems of a lack of competition, overregulation, and putting services into insurance that don’t belong there. Rising premiums are everyone’s problem. Rather than subsidizing, we should be focusing on reducing healthcare costs in the first place.

Did I miss a FAQ? Put it in the comments or hit reply and I’ll answer!

1. “Health Insurance Coverage of the Total Population, 2013-2024” Kaiser Family Foundation. KFF State Health Facts, Kaiser Family Foundation, Accessed Jan 2026.

2. Boissoneault, Lorraine, “Bismarck Tried to End Socialism’s Grip—By Offering Government Healthcare,” Smithsonian Magazine, Smithsonian Institution, July 14, 2017.

3. Claxon, Gary, Rae, Matthew, and Winger, Audrey. “Employer-Sponsored Health Insurance 101” Kaiser Family Foundation. Oct 8, 2025.

Kaiser Family Foundation “2024 Employer Health Benefits Survey” Oct 9, 2024.

4. If you’d like to browse your zipcode, go to https://www.healthcare.gov/

5. Kaiser Family Foundation, “Marketplace Plan Selections with Financial Assistance”, 2020-2025.

6. Ortaliza, Jared et al. “How much and why ACA Marketplace premiums are going up in 2026.” Peterson-KFF Health System Tracker.

Cox, Cynthia. “ACA Insurers Are Raising Premiums by an Estimated 26%, but Most Enrollees Could See Sharper Increases in What They Pay.” Quick Takes: Kaiser Family Foundation. Oct 28, 2025.

Many thanks to Sara Holland, health insurance scholar and foodie, for her brilliance with the hamburger analogy.