Will Steep Increases In Health Insurance Premiums Threaten U.s. Homebuying?

As Congress debates whether to extend Affordable Care Act (ACA) subsidies set to expire, Americans may face steep increases in health insurance premiums — a jolt that could directly threaten homebuying prospects and keep many current homeowners from staying afloat.

Daryl Fairweather, chief economist at Redfin; Emma Freer, senior policy analyst for health care at the American Economic Liberties Project; and Danielle Hale, chief economist at Realtor.com, each said the link continues to grow between health care costs and housing affordability.

Hale said the scale of the hit for families losing ACA subsidies is likely to be severe if the subsidies are discontinued.

“It’s going to mean that healthcare takes a bigger chunk out of their monthly budget, and that budget shift has got to come from somewhere,” she said. “So, for people who are currently renting and maybe saving up to buy a home, that (saving) progress might feel like the most discretionary part of their budget and probably would be a target.

“I do think for households that are on the (homebuying) margin, this is a big increase that could make a difference.”

Fairweather echoed her concerns — harkening back to foreclosure stories shared in years leading up to the 2008 housing crash.

“A lot of the main culprits behind why somebody would enter into foreclosure would be that they would have a life event, like they got an illness or cancer, and they got hit with really big medical bills,” she said. “This was before we had the Affordable Care Act, so sometimes those health care bills would be so high that it would put them into foreclosure.

“If we’re returning to a scenario where people are having to pay more out of pocket for their health care expenses because they aren’t getting as much coverage or [experience] random health events, [it] could put more homeowners in jeopardy. That could impact their ability to pay back their mortgages. I would think that would be something that people who are trying to measure risk in the housing market would care about.”

White House pauses health care announcement

President Donald Trump had been expected to roll out a plan to tackle rising health care costs — potentially including an extension ACA subsidies.

However, the White House has now paused the announcement amid congressional Republican pushback, several news outlets reported Monday.

A Nov. 18 post on Truth Social from Trump read, “THE ONLY HEALTHCARE I WILL SUPPORT OR APPROVE IS SENDING THE MONEY DIRECTLY BACK TO THE PEOPLE,” but no further details on that strategy have been shared.

Long-term cost increases

Freer said the U.S. health insurance system has been squeezing household budgets for years — but the next wave of increases could be more dramatic.

“When we think of premiums going up, people don’t always make the connection that those rising premiums really cut into earnings and people’s ability to save money and invest in things like first homes or other essential goods, because so much of their income is going to health care.”

She also pointed to employer-sponsored insurance — the most common form of coverage — where the average family premium has hit roughly $27,000 a year.

That cost has grown more than 50% over the past decade, Freer added.

“With [the One Big Beautiful Bill Act] and significant Medicaid cuts coming online over the next several years, [potentially] millions of Americans are going to lose coverage, and that’s going to further increase ACA and employer sponsored premiums,” she said. “That’s because there’s going to be more uncompensated care costs that are going to be tossed along to patients in all these different ways.”

Freer cited a recent study showing that rising health insurance premiums reduced cumulative family earnings by $125,000 between 1988 and 2019.

She noted that amount is equivalent to, or in some years greater than, the price of a home in many markets during those decades.

“We would like to see the conversation shift from continuing endless public subsidies of private insurance conglomerates that are using their market power to really inflate prices,” Freer said. “Instead, have the conversation be, ‘How can we bring those prices down, and how can the government use its regulatory authority to prevent corporate price gouging?’”

Steep hill for entrepreneurs

Fairweather said many entrepreneurs — including real estate agents — are especially vulnerable to increased health care premiums, which compounds existing trouble in qualifying for mortgages.

“They have to go into the open market to pay for their health insurance,” she said. “It’s already challenging for [independent contractors] to get a mortgage because they typically don’t have as solid of income history compared to W-2 workers. It’s going to be increasingly difficult for them to get a mortgage when their healthcare costs are going up at the same time.

“You might see people take on more business expenses to get their taxable income down. It might help their ability to afford health insurance, but hurt their ability to qualify for a mortgage.”

U.S. health care presents unique housing hurdle

The U.S. spends more per person on health care than any other major nation — with much higher out-of-pocket expenses and insurance premiums.

Studies from the Commonwealth Fund and Organisation for Economic Co-operation and Development show Americans pay roughly double what households pay in systems like Germany, France or the U.K. — despite similar or worse health outcomes.

Freer pointed to Consumer Financial Protection Bureau research showing that medical debt contributes to thousands of rejected mortgage applications each year.

“[Medical debt] is a poor predictor of loan repayment, and probably shouldn’t be considered when people are being assessed for mortgage applications,” she said. “We already see medical debt and health care costs impact people’s ability to get mortgages and buy their first home or a new home.”

A cascading threat to affordability

Hale said one silver lining of the ACA subsidy debate is inspiring more talk in the health care arena.

“The benefit of these subsidies expiring is that it has created a news cycle and drawn a lot of attention to healthcare subsidies in health care costs,” she said. “I think one good thing that can come out of this episode is that there probably will be a bit more attention on these costs in the share of the American budget.”

Freer said the stakes are high and immediate — for homebuyers and any American.

“Our policy solutions are about bringing down costs and eliminating some of the conflicts of interest that exists in our current healthcare system,” she said. “Then also, banning some of the practices that are abused by private corporations to drive up costs or to deny care, which is another way of increasing their profits.”