Why Your Monthly Health Insurance Premiums May Be 7% Higher in 2025

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If you’re one of the millions of Americans relying on Affordable Care Act (ACA) marketplace plans for health insurance, you may be facing a notable increase in your monthly premiums in 2025. Recent data from the Kaiser Family Foundation (KFF) reveals that health insurers are proposing a median premium increase of 7% for ACA plans in 2025. This rise, while expected in some regions, may vary significantly depending on the insurance provider and state-specific factors.

Understanding why premiums are increasing, how these changes might affect your healthcare coverage, and what you can do to manage the costs are essential as the ACA marketplace open enrollment period begins on November 1, 2024.


What Are Health Premiums?

Before diving into why premiums are increasing, it’s important to clarify what a health insurance premium is. A premium refers to the fixed amount you pay every month for health insurance coverage, regardless of whether you use healthcare services that month. It’s different from other healthcare costs such as copays, which are the small fees you may pay at the time of a healthcare visit, and deductibles, the out-of-pocket amount you must pay before your insurance starts to cover healthcare costs.

Premiums represent a consistent monthly expense and are typically the primary cost of maintaining health insurance, making any change to this figure particularly significant for policyholders. The projected 7% increase for 2025 could mean a notable rise in your monthly payments.


Why Are ACA Premiums Increasing?

Several factors are contributing to the 7% median increase in ACA premiums, many of which reflect broader trends in healthcare costs. According to an analysis of 324 insurer filings by KFF, while 50 insurers proposed reducing their premiums, 85 requested increases higher than 10%, underscoring that rising costs are not uniformly distributed but are pervasive in many areas of the market.

Key drivers of these rising premiums include,

Prescription Drug Costs: One of the most significant factors is the escalating cost of prescription drugs. Specialty medications, in particular, are contributing heavily to the rising premiums. According to Excellus Health Plan, Inc., specialty drugs are used by just 2% of their members but account for over 50% of total drug spending. Drugs such as Wegovy and Zepbound, popular obesity medications, have become emblematic of this issue. While these drugs provide essential treatment for chronic conditions, their high costs are reflected in the overall cost of insurance plans.

Hospital Care and Labor Shortages: Hospital expenses also play a significant role in premium increases. Hospitals are dealing with higher operating costs, including rising labor costs due to a shortage of healthcare workers and increased demand for care. In many regions, hospital market consolidation has given large hospital networks more leverage to negotiate higher prices with insurance companies. The result is higher costs that insurers pass on to consumers through increased premiums.

Inflation: Like nearly every other sector of the economy, healthcare has been impacted by inflation. The cost of everything from medical supplies to hospital equipment has risen sharply over the past few years. As hospitals and other providers increase their prices to keep up with inflation, insurers must follow suit by raising premiums to maintain coverage.

State-Specific Factors: It’s important to remember that insurance premiums are affected by regional market conditions. As Cori Uccello, a senior health fellow at the American Academy of Actuaries, notes, individual insurers may face unique challenges based on trends and developments in their state or local markets. This can lead to a wide variation in premium increases across different states and insurers.


Reviewing Your Plan Is Essential

While not all insurers will raise their rates, it’s essential to review your current plan during the 2025 open enrollment period to ensure that you’re getting the best value. Automatically renewing your existing plan without checking for increases or comparing your options could result in you paying more than necessary.

Marilyn Serafini, executive director of the Health Program at the Bipartisan Policy Center, emphasizes the importance of exploring your options. Even if your insurer is proposing a significant rate increase, you may find lower-cost alternatives within the marketplace. Some insurers may even offer plans with no premium increases or with benefits that better suit your needs.


How to Reduce Your Monthly Health Insurance Premiums

If you’re concerned about the impact of these premium increases, there are several ways to manage or reduce your monthly health insurance costs.

Premium Tax Credits (PTCs): Depending on your income, you may qualify for a premium tax credit. This credit can reduce your monthly premium throughout the year or lower the amount of taxes you owe when you file. To qualify, you generally need to earn at least 100% of the federal poverty level, which in 2024 equates to an individual income of $15,060. Those earning less may qualify for Medicaid, which doesn’t charge premiums, deductibles, or copayments.

Choosing the Right ACA Tier: ACA plans are divided into four tiers: bronze, silver, gold, and platinum. Lower-tier plans, like bronze, often have the lowest premiums but higher out-of-pocket costs. Conversely, platinum plans have the highest premiums but lower deductibles and copays. Depending on your health needs and how much medical care you expect to use, choosing a different tier could help you save money on premiums.

Income and Location: Your premium costs also depend on several personal factors, including where you live, how many people are on your plan, and whether you smoke. Premiums can vary widely from one state to another due to differences in local healthcare markets and regulations.

You can find out the exact cost of your premiums for 2025 by entering your personal information on the Healthcare.gov website when the open enrollment period begins.


Other Types of Insurance Are Increasing, Too

The ACA marketplace isn’t the only place where insurance premiums are expected to rise in 2025. Medicare, the federal health insurance program for individuals 65 and older, is also expected to announce its rate increases on October 1, 2024. Similarly, employer-sponsored health insurance plans are likely to reflect rising healthcare costs, with many companies offering information about premium increases in the fall.

What This Means for You

With ACA marketplace enrollment for 2025 starting on November 1, it’s crucial to explore your options thoroughly. The Healthcare.gov website offers tools to compare plans and premiums. Additionally, the site will provide links to certified health insurance navigators who can help guide you through the process. These navigators are available free of charge and can assist in identifying the most cost-effective plan based on your health needs and budget.


The projected 7% increase in ACA health insurance premiums for 2025 is driven by several interrelated factors, including rising prescription drug costs, hospital care expenses, and broader economic inflation. While not all insurers will raise their rates, it’s essential to be proactive in reviewing your options during the open enrollment period. Premium tax credits, Medicaid eligibility, and plan tier selection can all help mitigate the impact of these increases.

As the healthcare landscape continues to evolve, particularly in the aftermath of the COVID-19 pandemic and ongoing inflationary pressures, staying informed and actively managing your health insurance coverage is more important than ever. Whether through ACA marketplace plans, Medicare, or employer-sponsored insurance, understanding the factors behind premium increases can help you make the best decisions for your healthcare needs and financial well-being in 2025 and beyond.

Source: www.verywellhealth.com
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