Geometric Shape

The Impact of ACA in 2024 and Beyond…

By Rob Lourenco

About one year ago, in February 2023, we were analyzing the results of the previous ACA open enrollment period. By all measures it had been a successful season. Several prominent carriers had expanded their footprint, consumer choice continued to rise, and the market had grown to 16.4 million total lives. With a momentum of 2 million new lives per year in the previous two years and other positive signals in the industry, we predicted we’d see steady growth in the year to come.

Fast forward a few months to September, and the Kaiser Family Foundation (KFF) released an article echoing the same bullish sentiments. In the September 7th article, they highlighted, among other things, the record growth we continued to see in the first half of 2023. And although all the stars were aligning for another banner open enrollment season, few could’ve predicted the industry would balloon to 21.3 million lives in January of this year. That is an increase of 5 million lives in one year. To put that into perspective, the last 12 months have seen more growth in the ACA market than in the previous two years combined.

This naturally begs the question, what is behind this surge in growth? Well, there isn’t just one factor, but more like a constellation of reasons contributing to this record-breaking year. The first we need to address is the government subsidies that have continued to make this program accessible to more and more individuals and families. Some level of subsidy has always been embedded in the ACA. The COVID-era American Rescue Plan (ARP), however, introduced new enhanced subsidies to both assist those struggling in an economy ravaged by a pandemic and entice those still sitting on the sidelines. The ARP made zero premium plans a possibility for those under 150% FPL and introduced a premium cap for those on the higher end of the income spectrum. A short time later, the Inflation Reduction Act (IRA) extended those subsidies through 2025.

A second factor that has been boosting ACA enrollments, though not as widely known, is the ICHRA program. An Individual Coverage Health Reimbursement Account (ICHRA) created an alternative way for employers to provide healthcare coverage for their employees. Now instead of working with a carrier to offer traditional group health plans, as of 2020, employers can provide their employees with tax-free dollars to purchase an ACA plan directly on the open market. This offered choice to the consumer and a potential for cost savings for the employer — an appealing win-win arrangement that has certainly contributed to its popularity. Various estimates put the number of ACA lives in ICHRA anywhere from several hundred thousand to as many as 2 million.

A third major source of ACA growth has been former Medicaid members losing coverage through recertification. This recertification, sometimes referred to as the Medicaid unwinding, is meant to reset the Public Health Emergency initiative that provided much needed healthcare to millions of Americans who found themselves unemployed or furloughed during the pandemic. As of November 1, 2023, slightly more than 10 million of the 87 million people on Medicaid have been disenrolled. Naturally some have been moving to commercial group coverage through work. But a meaningful number of these folks are turning to the ACA for their healthcare needs.

All of this growth has meant that many insurance carriers are experiencing a windfall of new membership. And while a robust ACA market and a growing number of Americans with access to healthcare is cause for celebration, we can’t help but wonder what the next enrollment period, or periods, have in store for us. Though enhanced subsidies will remain with us through 2025, the Medicaid unwinding is set to conclude by July of this year. What legislators will do when the IRA subsidy extension expires is anyone’s guess — but it will be hard to do nothing when your constituents have enjoyed these benefits for almost five years. It is possible we’re headed for a strong open enrollment at year-end, though not likely we’ll be matching the same wave of growth we’ve seen over the last few months. For more in-depth analysis on what moved the market last open enrollment, please see our IFP Shopping and Switching Study published recently.