Premium Increases Show Why Government Managed Healthcare Cannot Control Costs
Americans who purchase their own health insurance through the Affordable Care Act marketplace may soon face another painful increase in the cost of coverage. Preliminary rate filings for 2027 show that Obamacare premiums are likely to rise for the second consecutive year by double digits, continuing a trend that has left many middle-class families questioning whether the program remains affordable.
According to healthcare research organization KFF, formerly known as the Kaiser Family Foundation, 77 Affordable Care Act insurers that have submitted publicly available rate filings are proposing a median premium increase of 14 percent for 2027. That follows a median increase of 20 percent for 2026, meaning many consumers will face two consecutive years of substantial premium hikes if the proposed rates are approved.
KFF is a nonprofit health policy research organization that analyzes healthcare costs, insurance markets, and public policy. Its reports are widely referenced by policymakers, insurers, journalists, and healthcare researchers across the political spectrum.
Insurers Blame Rising Costs
Insurance companies point to several reasons for the proposed increases. They cite rising hospital costs, prescription drug expenses, workforce shortages, overall inflation, federal regulatory changes, and the expiration of enhanced pandemic era premium subsidies. They also argue that many healthier enrollees left the marketplace after subsidies expired, leaving behind a smaller and sicker population that is more expensive to insure.
Those explanations may accurately describe what insurers see today. They explain why premiums are increasing this year.
They do not necessarily explain why the system has evolved into one that requires increasingly higher premiums year after year.
That is where critics of Obamacare argue the real discussion should begin.
A Prediction on Socialize Healthcare Has Come True
Supporters of the Affordable Care Act have generally argued that rising healthcare costs are the result of inflation, expensive medical technology, prescription drug costs, and demographic changes.
Those factors are symptoms rather than the underlying disease.
Obamacare introduced exactly the kind of market distortion that economists have long warned about whenever government increasingly separates consumers from the true price of goods and services. As taxpayer subsidies absorb more of the actual cost, fewer consumers make purchasing decisions based on price or value. Providers and insurers consequently face less competitive pressure to reduce costs.
This was one of the principal criticisms made when Obamacare became law and that today’s premium increases demonstrate those warnings were well founded.
The average American purchasing insurance without subsidies have experienced premium increases exceeding 300 percent since the program’s implementation in 2014, with some consumers seeing increases well above 400 percent depending on age, location, and plan selection.
By comparison, cumulative inflation in the U.S., even with the massive Biden inflation is only about 40%.
The Problem With Separating Price From The Consumer
Free enterprise functions because customers reward businesses that deliver better quality at lower prices. Competition forces companies to become more efficient while constantly improving their products.
Healthcare often operates differently.
When government subsidies or insurance companies absorb most of the bill, consumers rarely know what individual services actually cost. Patients cannot easily compare prices between providers, and providers have fewer incentives to compete on price. Instead of thousands of individual purchasing decisions driving efficiency, prices become increasingly influenced by negotiations among insurers, healthcare systems, regulators, and government programs.
The result is an upward spiral in which rising costs justify larger subsidies, larger subsidies reduce price sensitivity, and reduced price sensitivity allows costs to continue climbing.
This creates a negative feedback loop that becomes increasingly difficult to reverse.
The Marketplace Continues To Shrink
The expiration of enhanced premium subsidies has already produced significant changes within the Affordable Care Act marketplace.
Federal figures cited in the reporting show enrollment has fallen sharply as millions of Americans left marketplace plans after facing substantially higher premiums. Analysts quoted in the reports noted that many healthier individuals departed the exchanges, leaving a risk pool with higher average medical costs, which in turn placed additional upward pressure on premiums.
One researcher summarized the situation simply.
“When the healthy people leave, the prices go up.”
That prediction, healthcare analysts noted, is now being reflected in insurers’ rate filings.
A Different Direction
The author argues that the long-term solution is not expanding government subsidies or increasing federal involvement in healthcare. Instead, healthcare should move toward greater transparency, stronger competition, and greater consumer control.
The author advocates separating catastrophic health insurance from routine medical maintenance, allowing patients to purchase everyday healthcare services directly while reserving insurance for unexpected major medical events. Greater price transparency, consumer-directed healthcare accounts, and direct competition among providers would, in the author’s view, restore the normal market incentives that reduce prices while improving quality.
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Whether one agrees with that philosophy or not, the latest premium filings underscore one reality that is becoming increasingly difficult to ignore.
If approved, 2027 will mark the second straight year of double-digit Obamacare premium increases. For many Americans who do not qualify for substantial subsidies, the question is no longer whether healthcare is becoming more expensive.
It is whether the current system can continue asking families to absorb ever-rising costs without eventually reaching a breaking point.
FAM Editor: The silver lining is that AI will likely disrupt this cycle and destroy the structures that are making health care so expensive.
