How GOP's Budget Plan Impacts California Health Costs

The Rising Cost of Health Insurance in California

Heather Altman, a former corporate employee, decided to start her own environmental consulting business in 2014. At the time, the Affordable Care Act made it possible for her to afford independent health insurance. Her monthly premium for a platinum plan was $356. Today, she has downgraded to a gold plan and pays $1,147 per month. That’s a 222% increase over the past decade for less comprehensive coverage. Medical inflation has always outpaced general inflation, but recent changes to the healthcare system have raised concerns about affordability.

Altman is one of nearly 2 million people in California who rely on the Affordable Care Act marketplace, commonly known as Covered California. Many of these individuals own their own businesses or work for small employers that don’t provide insurance. The majority of enrollees are lower- to middle-income earners making $60,240 or less as individuals or $124,800 or less as a family of four. Nearly 800,000 people in California make half that amount.

Recent changes to Covered California, including those made by Trump’s budget reconciliation, have caused experts and insurers to warn about increased out-of-pocket costs for consumers. These changes include more complicated enrollment and verification procedures, eliminating automatic re-enrollment, prohibiting people who sign up outside the end-of-year open enrollment period from qualifying for financial assistance, and prohibiting certain immigrant groups from receiving financial assistance. Additionally, people who inaccurately predict their income will now have to repay all subsidies received, which is a change from previous policies where repayments were capped based on income.

The biggest impact came from the omission of extended subsidies. Trump’s budget bill did not extend enhanced subsidies, which were enacted during the COVID-19 pandemic to ensure more Americans could afford health insurance. As a result, premiums fell for all income levels and enrollment doubled nationwide between 2021 and 2025.

In California, nearly 90% of enrollees receive federal subsidies. Some of these changes, including the expiration of subsidies, will go into effect next year, leading to higher prices as soon as November when open enrollment starts. Other changes, such as who can enroll and when, will start in 2028.

Significant Premium Increases Expected

Premiums are expected to increase by 66%, or $101 per month, starting next year without subsidies, according to projections from Covered California. Lower-income people will see even higher increases because they receive more subsidies. Those making less than 400% of the federal poverty level (about $60,240 per year for an individual) are projected to pay an average of $191 more monthly.

More than 170,000 middle-income enrollees will lose financial assistance entirely. Some federal subsidies will still be available, but they are less comprehensive than the enhanced subsidies, and fewer people qualify. Congress could still decide to extend the enhanced subsidies before year’s end, but without further action, costs will jump. The nonpartisan Congressional Budget Office estimates that nearly 4 million people nationwide would drop coverage because of cost increases if the subsidies expire.

A Growing Concern for Small Business Owners

Altman said even without any changes to the Affordable Care Act marketplace, the regular annual premium increases are “almost unsustainable.” Most years, she makes too much money to qualify for subsidies, but health care costs are still a drain on her finances. On average over the past decade, Altman’s premiums have increased by more than 11% annually, according to data she shared. In comparison, the Consumer Price Index, a measure of inflation, increased an average of 2.7% annually during the same time period.

“If this is what I knew the situation would be when I started my business, I never would have done it,” Altman said. About one in four Covered California enrollees is self-employed. Altman is contemplating asking a colleague to hire her without salary just for the benefits, she said.

Enrollment Challenges and Potential Loss of Coverage

Janae Trevillion, a long-time human resources consultant who works with small businesses, said some of her clients, like Altman, are trying to get corporate jobs just for the benefits. “There’s a lot of movement happening,” Trevillion said.

The enrollment changes that will take effect in 2028 will also cause people to get rid of their Covered California insurance, Trevillion said. As the paperwork and verification processes get more complicated, fewer people will be willing to go through the sign-up process, she said. “People get frustrated easily,” Trevillion said. “People are going to say ‘I’m not interested,’ and people are not going to want to participate in having a marketplace plan.”

Covered California estimates that 600,000 Californians will drop their insurance due to added enrollment complexities and higher out-of-pocket costs. Jessica Altman, Executive Director of Covered California, said, “We have tried for our entire existence to make the process easier, to minimize administrative barriers, to simplify … to remove this friction from the system.”

About 70% of Covered California enrollees are automatically re-enrolled each year, a process that will end under the new policies implemented by Trump’s budget reconciliation. As more people drop out, costs will increase even further, said Edwin Park, a research professor at Georgetown University and a leading expert on Affordable Care Act expansions.

“Any time you have big reductions in enrollment, the ones who are most likely to be disenrolled … are the healthiest, lowest cost people, so that means a sicker risk pool, which in turn means higher premiums for those inside the marketplace,” Park said. The Congressional Budget Office estimates that premiums for Affordable Care Act benchmark silver plans will increase by an additional 7.9% as risk pools become sicker.