The ACA Death Spiral Is No Longer Just a Theory

Insurers are now quantifying what experts long warned would happen: healthier consumers are leaving the marketplace, premiums are rising, and affordability is deteriorating.

I’ve long warned that letting the enhanced ACA subsidies expire could set off a classic insurance death spiral: healthier people priced out first, a sicker risk pool left behind, higher premiums as a result, more healthy people priced out — rinse and repeat. Reports this week from KFF News and other media outlets about 2027 rate filings is the first time I’ve seen that mechanism actually measured rather than predicted.

Insurers filing preliminary 2027 rates in 16 states and D.C. are asking for a median 14% increase, according to a Peterson-KFF analysis. If the rates are approved by state regulators, that would be the second-highest jump since 2018. What makes this year’s filings different from a routine “medical costs went up” story is that insurers are saying that about four percentage points of that increase is the direct result of the enhanced subsidies expiring because of Congressional inaction – and healthier people leaving the pool as a consequence. Another chunk — UnitedHealthcare put it at 12.7% in its New York filing — is attributed to new Trump administration enrollment rules that make it harder to sign up and stay signed up.

In other words, what we’re now seeing is insurance companies telling regulators that the failure of Congress to extend the subsidies, along with the Trump administration’s new enrollment rules — not just rising medical costs — are a measurable share of what ACA marketplace premiums will be next year.

I want to be careful here because its too early to suggest that a death spiral is definitely underway. A full death spiral means an insurance market becomes non-viable — premiums rise, enrollment collapses, insurers exit the market, and coverage disappears entirely for a region or population. That is not what’s happening in the ACA marketplace right now. Enrollment is down about 3 million from last year, which is not a collapse. Federal risk-adjustment programs are still functioning. Most subsidized, low-income enrollees — the bulk of the marketplace — are still price-protected because their subsidies rise automatically as premiums rise. Some insurers are leaving this market – including big ones like Aetna and Cigna, where I used to work – but most insurers are still filing to participate in 2027 in most states, not fleeing the market (not yet, anyway).

What we’re seeing so far seems to be a self-reinforcing cost spiral concentrated among the roughly 5% of enrollees earning above 400% of the federal poverty line who lost all subsidy protection when the enhanced tax credits expired at the end of 2025. For them, the mechanism KFF describes is real and is compounding. And this is the second consecutive year of double-digit marketplace rate increases, on top of last year’s subsidy cliff. While that’’s a genuine affordability crisis for a specific population, it’s not evidence the whole system is on the verge of collapse. But, going forward, as more people continue to drop coverage because of premium increases, the affordability crisis will encompass more enrollees, and more of them will join the ranks of the uninsured.

by Wendell Potter, Healthcare Un-Covered |  Read more:

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[ed. Thanks to the Big, Beautiful, Backstabbing Bill passed by Republicans, which means more emergency room visits by uninsured people, and higher insurance premiums for the rest of us (exacerbated by cuts to Medicaid). Also, more people pushed into bankruptcy. See also: The Other Health Care Cliff Americans Are About to Fall Off  (high deductibles); and, In Preliminary Rate Filings, ACA Marketplace Insurers Largely Propose Double-Digit Premium Increase For 2027, Following a Steep Climb This Year (KFF); and, despite all this, Republican voters continue to internalize waste, fraud and abuse messaging as being the most important issue (KFF).]