Covered California Premiums Set to Climb as Federal Subsidies Vanish
Health insurance costs are set to jump sharply for hundreds of thousands of Covered California enrollees this year, as the enhanced federal subsidies that have kept marketplace premiums in check since the pandemic expired without renewal from Congress.
The enhanced premium tax credits, created under the American Rescue Plan in 2021 and extended through 2025 via the Inflation Reduction Act, capped marketplace premiums at no more than 8.5 percent of household income and, for the first time, opened subsidy eligibility to middle- and upper-income enrollees. Congressional Democrats pushed to extend the credits during the recent 43-day federal government shutdown, without success; Republicans have argued the pandemic-era assistance was always intended to be temporary and should revert to pre-2021 rules.
Covered California’s own preliminary estimates point to a statewide weighted average base-rate increase of just over 10 percent for the new plan year, before even factoring in the loss of the federal credits. Layered together, the combination of rising base rates and vanishing subsidies means a family of four earning around $150,000 a year could see monthly premiums climb from roughly $1,000 to more than $1,500 — an additional $6,000 to $9,000 annually. Consumers earning between $63,000 and $78,000 could see their subsidized monthly premium nearly triple, from around $358 to $871, according to Covered California’s own modeling.
Sacramento has moved to soften the blow for its lowest-income residents, allocating $190 million from the state’s Health Care Affordability Reserve Fund this year to fund state-based tax credits for enrollees earning up to 150 percent of the federal poverty level — about $26,000 for an individual or just over $50,000 for a family of four. The goal is to hold premiums at 2025 levels for that population, and the early data suggest it is working: renewal rates among enrollees eligible for the state subsidy are tracking in line with last year’s figures.
The strain is more visible further up the income ladder. Covered California’s enrollment data through the end of open enrollment show new sign-ups down 32 percent year-over-year, while cancellations among renewing, subsidy-eligible middle-income enrollees are running at 22 percent — roughly double the 11 percent cancellation rate the program recorded a year earlier. Even so, overall enrollment, buoyed by nearly 1.7 million renewals, reached a near-record 1.93 million Californians, including almost 390,000 receiving state-funded assistance averaging $45 a month.
Federal policy changes tied to the One Big Beautiful Bill Act have compounded the affordability squeeze for some of the program’s most vulnerable enrollees. The law eliminated premium tax credits for lawfully present immigrants earning below the poverty line who do not qualify for Medicaid because of their immigration status, while a related federal marketplace rule separately stripped coverage eligibility from DACA recipients altogether. Advocacy groups tracking the changes say the combined effect erodes more than a decade of progress on marketplace affordability and access.
State officials note that four out of five people enrolled in Covered California plans receive some form of financial assistance, underscoring how central subsidy policy — state and federal alike — has become to keeping coverage affordable for the state’s roughly 1.9 million marketplace enrollees.
With Congress showing no sign of revisiting the enhanced credits and California’s own subsidy dollars targeted narrowly at the lowest earners, the middle-income Californians who benefited most from the pandemic-era expansion are the ones absorbing the sharpest cost increases as the new plan year gets underway.
The math plays out differently depending on where an enrollee sits on the income scale. A gig worker earning around $32,000 a year — roughly 200 percent of the federal poverty level — remains eligible for traditional Affordable Care Act subsidies and may see a relatively modest premium increase in dollar terms, even though the percentage jump can still be steep for someone on a limited income. By contrast, a household earning above 400 percent of the poverty level, which lost eligibility for any subsidy once the enhanced credits lapsed, could face an additional $2,000 or more per month, pushing total premium costs toward a third of household income in some cases.
Covered California officials have said the geographic impact varies as well, with county-level premium increases tied to local carrier competition and regional health care costs; some Bay Area counties, for instance, are projected to see monthly premiums roughly double for affected enrollees once the federal credits disappear entirely.
This article was produced under The Navarro Report’s Human-Directed AI Journalism model: reporting, sourcing, and editorial judgment are directed by a human journalist, with AI tools used for research assistance and drafting under that direction.