States Take on Skyrocketing Health Premiums in Wait for Congress

Health insurance for millions of Americans is shifting to state governments as officials grapple with premium surges, an approach that leaves many without coverage as Congress weighs whether to renew expired subsidies.

More than 20 million people face premiums on average doubling should federal lawmakers fail to reinstate lapsed Affordable Care Act subsidies enacted under former President Joe Biden. A handful of states are seeking to soften the financial blow, making moves to help cover premiums on a basis that analysts warn is largely temporary.

Most states “have come out and said ‘this isn’t really sustainable on a long-term basis,” said Louise Norris, a policy analyst for healthinsurance.org. States are “pitching in. They’re mitigating the problem, but not completely solving it.”

California and Colorado are appropriating funds to grapple with the problem. Hawaii Gov. Josh Green (D) has urged the state legislature to put forth over $16 million to cover subsidies.

North Dakota, Virginia, Rhode Island, and Utah pressed Congress to extend tax credits, writing in a letter that residents will be “adversely affected” should they expire.

Long term, states “couldn’t backfill all of what is being lost,” Norris said. “So the states are still very much pushing for the federal government to step in and do something.”

But while Congress is in the process of passing a sweeping spending bill for federal health agencies, that measure doesn’t address the expired subsidies.

Softening the Blow

At least seven states so far are allocating funds to blunt the impact of rate increases.

Massachusetts Gov. Maura Healey (D) announced the state would spend an additional $250 million to lower premiums for families making under 400% of the federal poverty level.

The enhanced tax credits prompted Massachusetts to reduce its own subsidies, said Audrey Morse Gasteier, executive director of the Health Connector exchange. Now the state is stepping up its spending again.

But the help won’t reach people with incomes above 400% of FPL, and the state doesn’t have any “rabbits up our sleeve,” she said. Proactive cancellations are double what they were last year, she added, and are disproportionately hitting the upper income bracket.

“For anybody who’s looking at the details here, and the human impact and the system impact, they would see that even the best-off states like Massachusetts, who have some resources and some ability to help buffer some of these impacts, cannot go the full mile,” she said. “And the consequences are going to be disastrous, and we’re already seeing those impacts bear out on the ground.”

New York Gov. Kathy Hochul (D) pledged to “protect affordable health care for more than 1.3 million New Yorkers” in her State of the State address this month, but has not yet revealed plans. Her office did not provide details.

State Sen. Gustavo Rivera (D), chair of the health committee, predicts the conversation around single-payer will pick up again this year as insurance costs continue to soar. Rivera is working with several other states on single-payer plans, and former New York Comptroller Brad Lander endorsed Rivera’s bill in a December report on rising costs.

“The Affordable Care Act certainly was a positive step, but the fact that it still had a reliance centrally on insurance plans has always been, I think, its biggest weakness,” Rivera said.

Red v. Blue

Only states with their own marketplaces have the flexibility to put forth their own subsidies to replace those lost at the federal level. And while 20 states and the District of Columbia operate state-based marketplaces, only a small portion are taking steps to help enrollees.

“Most of them are not doing anything for all enrollees. A lot of them are doing it for just the lowest income enrollees,” said Matt McGough, a policy analyst at KFF.

Most states with marketplaces are under Democratic leadership. McGough said it’s the more progressive states using “all the flexibility that they are given under the law to have subsidies, implement reinsurance programs, to extend their open enrollment window.”

Washington state is redistributing state subsidies to help those who don’t qualify for federal aid. Enrollees who do qualify for federal assistance in 2026 will receive up to $55 a month in state subsidies, while those who do not will receive up to $250. The state also effectively eliminated its tobacco surcharge.

Idaho and Georgia, led by Republicans, operate their own marketplaces, but haven’t announced steps to mitigate coverage losses for citizens.

McGough said blue states with state marketplaces also expanded Medicaid, meaning that even without state-based subsidies they’d be “less affected by the expiration of the enhanced premium tax credits.”

In Mississippi, Georgia, and Florida, at least 10% of people in all congressional districts are enrolled in ACA marketplaces, according to a KFF analysis.

Texas and Florida, where districts have a relatively high number of marketplace voters, “are going to really feel the consequences of the expiration,” McGough said.

However, McGough noted that “state-specific subsidies come with a big price tag,” and “it isn’t fiscally feasible for many states to backfill the lost federal tax credits for even a portion of enrollees given state budget restrictions.”

No Levers Left

States have exhausted most available tools to lower premiums. In 2017, states began launching reinsurance programs to subsidize high-cost outlier claims after the federal reinsurance program expired.

After President Donald Trump stopped funding “cost-sharing reduction” subsidies for out-of-pocket expenses—which Congress never properly appropriated—states compensated in 2018 by exploiting a quirk in how premium subsidies are calculated.

The “silver-loading” strategy led to higher government spending and prompted Congress to revisit CSRs in the debate around extending the expiring premium subsidies.

Norris said there are long-term policy solutions that could help. But with states scrambling for “immediate fixes,” she said “there’s not really a solution beyond throwing money at the problem. Because money is the crux of the issue.”