As part of its Health Literacy Month, Consumers for Quality Care (CQC) commissioned Milliman to provide an overview of the key drivers of individual market Affordable Care Act (ACA) premium changes from 2025 to 2026, along with implications for future years. The ACA marketplace has experienced significant changes in 2026, with millions of enrollees leaving the market and average premiums increasing approximately 18% from 2025. In this paper, we break down the drivers of the premium changes reported in public rate filings and explore implications for future plan years.
Health plans typically develop ACA premiums by analyzing the most recently available full calendar year of claims data, applying trend and adjustments for factors, demographic changes, morbidity shifts, and benefit design changes to estimate the projected claims costs for the plan year. Health plans also add retention costs for the administrative expenses and required profit margin. Generally, the most significant driver of annual increases in ACA premiums is the change in underlying cost of care, including paying healthcare professionals, hospitals, clinics, and pharmaceutical companies for their services, supplies, and products. However, the most substantial change in the individual ACA marketplace between 2025 and 2026 was the scheduled expiration of enhanced premium tax credits (ePTCs) at the end of 2025. The introduction of these temporary subsidies caused a one-time reduction in consumer net premium increases when introduced in 2021. Similarly, unwinding them at the end of 2025 caused an increase in consumer net premiums. In this paper, we analyze the key drivers of the average gross premium increase using public rate filing information.
The main discussion points include the following.
- Key drivers of the increase: Medical trend, pharmacy trend, morbidity change, and other adjustments
- Retention: Estimated administrative and operating costs, profit and risk margin, and taxes and fees
- Beyond 2026: How the expiration of ePTCs is expected to remain a contributing factor to rate increases
Commissioned by Consumers for Quality Care.