Source: Politico
Nearly $1 trillion in Medicaid cuts, rising medical costs and the expiration of federal Obamacare subsidies are forcing health insurers to reevaluate how much Americans pay out-of-pocket for coverage.
The companies, several of which were already on shaky financial footing before President Donald Trump signed the “Big Beautiful Bill” into law recently, fear the changes could lead to tens of millions of people losing coverage. And, the looming changes create more financial uncertainty that could lead to a downturn for the health insurance industry that could last for years.
“You have this perfect storm here of very large changes happening all at once,” said Ellen Montz, a managing director with advisory firm Manatt Health and a former Centers for Medicare and Medicaid Services official during the Biden administration. “They’re looking at pricing, what is potentially coming down the pike, and we’re going to see some very large, both gross and net, premium increases.”
Both Centene and Molina Healthcare slashed their yearly financial guidance over the past few weeks amid unexpectedly high medical costs in Medicaid and Obamacare plans. And health insurance giant UnitedHealthcare in May lowered its guidance because of higher-than-anticipated Medicare Advantage costs.
“As we see these cost pressures continue to mount, as we see them go unaddressed and continue to snowball in their effect, the inevitable result is that we will see higher premiums,” said David Merritt, the senior vice president of policy and advocacy at the Blue Cross Blue Shield Association.
Obamacare’s uncertain future
Insurers with large Medicaid and Obamacare businesses could be hit the hardest. The Congressional Budget Office estimated that an earlier version of the “Big Beautiful Bill,” combined with the expiration of the enhanced Obamacare subsidies at the end of this year and new Trump administration ACA policies that make it more difficult to enroll, could cause nearly 17 million people to become uninsured.
This comes after years of booming business for Obamacare insurers, buoyed by the enhanced federal subsidies and other pro-ACA Biden administration policies. The enhanced subsidies were introduced in the American Rescue Plan Act of 2021 and later extended in the Inflation Reduction Act of 2022. They provide premium assistance to low- and-middle income Americans, which has helped drive record enrollment numbers.
But the GOP policies figure to put those in reverse. Insurers forecast that young, healthy people will leave the marketplace because of the higher premium costs, creating a less stable marketplace with greater financial risk.
“What could happen is the healthy people say, ‘Well, it’s not worth it to me anymore, so I’m going to drop my coverage,’ and what happens then is the population of people who are covered is going to get worse on average, and so that will push premiums up,” said Cori Uccello, a senior health fellow at the American Academy of Actuaries.
The changes could lead insurers to scale back on plans or pull out of the Obamacare market completely. CVS Health’s Aetna has already announced it will exit the marketplace in 2026, leaving 1 million enrollees across 17 states to find new insurance coverage.
“Looking back to other periods of upheaval, my sense is that [insurers] get into this defensive crouch, and what you see them doing when you have all this policy change and concern about adverse selection is they they raise their premiums, and they start to shrink their service areas or leave the market entirely,” said Sabrina Corlette, a co-director of Georgetown’s Center on Health Insurance Reforms.
Cushioning the blow
Insurers are pushing Congress and the Trump administration to mitigate some of the fallout, warning lawmakers in competitive districts about the widespread coverage disruptions their constituents are sure to face if the policies are implemented. The industry’s most pressing concern is the expiration of the enhanced subsidies — which Congress would need to extend within the next few months to avoid “very sudden” and “severe” cost hikes and coverage losses across the country, said Mike Tuffin, the CEO of health insurance trade group AHIP.
“It will be both loss of coverage as well as higher premiums for millions and millions of Americans,” he said.
So far, few Republican lawmakers have expressed interest in extending the subsidies, which CBO has estimated at $335 billion over 10 years. But Tuffin hopes the widespread campaign from the health care industry — including insurers, hospitals, doctors and patients — will be enough to convince vulnerable Republican lawmakers that an extension would be politically wise, especially as millions could lose Medicaid coverage as a result of the GOP megabill.
“We know over the last 30 years that when people’s coverage is disrupted, their access to health care is disrupted, there’s an immediate political response, and both parties have seen that in the past, and we want to prevent that,” Tuffin said.
In the longer term, insurers are pushing for changes to the GOP megabill before certain provisions are implemented. Those include technical changes to the enrollment verification process that would end auto-renewals and require enrollees to more frequently update their information to be eligible for tax credits, which the insurers argue create red tape and barriers to coverage.
“There were just a number of onerous steps included in the legislation that we hope can be smoothed out, because if you put up obstacles to either enroll or continue to enroll, it just jeopardizes folks’ ability to continue with their coverage,” said Merritt.
Sticker shock
Given the uncertainty about whether the subsidies will be extended, insurers in some states are filing two sets of rates for 2026 — one assuming an extension and another assuming they expire. Obamacare premium payments could jump on average more than 75 percent if the tax credits expire, with Americans in some states seeing their payments more than double, according to health policy think tank KFF.
A spokesperson for Centene, a major ACA insurer, said the expiration of the subsidies could force many lower- and middle-class working Americans “to make the impossible choice between healthcare and other basic needs” and risk a rise in the uninsured rate.
Merritt said Blue Cross Blue Shield has estimated that for a family of four making $64,000 a year, their average premium increase would be about $2,600 a year if the subsidies expire.
“When you think about living paycheck to paycheck, that is a significant sticker shock that most families at that level won’t be able to afford,” he said.
And the clock is ticking: Open enrollment begins Nov. 1, and if Congress doesn’t act to extend the subsidies soon, insurers worry that widespread confusion and sticker shock could lead to further coverage losses. Republicans might warm to a deal with Democrats on a partial extension of the subsidies if they’re concerned about massive coverage losses ahead of the midterm elections, said Katherine Hempstead, a senior policy officer at the Robert Wood Johnson Foundation, a liberal philanthropy.
“It depends in part how much some individual lawmakers feel like, ‘Hey, I feel a little vulnerable about some of the things I voted for. Maybe I want to be involved with some kind of bipartisan compromise that’s going to preserve these enhanced tax credits,’” said Hempstead. “Because this is just another hit to coverage on top of all these other things, and it’ll take effect immediately.”
And the potential health cost hikes could extend beyond the Obamacare market, policy experts said. The nearly 180 million Americans who receive health insurance through their employer could also see their out-of-pocket costs jump as a result of the federal policy changes and the adjustments insurers will be making to protect their bottom lines.
Provisions in the GOP megabill could deeply impact hospital revenue, driving providers to up their prices — translating to higher premiums across most insurance markets.
“If a lot of people’s employer-sponsored insurance gets seriously degraded, or costs more, and it’s attributed to this bill, that’s a bad vulnerability for the administration,” said Hempstead.
