How Health Insurance Got So Expensive

0:07It's open enrollment season for the 20 million Americans who buy their own health insurance prices this year. they're through the roof. That's putting it mildly. You've been telling us how your rates are changing. Hi, my name is Barb and I'm from Bellevue, Minnesota. And for healthcare premiums for 2026, the same plan, which I'm paying$474 a month for this year, is going to be$747 a month for 2026. I ended up going with a cheaper plan. The cheapest available to me was$590 a month for an$8 ,500 deductible. Yeah, like we said before, grab a chair. Rates are up an average of 30 % for a typical plan in the 30 states where the federal government manages health insurance marketplaces.

1:01In states that run their own markets, rates are up an average of 17%. That's according to an analysis from the health policy research group KFF. Meanwhile, the longest government shutdown in history continues in Washington. Republicans so far won't discuss extending subsidies that make health insurance more affordable. Democrats won't agree to a deal unless health care costs are on the table. So that's where we're at. Without those subsidies, the Congressional Budget Office estimates that more than 2 million people could lose access to health insurance entirely. How did health insurance get so expensive in the first place?

1:40And who stands to benefit from higher costs now? We've got those questions and so much more after the break. I'm Todd Zwillick, in for Jen White. You're listening to the 1A Podcast. Back with more in just a moment.

1:58Let's meet our panel. here in the studio with us is Cynthia Cox. She's a vice president and director of the program on the Affordable Care Act at KFF. Also, Margo Sanger-Katz. She's a reporter covering health care policy and government spending for The New York Times. Thank you both for being here. Let's start with the government shutdown. Well, the government shutdown, as we said, is now at 37 days. This week, it became the longest in history. Democrats say they won't vote for any funding bill that reopens the government that doesn't include tax credits that help make health insurance more affordable.

2:34Cynthia, bring us up to speed on these tax credits. Where did they come from? Why are they ending right now? So the Affordable Care Act has always had some sort of premium assistance as part of the law. The idea was that because the Affordable Care Act requires that insurers cover pre-existing conditions and pay for people's treatment, that makes premiums higher than they used to be. And so these tax credits were designed to offset those higher premium costs and encourage people to purchase health insurance and not wait until they get sick to do so. And so the ACA rolled out in 2014 and fewer people signed up than were expected to.

3:11And also over the next few years, as premiums started to rise, it became clear that some higher income people were just priced out because they made too much money to qualify for a tax credit, but not enough to afford full price health insurance. And so then fast forward to the pandemic. And so that's when these enhanced tax credits or extra financial help was passed. It closely mirrored what President Biden had been campaigning on when he was a primary candidate. But it was passed through this kind of COVID relief vehicle. How much extra subsidy was there for the pandemic time versus sort of what we had before?

3:48So, for example, a low-income person before, someone who made just above the poverty level, previously would have to pay about 2 % of their income for health insurance. Now they pay nothing. They have a zero premium contribution. Now someone who was higher income before in the original Affordable Care Act, they might have had to pay 9 % of their income, or maybe even more if they didn't get a tax credit, they might have had to pay 20 % of their income. Now it's capped at 8.5 % of their income. Margot, what's the universe of people who qualify for these subsidies under the Affordable Care Act, sort of the band of incomes or who they are?

4:23So it's basically everyone who doesn't get insurance through their own employer, through Medicare, or through Medicaid. If you buy your own insurance either on healthcare.gov or maybe directly from an insurance company, this affects you. Under the current subsidies that are set to expire at the end of this year, almost everyone has access to this financial help. If you are buying your own insurance, you're never going to have to pay more than 8.5 % of your income for a kind of typical plan. Once these subsidies expire, the share of people who are eligible for them goes down. But most people who buy this kind of insurance have relatively low incomes.

5:01And that makes sense if you think about the kinds of people who don't get insurance through work. So if you work in a kind of low-wage job or you have a couple of, like, gig economy jobs or, say, you're an entrepreneur or a freelancer, or you're kind of cobbling together work from different sources, probably don't get insurance through work, and you probably are a little bit lower on the income scale, most of those people are still going to be able to get a subsidy. It's just going to be less. But there is this group of people who, as Cynthia said, earn a little bit more, and this is the kind of more entrepreneurial people, people who are self-employed, early retirees.

5:33There are a lot of ranchers and farmers in this group, people that work for very small businesses that maybe can't afford to give insurance. And those people are the ones who are looking at these very large increases like the caller who we heard from at the beginning of the show. So there's two things going on here. When people see this sticker shock, we've been hearing from people all over America. We heard from Barb at the top of the show whose prices are just going, okay,$447 a month, now up to$747 for 2026. There's two things going on. And premiums, the tide is rising. Premiums are going up, but also the help you get to stay afloat is going down.

6:11Is that about right? That's exactly right. And some people are being hit by what we're calling like a double whammy. So the amount that the insurance companies are charging, that's going up by about 30 % in some cases. But that's not really what most people pay. What most people pay is net of this tax credit. And since they're getting a smaller tax credit or sometimes no tax credit at all, then there's this kind of dual effect here of rising insurance company premiums and less financial health. So here's a question from Rodney. How do insurance companies calculate what an average individual can afford?

6:44How is a$10 ,000 deductible before the insurance kicks in even effective? Then insurance companies regularly deny coverage anyway. Is it cheaper to just not have insurance? That is a very good question. So really what the insurance companies are doing is they're looking at their average costs that they're expecting for the next year. When it comes to determining what is affordable, that's really up to Congress. And so these tax credits were designed to, you know, take what – basically the idea is that if you're lower income, you're not going to be able to afford full price health insurance. And so then the ACA designed tax credits based on what share of your income seemed like someone might be able to pay.

7:23But at the time that the ACA was passed, there was no, like, unified definition of what affordable is. And so I think that's kind of where this conversation has been going with these enhanced tax credits is, you know, clearly they've had an effect on affordability. The number of people buying this coverage has more than doubled since the enhanced tax credits became available. I mean, for all the problems, it's popular. For all of the – I mean, boy, what a war over the Affordable Care Act in the early days. It now has broad support. That's right. Which you wouldn't have guessed 10 years ago. Yeah, it used to be when the ACA was first passed that it was, you know, there was a partisan divide for sure.

8:00But even a lot of Democrats were not big fans of the ACA. And now it's, you know, the majority of people do support the ACA. Margot, affordability is in the name, the Affordable Care Act. We're going to talk more about that. But the problem of affordability, it's just the top of the national conversation right now. It was obviously a big deal in New York City that drove the election of Zoran Mamdani. But it's an issue all over America, of course. Can you talk about affordability of premiums in the context of overall affordability, groceries, electric bill, other – child care, other costs that American families are confronting and how big a factor health insurance premiums now that they're starting to see the bill for January 1st, how that's factoring in?

8:43So, you know, we talk about inflation and all of the effects that that has on people's everyday lives. Well, you know, the cost of groceries going up, everything that really has been fueling our political conversation about affordability. But the truth is, is that the growth in insurance premiums is faster than inflation in other parts of the economy. I mean, we don't generally talk about grocery prices increasing by 30 percent in one year. But that's what we're seeing in this market for insurance. And there's been all of this focus on the Obamacare market because there's this big fight about the policy, this big fight about how much the government is going to help people offset these rising costs.

9:16But the truth is, is that these kinds of increases in the cost of health insurance are not unique to the Obamacare market. So if you have Medicare, if you have Medicaid, if you get your insurance through an employer, the cost of that kind of insurance is also increasing faster than inflation. And I think that's why so many people are feeling the squeeze, because these plans are starting to ask people to pay more and more of their own money, either towards higher premiums or towards these kind of higher deductibles and other forms of cost sharing, because no one can really afford to cover prices that are increasing at this speed.

9:48How much are premiums going up in the place where most Americans still get their insurance, which is through their job? The employer contributes a big part of the premium. You pay a big part of the premium. But it's going up for everybody. How much is it going up? So this year, from last year into this year, health insurance premiums for people who get their coverage through work went up 6 % to 7%. But looking ahead into next year, there are some estimates that health insurance costs for people with employer coverage will go up another 9%. When you look at the dollars, just how much does it cost to offer health insurance through work versus through the Obamacare markets, it's actually really similar, though.

10:28Let's go to this message we got from Mark. He writes, I used to buy catastrophic policies before the ACA was passed. Now catastrophic policies are considered bronze policies that cover treatment and hospitalization, but only cost a few hundred dollars less per month than a gold policy. My wife has terrible insurance through her job that only covers a few days of hospitalization. What can I do to cover an extended hospital stay other than buying a bronze policy? I'm looking at something with a$10 ,000 a year deductible. We only make about$70 ,000 a year. Mark, that's a great question. We're going to talk more about it after this quick break.

11:10Also, a little bit of history on the Affordable Care Act. How did we get here, and why didn't lawmakers use it to contain costs? Stay with us.

11:26Let's get back to the conversation now with some of these messages that we got from you. My name is Kate, and I own a small independent grocery in Cincinnati, Ohio. My name is Steve. I'm in Salt Lake City, Utah. And I had to take a job earning less than$20 an hour just for health insurance. I am on an ACA plan personally. Many of my employees are using the ACA for their health care. And with the dramatic increases in costs, I'm really not sure how we're going to handle that. I don't make enough money to pay my living costs. I'm using my retirement. My health insurance used to be$3 ,200 a month.

12:09That's the only reason I'm working is for health insurance. The voices of so many of you struggling with rising health insurance costs in America. We want to hear from you. Two, four million people could lose coverage across the market due to high prices. As Margo Sanger-Katz, we just heard the voices of Kate and Steve, just two people. Steve, going back to work just to have the health insurance. Kate's a small business owner who uses the ACA herself and so do her employees. And it looks like it's sort of getting to the end of the line in terms of the ability to manage the overhead. Yeah, I think this is a very common problem that, you know, particularly people in small business, They just don't have access to the same kinds of discounts and negotiations that the larger employers have, and they're increasingly using this market.

13:00It's worked pretty well since these enhanced tax credits went into effect because people get really a lot of financial assistance from the federal government. So they can send their workers into this market, and their workers don't have to pay very much for their health insurance. But that is going away, and I do think we're going to see a lot of people like that facing difficult choices. All right. I want to just do a little bit more history here because we're talking about health insurance premiums going up and up and up and up, and they are. Back when the Affordable Care Act was passed, there were two big problems, millions of Americans who didn't have insurance at all and rising costs.

13:38And the Affordable Care Act took care, didn't take care, but did a lot for problem A. Tens of millions of people got health insurance. Why didn't it do anything for problem B? Why did lawmakers do nothing, Margo, about cost containment when the Affordable Care Act passed? It wasn't really part of the deal. And here we are. How come? Well, I think I would push back slightly. So when Congress passed the Affordable Care Act, it was trying to do a lot of things at once. So one of the things it was trying to do is figure out how are we going to get insurance to the people who are uninsured? And how are we going to make that insurance meaningful?

14:14So it did increase the prices for people who bought their own insurance because the insurance companies no longer could exclude people who were sick because insurance companies for the first time had to cover things like childbirth, prescription drugs, mental health treatment. The cost of that kind of insurance did get more expensive. But then there was this whole other thing that the Affordable Care Act did, which is trying to figure out how do we get at this underlying cost of health care in America? How do we reduce the money that the government spends in the Medicare program on health care?

14:42And it did lots of things. There were a bunch of things that were kind of mechanical. They just basically said, we're going to pay less money to insurance companies that cover people in private Medicare plans. We're going to give hospitals smaller raises each year for caring for people in hospitals. And that drove down the cost of Medicare. But then they did a lot of things that were kind of harder to measure and, like, more interesting, more in the kind of experimental area where they're like, well, what if we try to change the incentives for hospitals? and make it so if, say, they discharge someone from the hospital and they come back two weeks later and need another hospitalization, we shouldn't pay them for both hospitalizations.

15:20There were a million little things like that that were designed to try to squeeze waste out of the system, encourage doctors and hospitals to do a better job taking care of people, encourage more Americans to get this kind of preventive care that started to become free for the first time with the idea that, you know, maybe if you're getting your cancer screenings, you're getting your cholesterol medicines, you'll be less likely to have some catastrophic expensive healthcare emergency down the road. But that's Medicare where the government has a lot of clout to decide who and how to pay. What about the rest of us on the private market?

15:52So I think this is what's kind of interesting. So there actually is this very robust debate about what did this actually do to the healthcare system? Medicare is just older people and some people with disabilities, but it's a huge payer. If you think about the health care system, it's like most of the patients are sick people. Most of – there's a lot of Americans who are in Medicare. And the idea was that if Medicare started to change the way that doctors and hospitals behaved, that would kind of spill over to everyone else. We kind of squish down over here. Maybe it would also squish down over there.

16:24And actually, if you look at what happened in this overall rate of health care spending. So I said before, you know, health care inflation always seems to be higher than regular inflation. during the 10 to 15 years after Obamacare passed into law, that rate of health care inflation actually started to get smaller. We saw kind of flattening out. Yeah, like how much it costs to give health care to an American. Year over year, those increases slowed down quite a lot. It's really hard to know what we should attribute that to. There definitely are people who think that the Affordable Care Act made a big difference here, but we don't really know.

16:59There are other changes that happened during the same period. Things like, we just didn't have a lot of big blockbuster drugs during this 15-year period. And they drive up costs. They drive up costs. In the last few years, Cynthia will know for sure, last two to three years, we're starting to see that spending kind of start to accelerate again. And so it could be that it was just a coincidence that this was the post-Affordable Care Act era and it just happened to be a kind of quiet time for healthcare. But there are definitely really smart people who have looked at this closely, And they do think that the kinds of policy changes that Congress passed in this law have prevented things from being even worse than they are right now.

17:35Meanwhile, here's a question from Cynthia. This is for you, Cynthia, who asks, why should taxpayers subsidize unaffordable health insurance from profiteering private health care companies? There should be a discussion of cutting out the middleman, which has no place in providing affordable health care. Single-payer health care would help. Okay, that's a big debate, but we're talking history. Back when the Affordable Care Act passed, there was a debate over what was called a public option. When you shop on the marketplace, you have UnitedHealthcare and Aetna and everybody offering. There was a debate about let's have a public option that will compete with the private guys, and maybe the private guys will drive down prices that way.

18:17I'm here to tell you it never happened. How come? There's a lot to unpack here. I guess first of all, I would say, yes, in theory, single payer or public option or some other way of shifting more health care spending into the public sector instead of through private insurers is one way to rein in health care costs. It's not the only way. When you look at other countries like, you know, the UK or Canada that have single payer systems, they spend less money on health care than we do. But you can also see plenty of other countries that have private insurance systems that also spend less money on health care than we do.

18:50And all of them have better health care outcomes than we do, too. But going back to the public option, you know, there have been some states that have tried to experiment with a public option. And it doesn't often yield significant savings, in part because, I mean, to be honest, they're implementing it through private insurance companies, too. So, I mean, it's kind of a little-known thing. But a lot of public insurance is actually administered by private insurers, too. A lot of Medicaid, a lot of Medicare is actually delivered via private insurance as well. What really makes those costs lower is when the payer, the insurance company or the government, pays a lower price to hospitals or a lower price to pharmaceutical companies.

19:34What do other countries do that their percentage of GDP on health care isn't what it is? What is it now, 18 %? Is that about – I'm guessing. Yeah, about one in every$5 that we spend in the United States goes towards health care. It's not that way in Norway. It's not that way in the UK, even though they have the NHS. It's not that way in any comparable country. Why? I think it's the thing that Cynthia just said, which is those countries just pay less for medical services. It's not that people in those countries are receiving a vastly different array of medical services. They're not necessarily going to the doctor less or having fewer hospitalizations for heart attacks.

20:10There are, of course, some population health differences, but mostly the difference is that every doctor's visit, every prescription drug that you fill at the pharmacy, every hospital day that you use in the United States costs more than it costs in those other countries. And most of those other countries, even the ones that have private insurance companies, have some system where the country says, this is what we're willing to pay for this health care service everywhere. And the health care system has to figure out how to live with that budget. In the United States, it's all of these private entities who are negotiating with each other, and that has led to us having higher prices pretty much across the board for all services.

20:47It turns out you can have rules to prevent this kind of stuff if you're willing to implement them. It turns out you can. We got this message from Elizabeth who says, I currently pay$257 a month for my insurance. My plan for next year through my company is going up to$271 a month and co-pays$10 to$20. I'll have to increase my coverage to my company's most expensive option, which is$347 a month to have the same co-pays and deductible I have now because I have asthma and I take an expensive medication and I need that good coverage. And you see that a lot, Cynthia, right? People needing the extra coverage because they're in the marketplace with a preexisting condition.

21:28That's right. And I think this raises a really important point, which is that for a person, their premium is only one part of the story. their co-pays or deductibles, everything adds up to, you know, what their total health care spending is. And a lot of the solutions that have been tossed around are, well, maybe we should deregulate health insurance and allow insurers to go back to, you know, either charging lower premiums for healthy people, which would mean higher premiums for sick people and so on and so forth. But, you know, it's not really getting at what we're talking about here, which is why is health care so expensive.

22:00It's moving money around, you know, it's making, you know, premiums lower for some people but higher for others or deductibles lower for some people and higher for others. Nina in Florida emails to say this. I'm 61 years old, so just a couple of years from Medicare. My 2025 healthcare premium with Florida blue bronze plan is$460 for a single person. My premium cost for 2026 will be nearly$1 ,400 for the same plan with zero subsidy. I just barely make over the subsidy income limit. I have to sign up on healthcare.gov. I won't be able to afford insurance at the new premium with zero subsidy. So Margo, that's one person, Nina, in Florida, who's confronting radically higher costs here.

22:46I mean,$460 up to$1 ,400 and makes too much to qualify for a subsidy. Yeah. These people who are earning close to this subsidy cliff are really facing these enormous increases. And they are not a lot of the people in Obamacare, but they are a lot of the people that we're hearing from. And I think that they are facing some really, really difficult financial choices. Yeah, just another place where the affordability crisis here really hits home. It's really across the income scale, and you can see it at all different levels of income. Let's take a quick pause here. Still to come, if your premium is rising, how should you shop for health insurance during open enrollment?

23:27Our experts weigh in. Back with more in just a moment.

23:35Margo, we're talking so much about people not being able to afford coverage, people considering going without coverage, people just confronting the fact that they see how much it's going to cost next year versus what they make, and they know they're just not going to be able to buy coverage. What effect does it have on us all, on the public health, if you like, when people can't afford insurance coverage and they go without? Well, when people don't have health insurance, we know that they tend to not receive health care. They're not going in for their checkups. They're not taking their prescription medicines that could prevent them from having a mental health crisis, having a heart attack, or an other serious health problem.