Best’s Commentary: Expiration of Affordable Care Act Subsidies May Shrink Plan Enrollment, Prompt Deterioration in Risk Pool

NOVEMBER 11, 2025 07:52 AM (EST)

Best's Commentary: Expiration of Affordable Care Act Subsidies May Shrink Plan Enrollment, Prompt Deterioration in Risk Pool

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OLDWICK - NOVEMBER 11, 2025 07:52 AM (EST)The expiration of enhanced premium tax credits for individual health insurance plans purchased on the Affordable Care Act (ACA) exchange marketplace will lead to higher out-of-pocket premiums and a reduction in member enrollment, according to a new AM Best special report. A new Best's Commentary notes that those enhanced premium tax credits have kept premiums lower and aided an explosion in enrollment growth for the ACA marketplace exchange, which nearly doubled to 24 million members as of June 2025, compared with 13.4 million at year-end 2020. Part of this growth was fueled by an influx of members that had been disenrolled from Medicaid. These new members are higher morbidity, resulting in a deterioration of the ACA marketplace risk pools and notable rate increases for the current open enrollment period. "The ACA utilization patterns are becoming similar to Medicaid, with higher use of emergency room and behavioral health services," said Jason Hopper, associate director, AM Best. "These higher utilization woes would be exacerbated if the enhanced premium tax credits are not renewed, as many healthier members will likely disenroll rather than choose to pay significantly higher premiums." According to the report, an extension of the enhanced ACA subsidies was not part of the agreement to reopen the U.S. government that was passed by the Senate on Nov. 9, 2025. The agreement does include a guarantee for a vote in December by Congress to extend the enhanced subsidies. The report also notes that healthcare utilization is expected to remain elevated, and challenges in the market have resulted in plans exiting the ACA marketplace in underperforming areas or entirely in 2026. Ten states have seen individual commercial enrollment more than double from 2020 to 2024 and are likely to experience the largest enrollment decline. Margins in this business declined to approximately 2% in 2024, down from 3% in 2023. "Without the enhanced subsidies, millions of enrollees are expected to be priced out of the ACA marketplace, with those expected to stay being higher-morbidity members," Hopper said. "This will likely lead to greater utilization and a further drag on underwriting profitability." Additionally, utilization is expected to rise in the fourth quarter of 2025 as individuals seek medical treatment, especially for those who are either considering or are dropping coverage in 2026 due to cost. To access the full copy of this special report, please visit https://http://www3.ambest.com/bestweek/purchase.asp?record_code=359823.