Will States Step Up? Tackling the ACA Subsidy Crisis in 2025
Innovation Direct Group (IDG)
O&O Media, Approved and Compliant Creatives / Advertising
Millions of Americans have only been able to afford health insurance through federal subsidies that reduce monthly premium costs—thanks to the Affordable Care Act (ACA). In 2025, however, these subsidies are at risk and, if Congress doesn't extend them, many people could see their health insurance costs skyrocket or lose coverage altogether.
With federal support uncertain, states may need to take action to prevent a health coverage crisis. Some states have already developed plans to supplement or replace federal subsidies while others are exploring solutions to keep health insurance affordable.
Looming ACA Subsidy Crisis
Under the Biden administration, enhanced ACA subsidies significantly lowered premium costs and doubled enrollment, especially in states with high uninsured rates. However, these subsidies are set to expire at the end of 2025. If Congress doesn't act, net premium payments could increase by an average of 79%, and ACA Marketplace enrollment could drop from 22.8 million in 2025 to 18.9 million in 2026, falling further to 15.4 million by 2030.
Without these subsidies, lower- and middle-income Americans will face tough choices: pay much higher premiums, switch to less comprehensive plans, or drop coverage altogether.
How States Can Respond
Despite federal action being uncertain, states have several options to mitigate the effects of subsidy cuts. Some states have already begun implementing policies that could serve as models for others.
Expanding State-Funded Premium Subsidies
States like California have already supplemented federal ACA subsidies with state funds to keep insurance affordable. If federal subsidies are reduced, states could expand these programs.
California has a history of taking proactive steps to make coverage more affordable. In 2020 the state created its own premium subsidies for middle-income residents before the federal government expanded ACA subsidies. In 2024 California allocated $165 million to further reduce out-of-pocket costs, offering zero-deductible and lower-copay plans to lower-income enrollees. If federal subsidies are cut, California could expand its state-funded assistance to help residents maintain coverage.
Other states—Massachusetts, New York, and Washington—have also explored state-funded insurance programs and could expand these efforts if federal subsidies disappear.
States with budget surpluses or health-related trust funds could redirect state tax revenues to cover a portion of the lost subsidies.
Implementing State-Level Individual Mandates
Requiring individuals to maintain health coverage—like the ACA's original individual mandate—helps to stabilize the insurance market and prevent premium hikes.
New Jersey and Massachusetts both enforce a state-level individual mandate, requiring residents to have health insurance or pay a penalty. This helps to maintain a healthier insurance pool, preventing large premium increases.
If more states adopted similar mandates, they'd be able to generate revenue that could be reinvested into state-funded subsidies.
Expanding Medicaid to Cover More Residents
Some states may look to expand Medicaid eligibility to cover residents who lose ACA subsidies and cannot afford private insurance. In 41 states as well as Washington, D.C., Medicaid has already been expanded under the ACA to cover more low-income adults.
If federal subsidies are cut, expansion states could adjust eligibility levels to cover more people, though this would require additional state funding.
However, states that haven't expanded Medicaid—like Texas and Florida—would need to pass new legislation to do so. Medicaid expansion requires state funding and, without federal support, some states may struggle to finance these changes.
Negotiating State-Level Public Option Plans
Some states have explored public option insurance plans that provide an affordable alternative to private insurance. For instance, Washington launched Cascade Care, a state-backed public option plan designed to offer lower premiums and out-of-pocket costs.
If ACA subsidies are cut, other states could follow the state of Washington’s lead by negotiating lower-cost plans with insurers to maintain affordability.
Recommendations for Health Insurance Companies
As federal ACA subsidies face potential cuts, health insurance companies will play a critical role in maintaining access to affordable coverage. By working with state governments, adjusting plan offerings, and educating consumers, insurers can help bridge the gap and prevent widespread coverage losses.
Health insurance companies could:
Recommendations for Employers
With many employees relying on ACA subsidies for their health insurance, employers may need to step in to provide additional support. Expanding benefits, offering subsidies, and educating workers on available options can help ensure continued access to affordable healthcare.
Employers may want to:
Recommendations for Consumers
Consumers will need to be proactive in navigating potential changes to ACA subsidies. Exploring state assistance programs, comparing coverage options, and advocating for local policy solutions can help individuals and families secure the best possible healthcare coverage.
Consumers should:
Sources:
Further Thoughts
The future of ACA subsidies remains uncertain, but states have a variety of tools at their disposal to prevent a coverage crisis. While some states will probably take proactive steps others may wait for federal action, leaving many residents vulnerable to rising costs and potential coverage losses.
Consumers should stay informed about state-level changes and explore all available options to maintain affordable coverage. If history is any indication, states that prioritize healthcare affordability will act swiftly, with the rest waiting until their residents feel financial strain.
In the coming months, choices made at the state level could determine whether millions of Americans continue to have access to affordable health insurance—or face a return to preACA instability.
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