Premium Payments Will Remain Low for Most Obamacare Enrollees

Senate Democrats have shut down the government for more than four weeks, demanding significant increases in federal health care spending, including a permanent extension of Biden’s costly COVID credits. By making Obamacare central to the government shutdown fight, Democrats have drawn new attention to the ways that the law has failed to make health care more affordable.

Open enrollment for Obamacare begins November 1. This is the first open enrollment after the expiration of the COVID-era subsidies, which congressional Democrats set to expire after 2025. I put together a 20-minute explainer video on Obamacare and the COVID credits last week. In that video, I made the point that premium payments would remain low for the vast majority of Americans—because of the size of Obamacare’s original subsidies. The actual dollar amounts are much more meaningful than the misleading premium percentage changes put out by KFF and others. Those percentages can be high even though the underlying premium increases are low because nearly half of 2025 Obamacare enrollees received subsidies that covered the entire premium—a feature that exploded fraud in the program. Now, new data from CMS confirm that even without Biden’s temporary COVID credits, premiums will remain highly subsidized—further weakening Democrats’ argument that affordability depends on keeping the credits.

In today’s newsletter, I start with data released yesterday by the Centers for Medicare and Medicaid Services (CMS) showing how enrollee premium payments will remain low. I then highlight a new Federalist piece from me, “Obamacare’s Underused Free Preventive Services Expose A System Rife With Fraud,” and a new Paragon Pic that shows how the Biden COVID credits significantly increased the percentage of revenue that insurers receive from federal taxpayers for Obamacare plans. Finally, I discuss the growing skin-substitute controversy and highlight Paragon’s support for a CMS proposed rule aimed at curbing Medicare waste and fraud in this space.

Most Enrollees Will Pay Low Share of Premium in 2026 Due to Large Underlying Subsidies

On October 28, CMS put out information on exchange plan premiums and offerings. The data make clear that Obamacare’s underlying subsidies remain extremely generous—taxpayers continue to cover nearly all premium costs for most enrollees. According to CMS:

• On average, subsidies are projected to cover 91 percent of the lowest cost plan premium in 2026 for eligible enrollees. This is higher than the 85 percent it covered in 2020—the last coverage year before Biden’s temporary COVID-19 credits.
• The average enrollee’s monthly premium payment for the lowest-cost plan will be $50 in 2026—about $20 less than in 2020.
• In 2026, nearly 60 percent of eligible re-enrollees will have access to a plan in their chosen category at or below $50 in monthly expense to them—compared to 56 percent in 2020.
• In 2026, 95 percent of enrollees will have access to three or more Qualified Health Plan (QHP) issuers, compared to 68 percent in 2020.

Together, these figures show that Obamacare enrollees will still face low out-of-pocket premiums and expanded plan choice even after the temporary credits expire.

Phantom Enrollees Don’t Use Free Preventative Services

The evidence of massive improper enrollment in the Obamacare exchanges is overwhelming. There are data: 6.4 million people enrolled in fully subsidized plans who are ineligible for them. In 15 states, the number of people in fully subsidized plans is more than double the number eligible for such assistance, based on federal income limits. There are numerous news reports, including from KFF Health News, The Wall Street Journal, and Bloomberg.

In August, I wrote about CMS data that 40 percent of enrollees in fully subsidized plans did not use their plan a single time while they were covered in 2024. This percentage is 2.5 times higher than the percent of people with health insurance who do not use their plan. Some on the Left have refused to admit the extent of fraud, even when they post information about the extent of Obamacare enrollees in certain congressional districts that are utterly implausible if the law was being followed.

If not fraud, then such a high percentage of zero-claim enrollees undermines a core premise of Obamacare, as I argue in The Federalist. Obamacare’s preventive service mandate eliminated cost-sharing for preventive services graded “A” or “B” by the U.S. Preventive Services Task Force, such as annual check-ups, mammograms, colonoscopies, and immunizations. The premise was that patients would receive timely screenings and wellness visits which would reduce emergency care, lower hospitalizations, and improve health. Despite insurers’ heavy promotion of free preventive services, an extremely high share of Obamacare enrollees used no care at all—not even basic check-ups, screenings, or immunizations. Here is my conclusion:

Obamacare supporters and the health insurance industry cannot have it both ways. Those who downplay the fraud simply show that Obamacare is broken in other ways as the coverage does not translate into any care—not a single visit to the doctor, prescription filled, or lab test ordered. The reality is that both explanations indict the law. If millions of enrollees are fraudulent, taxpayers are being robbed. If such a large number of enrollees are real but not using any care, Obamacare’s central theory collapses—that generous subsidies and “free” preventive services would drive better health and savings. Either way, the system is failing on its own terms.

Biden’s COVID Credits Made Obamacare Insurers Even More Dependent on Taxpayers

Obamacare transformed the individual market from an unsubsidized market into a heavily subsidized one, and Biden’s COVID credits expanded this subsidization significantly. In 2024, 87 percent of the revenue made by insurers selling ACA exchange plans in the 31 states that utilize the federal exchange, HealthCare.gov, came from federal taxpayers. This is a ten-percentage point jump in the taxpayer-financed share of premium revenue since before the pandemic. Taxpayers bore 92 percent of the increased cost of ACA plans from 2020 to 2024.

This Paragon Pic shows premium revenue collected by the insurers from enrollees and from federal taxpayers. The figure at the top of the bar shows the percentage of revenue that is subsidized.

A higher share of premiums is paid by taxpayers in federal exchange states because every non-Medicaid expansion state used the federal exchange in 2024. In those states, enrollees between 100 and 150 percent of the federal poverty level (FPL) receive fully-subsidized plans versus just 138 to 150 percent FPL in expansion states. Looking at all states, the percentage of insurers’ ACA premium revenue deriving from federal taxpayers increased from 73 percent in 2021 to 83 percent in 2024—a ten-percentage point increase.

For perspective, a 50-year-old at 200 percent of the federal poverty level, which is higher income than for the median enrollee, receives a subsidy that covers at least 90 percent of their premium because of the COVID credits. When the COVID credits expire, the taxpayer will still cover more than 80 percent of the premium.

CMS’s Commonsense Proposal to Reduce Skin Substitute Waste

At the 2025 Medicare Advantage Leadership & Policy Forum, CMS Administrator Dr. Mehmet Oz highlighted the large Medicare spending increase driven by skin substitutes, an emerging live biological product. A skin substitute is a material used to cover and promote healing of skin wounds by acting as a temporary or permanent replacement for damaged skin:

Skin substitutes were a $250 million business five years ago. It will be over $13 billion this year. And it’s very hard to justify that increased expense by outcomes which really haven’t been reported in ways which are, at least discernible from the FDA’s perspective, as being a better quality experience… We’ve allowed bad players to come into a sector, and unless you drive them all out, they will just find other ways of eating at the fruit of the harvest.

The administrator’s statements follow CMS’s proposed reimbursement change in the Physician Fee Schedule (PFS) proposed rule. Between the first quarter of 2023 and the third quarter of 2024, the average Part B payment amount per unit of skin substitute increased by 153 percent. In less than two years, the amount paid per Part B enrollee has tripled. This has occurred directly because of a non-market-based payment mechanism that allows manufacturers to set their own Medicare rate for periods of time. Without critical and fundamental changes, Medicare risks rewarding frivolous and frequent medically unnecessary service renderings and fraud schemes targeting vulnerable seniors.

In a comment letter on the proposed rule, we strongly supported the reform to how Medicare pays for skin substitutes. Paying at a flat rate and reducing spending by 90 percent targets systemic waste caused by government payment distortions. It also curbs rate gaming and further encourages efficient use of products, rather than excessive utilization that is often not medically necessary or appropriate care. At Paragon, we support reforms—like CMS’s proposed overhaul—that eliminate waste, protect seniors, and strengthen program integrity across federal health programs.