Low Marketplace Premiums Often Reflect High Deductibles

Abstract

Issue: The Affordable Care Act aims to make private health insurance affordable for low-income individuals, but those with incomes above 250 percent of the federal poverty level face limited cost-sharing protections. While marketplace plans achieve premiums 15 percent to 23 percent lower than employer-sponsored insurance, they often do so through high cost-sharing requirements.

Goal: To analyze deductibles and out-of-pocket maximums in plans offered by insurers and evaluate a proposed reform designed to enhance coverage affordability.

Methods: We examined plan features in silver and bronze plans, comparing lowest- and highest-premium options from representative insurers in five regions. We analyzed deductibles and out-of-pocket maximums and estimated reform impacts using the Health Insurance Policy Simulation Model.

Key Findings and Conclusions: Silver-plan deductibles typically exceed $5,000, while bronze plans approach $7,500 — representing up to 21 percent of annual income for those at 250 percent of poverty. Out-of-pocket maximums are generally above $9,000 at both metal tiers. While higher-premium options offer lower deductibles, they often include substantial prescription drug deductibles. A proposed ACA reform would shift the benchmark plan from silver to gold coverage and expand cost-sharing subsidies, reducing out-of-pocket spending by an average of 24 percent at an estimated annual federal cost of $15 billion.

Introduction

The Affordable Care Act’s (ACA) marketplace insurance plans do not have particularly high premiums. A recent study that adjusted for age, benefit generosity, and the presence of cost-sharing subsidies revealed that premiums for marketplace plans were between 15 percent and 23 percent lower than for employer-sponsored insurance (ESI).¹ Much of this difference was attributed to lower provider payment rates and narrower (more limited) provider networks. The finding suggests that ACA health plans could be financially attractive options for people who do not have ESI and are not eligible for Medicaid.

As we show in this brief, however, marketplace plans also achieve low premiums in part through lower plan generosity, which is often reflected in very high deductibles. Plans typically cover between 60 percent and 70 percent of an enrollee’s health care expenses — less generous than most ESI plans, which usually cover 80 percent or more. That means health care obtained through ACA plans can still be unaffordable for many low- and middle-income people.

Insurers in the ACA marketplace compete for enrollees by keeping premiums low and offering financially attractive plans. The federal government provides tax credits that cover the difference between a percentage of enrollees’ household income (which varies based on income level) and a benchmark premium (described below). As household income decreases, the premium subsidy increases.

Tax credits are tied to a silver-tier “benchmark” plan offered within each rating area (a geographic region that determines ACA health insurance premiums).² People who select plans with premiums higher than the benchmark must pay the difference. This creates strong incentives for insurers to keep premiums low, particularly since research has shown that while some enrollees will pay higher premiums for plans with a recognized brand name or broad provider networks, price remains the primary factor.³

Notably, an individual or family can use the tax credit for the benchmark plan to purchase a bronze plan (which pays approximately 60 percent of incurred medical costs), resulting in premiums, after tax credits, that are often close to zero. Alternatively, applying the benchmark tax credit to a gold plan can make insurance with more benefits relatively inexpensive.

The decision to choose plans with low premiums and high deductibles, versus higher premiums and lower deductibles, depends in part on income. For instance, individuals and families with income below 250 percent of the federal poverty level (FPL) receive cost-sharing reduction (CSR) payments alongside premium subsidies. These CSR payments enable consumers with incomes below 150 percent of FPL, for example, to access plans that cover 94 percent of costs and have an average deductible of $90.⁴ Given these benefits, there is little incentive for low-income households to pay more in premiums to obtain a lower deductible.

However, CSR benefits disappear once income rises above 250 percent of FPL. Above this level, consumers could decide to pay more in premiums than the benchmark rate to reduce their deductible. The choice reflects individual preferences and does not affect government costs.

We examine whether marketplace coverage provides affordable access to care for those not eligible for CSRs, focusing particularly on the impact of high cost sharing (deductibles and out-of-pocket maximums). This question is crucial to determine if the marketplaces provide affordable options for low- and middle-income working families without access to ESI.

Our analysis focuses on silver and bronze plans of representative insurers in five urban rating regions, examining the relationship between premiums and cost-sharing features. We specifically investigate the deductibles and out-of-pocket limits associated with low-premium plans, while also analyzing how much deductibles can be reduced by paying higher premiums for plans offered by the same insurers.

Key Findings

Our analysis examines plan features across five representative regions that span large and small cities and high- and low-cost markets: Charleston, South Carolina; Cheyenne, Wyoming; Philadelphia, Pennsylvania; Houston, Texas; and Miami, Florida. For each region, we analyze up to three insurers’ silver and bronze plans, focusing on deductibles and out-of-pocket maximums; for three regions, we also compare premiums and deductibles for insurers’ highest- and lowest-priced silver-tier options.⁵ For all plans, we show unsubsidized monthly premiums for a 40-year-old nonsmoker, along with their corresponding deductibles and out-of-pocket limits.⁶

The key patterns in marketplace plan deductibles and out-of-pocket costs are shown in Exhibits 1 and 2. Silver-plan deductibles typically range from $5,000 to $6,000 — significantly higher than the $1,800 average annual deductible for single coverage in ESI in 2024.⁷ In Miami’s marketplace, AmeriHealth Caritas and UnitedHealthcare set deductibles at $5,900, which would be over 16 percent of annual income for individuals earning just above 250 percent of FPL ($39,125 for an individual in 2025) — more than four times their share of the premium cost. Identical deductible levels appear in Houston for BlueCross BlueShield and Oscar.

UnitedHealthcare seemingly stands out as a notable exception in the Charleston and Houston markets. However, while the insurer eliminates the overall deductible in Houston and offers a lower $2,750 deductible in Charleston, these plans include separate prescription drug deductibles of $2,500 and $3,500, respectively. Out-of-pocket maximums for silver plans are generally $9,100 or higher — equivalent to 25 percent of annual income for individuals at 250 percent of FPL. Some insurers align their out-of-pocket maximums with their deductibles: Ambetter caps both at $5,400, while BCBS of Texas sets both at $5,900.

Exhibit 2 extends this analysis to bronze plans, where deductibles generally are over $7,000. The highest deductible appears in Miami’s marketplace, where AmeriHealth Caritas sets it at $9,450, while Florida Blue requires $7,500. Similar patterns emerge in Philadelphia, where Ambetter and Independence Blue Cross set deductibles at $7,250 and $8,500, respectively. In Charleston, both Ambetter and BCBS maintain $7,500 deductibles — representing 21 percent of annual income for individuals at 250 percent of FPL.

UnitedHealthcare in Houston again is the seeming exception, offering a bronze plan with no general deductible but requiring a $4,500 prescription drug deductible. Out-of-pocket maximums typically range from $9,000 to the legal maximum of $9,450 — exceeding a quarter of annual income for individuals at 250 percent of FPL. As with silver plans, some insurers align their maximums with their deductibles, notably Ambetter in Philadelphia, which sets both at $7,250.

Exhibit 3 shows the differences between the high- and low-premium silver plans offered by three different insurers in three rating regions, and the associated reduction in the deductibles. The results are as follows:

• BCBS of South Carolina (Charleston): For an additional $1,039 per year in premiums ($87 per month), the annual deductible would be lowered from $8,000 to $5,300, although the out-of-pocket maximum is increased by $150 (data not shown).
• Independence Blue Cross (Philadelphia): The highest-premium plan costs $2,571 more per year ($214 per month) and reduces the annual deductible by $1,500; in addition, the prescription drug deductible of $500 is eliminated and the out-of-pocket maximum is reduced from $9,450 to $8,500 (data not shown).
• BCBS of Texas (Houston): For an additional annual premium of $3,564 ($297 per month), the overall annual deductible is lowered from $5,900 to $0, but the higher-cost plan has a $200 prescription drug deductible and a higher out-of-pocket maximum ($9,450 vs. $9,100) (data not shown).

A Possible Reform

The high cost-sharing burden in marketplace plans reflects inherent trade-offs in their design. While deductibles, out-of-pocket maximums, and copayments and coinsurance could be lowered to improve affordability, these elements are interconnected — reducing one requires increasing another to maintain the different percentages of costs covered for each marketplace tier. Meaningfully reducing household burden for marketplace participants would require legislative changes to the ACA.

One potential model for reforming the ACA’s cost-sharing structure comes from the “Improving Health Insurance Affordability Act” (IHAA), introduced in Congress in 2021.⁸ The proposal would expand coverage affordability through three key changes: increasing the generosity of CSRs, extending them to 400 percent of FPL, and shifting the benchmark plan from silver to gold coverage. Enhanced CSRs would provide access to plans covering 95 percent of costs for households below 200 percent of FPL, 90 percent for those at 200 percent to 300 percent of FPL, and 85 percent for those at 300 percent to 400 percent of FPL (Exhibit 4). The legislation also would ensure that individuals with income above 400 percent of FPL could purchase a gold plan covering 80 percent of their health care costs for 8.5 percent of their income. By tying premium subsidies to the gold tier, the IHAA would increase premium subsidies and likely expand gold-plan offerings at all income levels.

Our estimates indicate that these changes would substantially reduce costs for those in the marketplace while decreasing the number of uninsured people by 1 million in 2025. The changes would require $15 billion in additional federal spending. Employer premium spending would fall, as some workers would switch to nongroup coverage. Uncompensated care costs would also fall.⁹

The impact on household finances would be significant. As shown in Exhibit 5, families with nongroup coverage would see on average a 24 percent reduction in out-of-pocket medical expenses. These savings would be as high as 45 percent for people with incomes between 150 percent and 200 percent of FPL, while those at 200 percent to 250 percent of FPL would save 34 percent. The greatest CSR benefits would accrue to individuals with significant medical needs, who are typically most affected by high plan deductibles. People in the 90th percentile of medical spending would see their annual out-of-pocket savings exceed $2,000, reaching over $3,300 for households with incomes between 250 percent and 300 percent of FPL.

Conclusion

The structure of the ACA creates strong incentives for insurers to keep premiums low to compete for market share. Since tax subsidies are tied to the benchmark silver plan, and people purchasing plans with premiums greater than the benchmark pay the difference, insurers must carefully balance multiple factors in their plan designs. These include not only deductibles, out-of-pocket maximums, and other forms of cost sharing, but also the scope of their provider networks.

Our analysis demonstrates that marketplace plans with the lowest premiums — both silver and bronze — typically impose substantial financial barriers through high deductibles and out-of-pocket maximums (although most plans cover primary care and other physician services, with copayments, before deductible are met). The most affordable silver plans generally carry deductibles of $5,000 or more, while similar bronze plans exceed $7,000, and out-of-pocket maximums typically surpass $9,000 for both metal tiers.

While CSRs effectively shield people with very low incomes from these costs, the protection diminishes significantly for households above 200 percent of the federal poverty level and is eliminated above 250 percent of FPL. These enrollees can opt for plans with lower deductibles, but only by accepting substantial premium increases. Moreover, even plans that appear more generous by reducing or eliminating their overall deductible often incorporate separate prescription drug deductibles. Ultimately, affordable marketplace coverage proves to be particularly challenging for those households with incomes above 250 percent of FPL.

While the reforms called for in the Improving Health Care Affordability Act would not address all ACA marketplace shortcomings, they would represent a major step forward. The current limited scope of CSRs leaves many marketplace consumers facing significant financial barriers to care, undermining the ACA’s potential to serve as a viable pathway for low- and middle-income working families.