ACA Premium Hikes Raise Questions On Affordability And `Death Spiral’

Obamacare is increasingly at risk of a possible “death spiral” as premiums in 2027 are projected to increase by double-digits yet again. Former Cigna executive turned whistleblower, Wendell Potter, says that healthier people are dropping Affordable Care Act coverage while the remaining risk pool is in comparatively poor health. In turn, this leads to higher premiums which can then further price out healthy people.

Based on a preliminary analysis of proposed rate changes issued by 77 insurers participating in the ACA exchanges from the 16 states and the District of Columbia with publicly available filings, KFF announced this week that Obamacare premiums are set to rise 14% in 2027. It’s the second consecutive year of double-digit percentage premium increases. Last year’s median nationwide proposed rate change was 18%, and the finalized rate change was 20%. The hikes in premiums appear to be driven by rising medical costs and prescription drugs — including popular GLP-1 treatments for weight loss and diabetes, among other conditions— as well as cuts in federal subsidies that had helped lower beneficiary costs.

Between 2.6 million and three million people officially dropped their ACA marketplace coverage at the start of 2026. Expert in healthcare policy, Celine Gounder, notes that healthier consumers are leaving the marketplace. This is driving up premiums for those who remain on the ACA rolls.

People who sign up for coverage on the ACA exchanges don’t get their health insurance from an employer and don’t qualify for Medicaid or Medicare. Many are self-employed or small business owners. They benefit from features of the law, including barring insurers from denying coverage or hiking premiums for people with pre-existing conditions, elimination of annual and lifetime coverage maximums and making it compulsory for all health plans to offer dependent coverage allowing young adults to stay on their parent’s plan until they reach age 26.

Enhanced tax credits established during the COVID-19 pandemic had helped lower the cost of health insurance for ACA enrollees. Those earning annually up to 400% of the federal poverty level or about $62,000 were mostly insulated from premium increases. But lawmakers failed to extend these added subsidies, which made the program’s affordability even more problematic.

Given that millions have already decided to forego coverage, there’s talk of a possible death spiral for the ACA program. Nonetheless, experts caution against assuming the worst for Obamacare. Larry Levitt, executive vice president for health policy at KFF and former White House advisor writes: “The ACA is not in a death spiral. Enrollment is down by 3 million after Congress did not extend enhanced premium subsidies. And, insurers are raising premiums as healthier people drop coverage. But, the original ACA premium subsidies remain, cushioning against these changes.”

People who must pay full price without premium subsidies — about 13% of marketplace enrollees — will likely be impacted the most by hikes in premiums in 2027. But the majority of enrollees who receive premium subsidies that generally increase as premiums rise will be less affected.

Nevertheless, polling suggests that affordability is on the minds of most people as they face increases in the prices of groceries, gas and many other items. This is reflected in the rising Consumer Price Index, now at around 4% on an annual basis. When wages don’t keep pace, people’s purchasing power is reduced.

Because the CPI index doesn’t fully account for healthcare cost increases, consumers are facing an even higher inflation figure than 4%. While the CPI Index measures items such as what health insurers pay, that is, their medical costs based on submitted claims, it doesn’t take into account certain increases in out-of-pocket spending by patients like steadily rising deductibles or money enrollees must spend out-of-pocket before insurance kicks in.

The ACA is only one relatively small part of a complicated and fragmented healthcare system. While it has the media’s attention currently, affordability issues affect other parts of the system as well and have done so for decades. For example, in the much larger employer-sponsored market — over 150 million people — employees are experiencing a 10% premium hike in 2026. Premiums here have risen enormously in the past 25 years. Family health insurance premiums have surged 297% since 2000. This increase doesn’t seem sustainable, given the financial burden and the fact that it crowds out wage growth.

Nearly half of Americans now say it’s difficult to afford healthcare costs, even if they have insurance. And roughly 50% of American adults now report they cannot pay a $500 medical bill without going into debt. An increasing number of Americans are opting to go without health insurance. A Gallup poll released at the end of last year found hat around a third are considering running that risk because they say they can’t afford the costs.

The underlying problems of affordability to patients and sustainability of the system as a whole is “surging healthcare spending,” according to Zack Cooper of Yale University. He blames this on the high prices of goods and services, a system that pays healthcare providers on a fee-for-service basis and consolidation of hospitals through mergers (hospitals can then act as near-monopolies in certain regions). Cooper encourages legislators to examine drivers of rising healthcare costs that made things like the ACA subsidies necessary in the first place.

And Antonio Ciaccia, co-founder of the pharmacy drug data site 46Brooklyn.com and former head of government affairs for the Ohio Pharmacist Association, points to a “bloated pricing system” and the need for policy prescriptions that include “real, system-wide solutions” that address how medical technologies and healthcare services are priced.