Why are expiring ACA subsidies raising health insurance premiums? – Brookings

Report on the Expiration of U.S. Affordable Care Act Subsidies and Implications for Sustainable Development Goals

1. Executive Summary

A significant policy shift in the United States, the scheduled expiration of expanded Affordable Care Act (ACA) premium subsidies at the end of 2025, poses a direct challenge to progress on several key Sustainable Development Goals (SDGs). The resulting increase in healthcare costs is projected to reduce insurance coverage for millions, undermining efforts to achieve **SDG 3 (Good Health and Well-being)**, particularly Target 3.8 on universal health coverage. This development also threatens to exacerbate financial hardship, conflicting with **SDG 1 (No Poverty)**, and widen health disparities, running counter to **SDG 10 (Reduced Inequalities)**. This report analyzes the causes and multifaceted consequences of this policy change through the lens of the 2030 Agenda for Sustainable Development.

2. Analysis of Impending Premium Increases

The primary driver of rising healthcare costs for individuals on ACA plans is the termination of enhanced federal subsidies first implemented in 2021. This policy reversal creates a dual financial pressure on consumers and the healthcare market.

1. Cessation of Enhanced Subsidies: The core issue is the reduction in financial assistance from the federal government, which will require enrollees to pay a significantly larger portion of their monthly premiums out-of-pocket.
2. Adverse Selection and Market Reaction: Insurers anticipate that rising costs will cause healthier individuals to drop their coverage, leaving a sicker, more expensive risk pool. In response, they are preemptively increasing base “sticker” premiums to compensate for this anticipated shift.
3. Impact on Unsubsidized Population: The 15% of marketplace enrollees who do not receive subsidies will be directly impacted by the increase in sticker premiums, compounding the affordability crisis.

3. Setbacks to Sustainable Development Goal 3: Good Health and Well-being

The projected loss of health insurance coverage represents a significant regression from the aims of SDG 3, which seeks to ensure healthy lives and promote well-being for all at all ages.

• Erosion of Universal Health Coverage (Target 3.8): The combination of subsidy expiration and other legislative changes, such as the “One Big Beautiful Bill Act,” is estimated by the Congressional Budget Office to increase the number of uninsured Americans by approximately 15 million. This would erase nearly three-quarters of the coverage gains achieved since the ACA’s initial implementation.
• Reduced Access to Essential Care: A substantial body of evidence confirms that uninsured individuals access less healthcare, leading to poorer health outcomes.
• Increased Mortality Rates: Recent research, facilitated by natural experiments from the ACA’s rollout, has established a clearer link between a lack of health insurance and higher mortality rates.

4. Contradiction of SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities)

Health insurance serves as a critical social protection mechanism. Its erosion has profound implications for economic stability and social equity, directly impacting SDG 1 and SDG 10.

Impact on Financial Security and Poverty (SDG 1)

• Health insurance provides essential financial protection against catastrophic medical expenses. Without it, individuals and families face large out-of-pocket bills that can lead to debt and poverty, undermining their ability to meet other basic needs.
• The loss of coverage dismantles a key pillar of the social safety net, moving away from the goal of implementing nationally appropriate social protection systems for all.

Exacerbation of Health and Economic Disparities (SDG 10)

• The termination of subsidies will disproportionately harm low- and middle-income individuals and families who rely on this assistance to afford coverage.
• This policy will widen the gap in access to healthcare between different socioeconomic groups, directly contravening the objective of reducing inequality within and among countries.

5. Long-Term Outlook and Policy Considerations

The current policy debate is a continuation of the decade-long discourse surrounding the role and scope of the ACA. The path forward will have lasting implications for the nation’s alignment with global sustainable development commitments.

1. Policy Trajectory Away from SDGs: The expiration of subsidies and legislative efforts to pare back Medicaid and marketplace eligibility represent a policy direction that diverges from the principles of universal health coverage, poverty reduction, and greater equality.
2. Policy Trajectory Toward SDGs: Conversely, any future legislative action to reinstate or make permanent the expanded subsidies would signal a renewed effort to strengthen the ACA framework and advance progress toward achieving SDGs 1, 3, and 10.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 3: Good Health and Well-being

  This is the most prominent SDG in the article. The entire discussion revolves around the Affordable Care Act (ACA), health insurance coverage, access to healthcare services, and the resulting health outcomes. The article explicitly mentions that when people become uninsured, they “access less health care,” which has “downstream consequences for their health outcomes,” including an increased likelihood of mortality.

• SDG 1: No Poverty

  The article connects health insurance to financial stability, which is a key component of poverty reduction. It states that health insurance is “a source of financial protection” and that it improves “financial security” by preventing individuals from “facing very large bills out of pocket” after a health shock. The expiration of subsidies increases the financial burden on individuals, potentially pushing them towards poverty.

• SDG 10: Reduced Inequalities

  The ACA and its premium subsidies are social protection policies designed to reduce inequality in access to healthcare. The article discusses how these subsidies make coverage affordable for a broad swath of the population. The debate over extending or expiring these subsidies is fundamentally about a policy that affects equality, as the changes disproportionately impact those who rely on government assistance to afford health insurance.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 3.8: Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all.

  The article directly addresses this target by focusing on the mechanisms for achieving health coverage (the ACA marketplaces), financial risk protection (premium subsidies), and access to care. The potential expiration of subsidies threatens all aspects of this target by making coverage unaffordable, increasing financial risk, and consequently reducing access to healthcare for millions.

• Target 1.3: Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable.

  The ACA premium subsidies are a clear example of a “nationally appropriate social protection system.” The article explains that “around 85% of them, receive a subsidy from the federal government that helps pay their premium.” The potential expiration of these subsidies represents a significant scaling back of this social protection system, directly impacting its coverage of vulnerable populations.

• Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality.

  The ACA itself, and specifically the expanded premium subsidies discussed in the article, are social protection policies aimed at achieving greater equality in health outcomes and financial security. The article frames the political debate as a “push and pull” over these policies, with one side seeking to “make further progress in reducing uninsurance” and the other attempting to “make progress in paring back the ACA.”

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicators for Target 3.8

  1. Coverage of health services: The article explicitly uses the “number of people with health insurance” and the “uninsured rate” as key metrics. It quantifies the potential impact of policy changes, stating they could lead to a “reduction in insurance coverage of around 15 million people” and wipe out “about three quarters of the fairly large decline we saw in the uninsured rate.”
  2. Financial risk protection: The article implies this indicator by discussing the “big increases in their monthly health insurance premiums” and the risk of “facing very large bills out of pocket.” The affordability of premiums and the level of out-of-pocket costs are direct measures of financial protection.

• Indicator for Target 1.3

  1. Population covered by social protection systems: The article provides a direct indicator by stating that “around 85%” of people who buy coverage on the individual market receive a subsidy. The change in the number and percentage of people receiving these subsidies serves as a clear measure of the scope of this social protection system.

• Indicator for Target 10.4

  1. Existence and scope of social protection policies: While not a quantitative metric, the article’s entire focus is on the status of a key social protection policy—the ACA premium subsidies. The legislative actions to expand, extend, or allow the expiration of these subsidies are themselves indicators of policy adoption (or reversal) aimed at affecting equality.

4. Summary Table of SDGs, Targets, and Indicators

Source: brookings.edu