What's Happening?
The expiration of Affordable Care Act (ACA) subsidies is leading to a significant shift in the U.S. health insurance market. Enrollment in ACA plans has decreased to approximately 23 million Americans, a drop of 1.2 million from the previous year. This
decline is attributed to rising costs, which are expected to more than double average annual premiums from $888 in 2025 to $1,904 in 2026. As healthier individuals opt out, the remaining insurance pool becomes smaller and sicker, driving costs higher. Concurrently, employer-sponsored health insurance costs have risen, with average family premiums reaching nearly $27,000 in 2025. In response, many employers are turning to self-funded health plans, which allow them to assume financial risk for claims and offer more control over data and cost management.
Why It's Important?
The shift towards self-funded health plans reflects a broader trend in the U.S. healthcare market, driven by the expiration of ACA subsidies and rising insurance premiums. This change could have significant implications for both employers and employees. Employers benefit from greater control over healthcare spending and the ability to tailor benefits to their workforce's needs. However, the rising costs of traditional insurance plans may leave some individuals without affordable coverage options, potentially increasing the uninsured rate. The move towards self-funded plans could also influence the overall structure of the health insurance market, as more businesses seek alternatives to conventional insurance models.
What's Next?
As ACA subsidies expire and insurance premiums continue to rise, it is likely that more employers will adopt self-funded health plans. This trend may lead to further changes in the health insurance landscape, with potential impacts on policy and regulation. Stakeholders, including policymakers and healthcare providers, may need to address the challenges posed by these shifts, such as ensuring access to affordable coverage and managing the financial risks associated with self-funded plans. Additionally, the healthcare industry may see increased innovation in cost management and benefit design as employers seek to optimize their self-funded plans.
