Millions may drop ACA coverage — and raise health insurance costs for everyone else

WASHINGTON – The expiration of enhanced federal subsidies at the end of 2025 has sent a shockwave through the Affordable Care Act (ACA) marketplace, causing insurance premiums to skyrocket for millions of Americans and raising fears of a mass exodus from coverage. The sudden affordability crisis threatens to destabilize the individual insurance market, potentially driving up costs for everyone who remains and prompting experts to warn of a potential "death spiral."

Why it matters

The lapse in financial aid represents the most significant challenge to the ACA's stability in years. For consumers, it means an immediate and painful increase in monthly costs. For the market, it risks a self-reinforcing cycle where rising premiums push healthier individuals out, leaving a sicker, more expensive pool of enrollees and forcing insurers to raise prices even further.

By the numbers: The Subsidy Shock

The financial impact of the expired subsidies, which were in place since the American Rescue Plan Act of 2021, is stark. Data from health policy research groups paints a grim picture for 2026.

• Soaring Premiums: The average monthly premium for a subsidy recipient more than doubled, jumping from $888 in 2025 to an estimated $1,904 in 2026, according to analysis by KFF, a nonpartisan health policy research group.

• Mass Exodus: The Urban Institute and The Commonwealth Fund project that 7.3 million people will leave the ACA marketplace in 2026. Of those, an estimated 5 million are expected to become uninsured rather than find alternative coverage.

• Youth Disenrollment: Young, healthy adults—who are crucial for balancing risk in an insurance pool—are the most likely to drop their plans. Nearly half of the newly uninsured, about 2.3 million people, are expected to be between the ages of 19 and 34, according to Jessica Banthin, a senior fellow at the Urban Institute. By contrast, only 500,000 are projected to be in the 55-to-64 age bracket.

• Insurer Reaction: Insurers, anticipating this demographic shift, have already adjusted their pricing. KFF estimates that insurers raised gross premiums by an average of 26% for 2026. According to Emma Wager, a senior policy analyst at KFF, insurers have indicated that 4 percentage points of that hike are a direct result of expecting a sicker, riskier customer base.

The Big Picture: A Looming "Death Spiral"

Economists and policy experts are closely watching for signs of an "adverse selection death spiral," a long-feared scenario for insurance markets.

The cycle begins when healthy, price-sensitive customers drop their plans because they deem the cost too high for the benefits they use. "It all comes down to who really feels like they need to have health insurance," said Wager.

This exodus leaves behind a pool of enrollees who are, on average, older, sicker, and more likely to require expensive medical care.

"If these [relatively young, healthy] individuals, whose health care costs are lower on average, exit the risk pool, the average cost of care will increase and thereby cause premiums to increase further," explained Meredith Rosenthal, chair of the Department of Health Policy and Management at Harvard University's T.H. Chan School of Public Health.

"The worry is that this process can spiral (known as a 'death spiral') and lead to further disenrollment and even higher premiums," Rosenthal added.

Other factors are also contributing to the 26% average premium hike, including the rising cost of specialty drugs, increased labor expenses for providers, and ongoing consolidation within the hospital and health system industry.

Yes, but... Is a Death Spiral Inevitable?

While the threat is real, some experts argue that warnings of a complete market collapse are premature, pointing to the ACA's original design as a potential backstop.

"I think the death spiral concern is understandable, but may be a slight exaggeration," said Michael Gusmano, a professor of health policy at Lehigh University. "What seems likely is that the loss of people from the overall pool will lead to increases in price — and this will further erode the willingness of people to sign up."

The key mitigating factor is the ACA's original premium tax credit structure, which remains in place even after the enhanced subsidies expired.

• The ACA's Built-in Safeguard: The law was designed to prevent a true death spiral by tying subsidies to income. The original tax credits cap the amount a household must pay for a benchmark silver plan as a percentage of its income (ranging from roughly 2% to 9.5%). While less generous than the enhanced subsidies that capped payments at 8.5% and offered zero-premium plans to the lowest earners, this structure provides a crucial floor. As gross premiums rise, the value of the tax credit for eligible individuals also rises, shielding them from the full price increase and preventing costs from becoming completely unaffordable for many.

What's Next

The coming months will be critical for assessing the true damage to the ACA marketplace and determining its future trajectory.

• A Summer of Data: The public will get a clearer picture of the enrollment fallout over the summer, when federal agencies are expected to release detailed data on how many people dropped their coverage and the demographic makeup of the remaining enrollees.

• Market Monitoring: Insurers and state regulators will be scrutinizing this data to understand the new risk pool. Their findings will heavily influence premium requests for the 2027 plan year, determining whether the market stabilizes or faces another round of steep price hikes.

• The Policy Debate: The expiration of the subsidies has thrust the debate over healthcare affordability back to the forefront in Washington. The stark consequences will likely fuel renewed calls for a permanent legislative solution to stabilize the individual market, which remains the only source of coverage for millions of Americans without access to employer-sponsored insurance.