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.

There is still time for Congress to act to extend the enhanced subsidies and there is bipartisan interest in doing so, but I’m not holding my breath. As we reported at the time, the House passed a three-year extension of the tax credits/enhanced subsidies in January, 230–196, with 17 Republicans joining all 213 of the Democrats, which suggests the affordability pain is showing up in members’ town halls regardless of party. The extension stalled out in the Senate, however, and did not reach the floor for a vote. Majority Leader Thune has said he believes there is “no appetite” for it in the Senate, and a standalone extension bill couldn’t get to 60 votes to overcome a filibuster. A bipartisan Senate group is reportedly negotiating a narrower compromise — an extension plus income caps and enrollment-period changes — but nothing has moved, and insurers are pricing their 2027 health plans as if it won’t.

Short of Congressional action, there are tools, including reinsurance programs, that don’t require restoring the subsidies. Some states already run such programs, which reimburse insurers directly for their highest-cost claims. That results in lower premiums for marketplace enrollees, although not low enough so far, as all but one state have reported drops in ACA marketplace enrollment over the past several months. A federal reinsurance backstop, or more states adopting their own reinsurance programs, could blunt the spiral without reopening the subsidy fight in Congress.

Then there’s the Trump administration’s own proposed 2027 rule — shorter open enrollment, fewer special enrollment periods, tighter income verification — aimed at what it calls cleaning up fraudulent enrollment. Whatever you think of the political framing, those changes cut in the opposite direction from marketplace stabilization: They make it harder for people to enroll and re-enroll, which over time inevitably will contribute to a smaller, likely sicker pool rather than a larger, healthier one.

Across the country, both blue and red states are reporting significant drops in enrollment in marketplace plans because of higher premiums and new hoops to jump through to enroll. At the top of the list is Ohio, where former Senator Sherrod Brown, a Democrat who lost his reelection bid in 2024 to Republican Bernie Moreno, is running against Senator Jon Husted, who was appointed by Gov. Mike DeWine last year to replace J.D. Vance when Vance became Vice President. Ohio has lost 32.4% of its marketplace enrollment since February 2025, according to the Associated Press. That’s approximately 160,000 Ohioans.

Every state except New Mexico has reported ACA marketplace enrollment declines. New Mexico was the only state to fully replace the expired federal subsidies using its own state resources. We’ll let you know if any other states follow New Mexico’s lead.