Tennessee’s ACA Marketplace: How Enhanced Subsidies Shaped Coverage and Costs

Congress is currently debating whether to extend temporary subsidy increases for health insurance coverage purchased on the Affordable Care Act (ACA) Marketplace. Continuing the increased premium subsidies in their current form is estimated to come at a net cost of about $23 billion in federal FY 2026 and $350 billion over 10 years. (1) This issue brief provides basic information about the subsidies and recent data on Marketplace enrollment and health insurance coverage in Tennessee.

Background

The American Rescue Plan (ARPA) temporarily expanded premium subsidies for ACA plans. The ACA provides income-based subsidies tied to caps on premium costs—known as advanced premium tax credits (APTCs)—for health plans purchased on the Marketplace (see text box). As a COVID relief measure, ARPA and then the 2022 Inflation Reduction Act temporarily increased those tax credits by boosting the ACA’s premium caps and expanding eligibility for 2021-2025 (Figure 1). (2)

ARPA’s larger premium subsidies also drove increased enrollment in plans with subsidies that reduce out-of-pocket spending requirements (i.e., deductibles, co-pays, coinsurance). In addition to APTCs, the ACA also subsidizes out-of-pocket costs with income-based cost-sharing reductions (CSRs) for certain plans (see text box). Although eligibility for CSRs has not changed, the lower premiums from the larger APTCs has spurred more enrollment in CSR-eligible plans. (3)

Figure 1

Figure 2

Marketplace Enrollment in Tennessee

In 2025, nearly 643,000 Tennesseans enrolled in ACA Marketplace plans—more than twice the number enrolled in 2020 before Congress enacted the temporary subsidy increase (Figure 3). (4) (5) (6) (7) (8) (9) (10) (11) Tennesseans in all 95 counties enrolled in plans—from as few as 5.2% of Trousdale County residents to as many as 12.3% in Davidson (Figures 4 and 5). (11) (12) Other key trends include:

• Both the number and share of Tennessee enrollees receiving either APTCs or CSRs also increased during this period (Figure 3).
• Between 2020 and 2025, the number of Tennessee enrollees with the most generous CSR plans more than quadrupled (Figure 6). Only those with incomes between 100-150% of poverty are eligible for these plans. In 2020, about 55,000 enrollees—or 28% of all Tennessee enrollees—had Silver plans with CSRs that boosted the AV from 70% to 94%. By 2025, that had increased to 293,000—or 46% of all enrollees.
• During this period, average enrollee premiums—both before and after the application of premium subsidies—declined even without adjusting for inflation (Figure 7).
• The trends above suggest that—on average—Tennessee enrollees paid less and selected more generous plans in 2025 than they did in 2020, even without adjusting for inflation.
• Enrollment increased at all income levels but was strongest among enrollees with incomes between 100-150% of the poverty level (Figure 8). Between 2020 and 2025, enrollment in this group increased by almost 460%—from about 49,000 to over 372,000.

Figure 3

Figure 4

Figure 5

Figure 6

Figure 7

Figure 8

Looking Ahead

Without the enhanced subsidies, Tennessee enrollees will face higher premiums, leading some to drop Marketplace coverage to go uninsured or switch to other plans—such as employer coverage. Analyses suggest average premiums could more than double, with the biggest effects on small business owners, gig workers, rural residents, older adults with incomes over 400% of poverty, and households earning between $100,000 and $150,000. (13) (14) (15) An estimated 142,000 to 203,000 Tennesseans could forgo insurance coverage as a result of the price increases. (16) (17) For context, Tennessee’s uninsured rate fell in 2022 and 2023 due to expanded subsidies and Medicaid eligibility redetermination changes but began rising again in 2024 (Figure 9). (18)

Figure 9

Marketplace insurers expect higher 2026 premiums as they anticipate a costlier enrollee pool without enhanced subsidies. (19) Those most likely to drop coverage are lower-income individuals who can no longer afford a plan or healthier people who see less value at higher prices, which increases prices for those who remain. Nationally, the proposed 2026 rate hikes are the largest in eight years. In Tennessee, Marketplace insurers have proposed increases of 0.3% (Alliant Health Partners), 28% (Oscar), 38% (Celtic), and 41% (BlueCross BlueShield of Tennessee). (20)

An increase in the number of uninsured people in Tennessee can have broad effects on individuals and the health care system. Uninsured individuals often delay care due cost—especially low-income individuals—which can worsen health outcomes. (21) (22) Uninsurance can also increase reliance on emergency services and uncompensated care, putting financial strain on hospitals and providers. (23) (24) (25) (26) (27) (28)

Without the enhanced subsidies, however, both insurers and enrollees may have a greater incentive to control costs. When federal subsidies cover more of the premium cost, enrollees have less incentive to shop for lower-cost plans, and insurers face less pressure to keep premiums down. (29) (30) (31) Meanwhile, when enrollees pay less at the point of care (i.e., primary care, hospital) via plans with a higher AV, they tend to be less sensitive to both health care prices and utilization. This can come with trade-offs that include both protecting individuals from the high costs of needed or effective care while potentially increasing overall health care spending. (32) (33) (34)

Parting Words

Congress is currently considering whether to extend the temporary enhanced Marketplace subsidies or pursue alternative approaches that modify or phase them out. Each option carries trade-offs for affordability, federal spending, market stability, and coverage levels. Tennessee’s recent experience illustrates how these subsidies have influenced coverage levels, plan selection, premiums and the overall individual health insurance market.