A potential health insurance crisis is looming, and it could impact millions of Americans and their wallets. The issue? A drop in coverage and a potential rise in costs for everyone else.
With the expiration of enhanced premium subsidies for Affordable Care Act (ACA) marketplace consumers, millions are at risk of losing their health insurance. This could lead to a tricky situation where those who remain enrolled face higher costs, sparking concerns of a 'death spiral' in the ACA market.
Let's break it down. The lapse of these enhanced subsidies at the end of 2025 has resulted in a significant increase in insurance premiums for the average recipient. According to KFF, a nonpartisan health policy research group, premiums have more than doubled, jumping from $888 per month in 2025 to a whopping $1,904 in 2026.
But here's where it gets controversial... Economists predict that younger, healthier individuals are more likely to drop their policies if they perceive the premiums as too high. This would leave an older, sicker population of enrollees, who are more likely to utilize their insurance and require costly medical care. And this is the part most people miss: this shift in demographics could prompt insurers to further raise premiums, creating a self-reinforcing cycle of higher costs.
Meredith Rosenthal, Chair of the Department of Health Policy and Management at Harvard University's T.H. Chan School of Public Health, recently warned, "If these [relatively young, healthy] individuals exit the risk pool, the average cost of care will increase, causing premiums to rise further. The worry is that this process can spiral and lead to further disenrollment and even higher premiums."
The numbers don't lie. The Urban Institute and The Commonwealth Fund estimate that a staggering 7.3 million people will leave the ACA marketplace in 2026 due to the loss of enhanced subsidies. Young adults, particularly those aged 19 to 34, will see the largest increases in being uninsured, accounting for nearly half of the anticipated rise in uninsured individuals. In contrast, only about 500,000 of those who will be uninsured are aged 55 to 64.
There's evidence that insurers have already raised premiums for 2026, anticipating a riskier pool of insured consumers. KFF reports that insurers have increased their gross premiums by an estimated 26% on average for 2026. Emma Wager, a senior Affordable Care Act policy analyst at KFF, explains that insurers expect healthier people to drop coverage if the enhanced premiums tax credit lapses, accounting for a 4% increase in premiums.
However, some policy experts argue that warnings of a death spiral may be premature. Michael Gusmano, a professor of health policy at Lehigh University, believes the concern is understandable but potentially exaggerated. He suggests that while the loss of people from the overall pool will likely lead to price increases, it may not necessarily result in a death spiral.
The design of the premium tax credits could also prevent a death spiral, according to policy experts. These tax credits cap households' out-of-pocket expenses for insurance premiums as a percentage of household income. For instance, the enhanced federal subsidies capped outlays at 8% of household income, while the lowest earners paid 0%. While the enhanced subsidies have disappeared, the standard premium tax credits remain, capping out-of-pocket premiums at roughly 10% of annual income for qualifying consumers, with the cap declining on a sliding scale for lower earners.
Economists argue that these income caps would likely prevent a death spiral. If insurers raise premiums, the increases are largely borne by the federal government via tax credits, not consumers. John Graves, a professor of health policy and medicine at Vanderbilt University, explains, "All those higher premium costs mostly get translated into higher government subsidies."
The bottom line? While millions of people may drop their ACA coverage, the income caps on premium tax credits could help stabilize the risk pools. However, the situation could become more dire if the current subsidy structure is converted into a fixed-dollar payment for consumers, as proposed by Republican lawmakers and President Donald Trump. In that case, the premium increase would be entirely borne by individuals, increasing the prospect of a death spiral.
So, what do you think? Is a health insurance death spiral inevitable, or can the system adapt and stabilize? We'd love to hear your thoughts in the comments below!
