KFF: Federal Subsidies To Help Offset Premium Hikes Caused by ACA

Though the Affordable Care Act likely will contribute to higher premiums for people who purchase coverage in the individual market, federal subsidies issued through the ACA to low- and middle-income families will offset the additional costs, according to a Kaiser Family Foundation report, Kaiser Health News' "Capsules" reports.

The report predicted that premiums for coverage purchased on the individual market will increase because of ACA provisions that: 

• Require plans to cover a broader scope of items -- including maternity care and mental health treatment -- than previously covered; 
• Mandate that premiums for older beneficiaries be no more than three times higher than what younger people pay; 
• Bar insurers from rejecting people with pre-existing conditions; and
• Limit deductibles.

The report did not estimate how much premiums would rise, but a 2009 Congressional Budget Office report suggested an increase of between 10% and 30%. 

However, the report noted that in many cases the additional costs would be defrayed by federal subsidies. For example, about 80% of individuals whose premiums increased because of the age ratio mandate would have that increase offset by the federal subsidies. 

Some observers are concerned federal subsidies are not a viable solution, since U.S. residents will have to pay for those subsidies through taxes. In addition, certain lawmakers are proposing legislation to limit some of the provisions in an effort to keep premiums low.

For example, Rep. Phil Gingrey (R-Ga.) on Wednesday unveiled legislation (HR 544) that would allow states to set their own age ratios (Appleby, "Capsules," Kaiser Health News, 2/6).