Key Takeaways
- The scheduled expiration of enhanced Affordable Care Act (ACA) subsidies at the end of 2025 poses a significant risk to the health insurance market, with projections indicating premium increases of around 75% and 2.2 million people losing coverage in 2026.
- The political debate over extending the subsidies is a central issue ahead of the 2026 midterm elections, creating policy uncertainty that affects rate filings and market stability for insurers.
- Health insurers, particularly those with high exposure to the ACA marketplace like Centene and Oscar Health, have experienced substantial enrolment growth and would be negatively affected by subsidy expiration.
- Failure to extend the subsidies could lead to a higher national uninsured rate, increase uncompensated care costs for hospitals, and potentially add USD 60 billion in premium expenditures by 2027.
The potential extension of enhanced subsidies under the Affordable Care Act beyond their scheduled expiration at the end of 2025 represents a critical juncture for the US health insurance marketplace, with far-reaching implications for enrolment levels, premium affordability, and the financial performance of insurers operating in this segment.
Current State of ACA Subsidies and Market Dynamics
Enhanced premium tax credits, initially introduced through the American Rescue Plan Act in 2021 and extended until the end of 2025 via the Inflation Reduction Act, have played a pivotal role in expanding access to health coverage. These subsidies cap premium costs at a percentage of household income, making plans more affordable for individuals earning up to 400% of the federal poverty level and extending eligibility beyond that threshold. As of 2025, enrolment in ACA marketplace plans has reached record highs, with approximately 21 million individuals covered, according to data from the Centers for Medicare & Medicaid Services reported as of 30 June 2025.
Without an extension, the Congressional Budget Office projects that 2.2 million people would lose coverage in 2026 alone, driven by premium increases averaging 75% for subsidised enrollees, as detailed in their analysis dated 5 December 2024. This forecast aligns with independent assessments, such as those from the Kaiser Family Foundation, which estimate that average annual premiums could rise from USD 5,640 in 2025 to USD 9,840 in 2026 for a benchmark silver plan without the enhanced subsidies. Such shifts would disproportionately affect middle-income households, potentially leading to higher uninsured rates and increased pressure on hospital uncompensated care costs.
Political Context and the 2026 Midterm Elections
The debate over subsidy extension is intensifying amid preparations for the 2026 midterm elections, where control of Congress could hinge on voter perceptions of healthcare affordability. Republican-led tax legislation in early 2025 omitted provisions to renew these credits, setting the stage for expiration, yet bipartisan discussions have emerged as election cycles approach. State insurance exchange officials have urged federal action, warning of dual planning scenarios for 2026 that could disrupt rate filings and market stability. For instance, a report from Modern Healthcare on 7 May 2025 highlighted pleas from exchange executives for clarity to avoid premium volatility.
Historical precedents suggest that electoral pressures can influence healthcare policy. During the 2022 midterms, similar affordability concerns contributed to Democratic gains in key states. Current sentiment on platforms like X underscores the market’s underappreciation of extension risks, but broader analysis indicates that any renewal would require compromise, possibly tied to broader fiscal packages. If extended, subsidies could sustain enrolment growth, with projections from the CBO indicating stabilisation of the uninsured rate at around 8% through 2030, compared to a rise to 10% without intervention.
Impact on Health Insurance Providers
Insurers specialising in ACA marketplaces stand to benefit significantly from subsidy continuity, as higher enrolment bolsters revenue streams while spreading risk across larger pools. Companies like UnitedHealth Group (UNH) and Centene Corporation (CNC), which derive substantial portions of their business from individual and Medicaid-managed plans, have seen enrolment surges under the current regime. For UNH, individual marketplace membership grew 15% year-over-year to 1.5 million as of Q2 2025 (April–June), per their earnings release on 16 July 2025. Similarly, CNC reported a 12% increase in ACA plan enrollees to 4.2 million in the same period.
Oscar Health (OSCR), a technology-driven insurer focused on the individual market, exemplifies the sector’s vulnerability and potential upside. As of 30 July 2025, OSCR’s market capitalisation stands at USD 4.2 billion, with shares trading at USD 18.50, reflecting a 25% year-to-date gain amid enrolment growth to 1.1 million members in Q2 2025. However, without subsidy extension, analysts from S&P Global forecast a 20% drop in OSCR’s membership by 2027 due to affordability barriers, potentially compressing medical loss ratios and profitability. Conversely, an extension could drive a 10–15% revenue uplift, based on FactSet consensus estimates updated on 25 July 2025.
Comparative Performance Metrics
| Company | Ticker | Q2 2025 Enrolment (millions) | YoY Growth (%) | Market Cap (USD bn, as of 30 Jul 2025) |
|---|---|---|---|---|
| UnitedHealth Group | UNH | 1.5 | 15 | 520 |
| Centene Corporation | CNC | 4.2 | 12 | 38 |
| Oscar Health | OSCR | 1.1 | 18 | 4.2 |
These figures, sourced from company filings and Bloomberg terminals accessed on 30 July 2025, illustrate the sector’s reliance on subsidised markets. Peer comparisons reveal that firms with diversified portfolios, such as UNH, may weather expiration better than pure-play ACA insurers like OSCR.
Broader Economic Implications
Beyond individual companies, subsidy expiration could exacerbate healthcare cost inflation, with KFF analysis from 26 July 2024 projecting an additional USD 60 billion in national premium expenditures by 2027. This scenario might also influence labour market dynamics, as affordable coverage encourages workforce participation. In contrast, extension could align with macroeconomic goals of reducing inequality, potentially adding 1.5 million jobs in healthcare services by 2030, per Reuters modelling cited on 11 July 2025.
Investors should monitor legislative developments closely, particularly as midterm campaigns ramp up. While extension remains uncertain, the historical pattern of pre-election healthcare concessions suggests a non-negligible probability, which could recalibrate market valuations in the sector.
References
- Adler, L. [@LorenAdler]. (2025, May 20). [Tweet summarizing CBO score on ACA subsidies]. X. Retrieved from https://x.com/LorenAdler/status/1924952923353514255
- American Hospital Association. (2024, December 6). CBO: 2.2 million consumers will lose insurance in 2026 if ACA enhanced premium subsidies expire. Retrieved from https://www.aha.org/news/headline/2024-12-06-cbo-22-million-consumers-will-lose-insurance-2026-if-aca-enhanced-premium-subsidies-expire
- CBS News. (2025, July 18). Millions could face higher ACA premiums, lower subsidies: “There will be sticker shock”. Retrieved from https://www.cbsnews.com/news/aca-higher-premiums-lower-subsidies-sticker-shock/
- CNBC. (2025, July 11). Why ACA health insurance premiums may see ‘sharp’ increase in 2026. Retrieved from https://www.cnbc.com/2025/07/11/aca-health-insurance-premiums-increase.html
- Company Filings & Market Data. (2025). Enrolment data, financial figures, and market capitalisations sourced from company quarterly reports (e.g., UnitedHealth Group Form 10-Q, 16 July 2025; Centene Corporation Form 10-Q, Q2 2025) and cross-referenced with FactSet and Bloomberg terminal data as of 30 July 2025.
- Congressional Budget Office. (2024, December 5). Projections of Health Insurance Coverage. Figures cited by the American Hospital Association and The Hill on December 6, 2024.
- Forbes Advisor. (2025, July 24). Expanded ACA Subsidies Ending: Premiums Could Rise. Retrieved from https://www.forbes.com/advisor/d/aca-expanded-subsidies-expire-premiums-2026/
- Kaiser Family Foundation. (2024, July 26). Inflation Reduction Act Health Insurance Subsidies: What is Their Impact and What Would Happen if They Expire? Retrieved from https://www.kff.org/affordable-care-act/issue-brief/inflation-reduction-act-health-insurance-subsidies-what-is-their-impact-and-what-would-happen-if-they-expire/
- Modern Healthcare. (2025, May 7). State exchange officials plead for ACA subsidy extension. Retrieved from https://www.modernhealthcare.com/politics-policy/policy/aca-subsidies-state-exchange-officials
- Mondaq. (2024, October 11). 2025 Deadline For Health Insurance Subsidies Looms Over Elections. Retrieved from https://www.mondaq.com/unitedstates/insurance-laws-and-products/1529334/2025-deadline-for-health-insurance-subsidies-looms-over-elections
- The Hill. (2024, December 6). Millions will lose health coverage if ACA subsidies expire: CBO. Retrieved from https://thehill.com/policy/healthcare/5026478-affordable-care-act-subsidies-expiration-health-coverage/
