Overview

The expiration of enhanced premium tax credits for Affordable Care Act (ACA) marketplace plans at the end of 2025 has triggered the most severe enrollment contraction in the program’s history. Approximately 5 million Americans have lost ACA coverage in 2026, with enrollment projected to fall from a record 22 million in 2025 to as low as 17.5 million by year-end [1][2][3]. The withdrawal of these subsidies, which had capped insurance costs at 8.5% of income for those above 400% of the federal poverty level, has caused average premiums to surge by 58% and deductibles to rise by 37% [4][5]. The consequences are rippling across the entire U.S. healthcare system: major insurers are shedding members and exiting markets, hospitals are absorbing rising uncompensated care costs, and state Medicaid programs are bracing for billions in new financial burdens as work requirements loom. This report quantifies the coverage losses, analyzes the financial impacts on insurers and providers, assesses the strain on Medicaid budgets, and synthesizes the investment implications for key healthcare subsectors.

Coverage Losses: Magnitude, Geography, and Demographics

National Enrollment Decline

The Department of Health and Human Services (HHS) reported on June 26, 2026, that approximately 5 million fewer Americans are enrolled in ACA marketplace plans compared to the prior year [1][2][3]. The decline comprises over 1 million fewer plan selections during the 2026 open enrollment period and an additional 4 million people who disenrolled or failed to pay premiums [1][2][3]. In February 2026, effectuated enrollment stood at 19.2 million, down 13% from 22.1 million in February 2025 [6][7]. KFF projects that enrollment will continue to erode throughout the year, potentially reaching 17.5 million, while the Commonwealth Fund estimates a possible low of 16.5 million [1][3][8].

The Congressional Budget Office had previously forecast that marketplace enrollment could shrink by roughly 25% after the enhanced subsidies expired [1]. A KFF survey conducted in late February and early March 2026 found that 9% of 2025 marketplace enrollees had become uninsured, 4% of returning enrollees had not paid their first month’s premium, and 17% were not confident they could afford coverage for the full year [1][3].

Premium and Cost Increases

Without the enhanced subsidies, average premiums doubled from 2025 to 2026 [1][2]. KFF data show average monthly premiums rising 58% nationwide, from $113 to $178 [4][5]. For a 60-year-old couple, the loss of enhanced credits translates to an additional $19,000 to $22,000 in annual costs [1]. The average annual premium for a 60-year-old, which would have been $5,525 under the expired subsidies, now stands at $15,914 [9]. Average deductibles experienced the steepest increase on record, rising 37% (over $1,000) to $3,786 in 2026 [5][10]. Consumers have responded by flocking to bronze plans, which now account for 40% of total plan selections, up from 30% the prior year [10].

State-Level Breakdown

Enrollment fell in 41 states during the 2026 sign-up period [1][3]. The hardest-hit states, all with declines exceeding 15%, include Arizona, Delaware, Indiana, North Carolina, Ohio, Oklahoma, Oregon, and West Virginia [1][3]. North Carolina suffered the sharpest drop at 22%, losing more than 213,000 enrollees [1][6]. South Carolina saw a decline of more than 20% [1]. Indiana experienced a 16% drop, with nearly 60,000 fewer Hoosiers enrolled, falling from 359,240 in 2025 to 300,049 in 2026 [11][12].

A handful of states bucked the trend. New Mexico posted an 18% enrollment gain after the state legislature allocated $40 million to fill the gap left by expired federal subsidies [1][3]. Texas saw a 5% increase, while Massachusetts and Connecticut each rose 4%, aided by state-funded subsidies [1][3]. California, despite using $190 million in state funds to partially offset losses for lower-income families, saw Covered California enrollment fall 7% year-over-year to 1.8 million, with 374,000 middle-class Californians canceling coverage in the first three months of 2026 [13][14]. Pennsylvania lost an estimated 60,000 enrollees since January 2026 [10].

Demographic Impacts

The coverage losses have been concentrated among middle-income households. The number of enrollees with incomes between 400% and 500% of the federal poverty level fell 44% year-over-year, while those above 500% FPL dropped 27% [1][3]. This group, though only 3% of marketplace enrollees, accounted for 27% of the overall enrollment decline [1]. Older adults are particularly affected: about two-thirds of those aged 50–64 were already enrolled in the lowest-cost ACA plans, leaving them no cheaper options [9]. The Urban Institute estimates that approximately 400,000 people aged 55–64 will lose marketplace insurance due to the subsidy expiration [9].

Racial and ethnic disparities are evident. Hispanic adults represent the largest portion of the uninsured population, and while the uninsured rate for Hispanic adults fell from 30.1% in 2021 to 21.9% in 2025, the coverage losses threaten to reverse those gains [15]. Rural communities are also disproportionately impacted, as evidenced by Indiana hospitals serving rural areas reporting a 17% increase in emergency department visits, far above the national average of 1.4% [11][12].

Fraud vs. Affordability Debate

The Trump administration attributes the enrollment decline to fraud prevention efforts, citing a Paragon Health Institute analysis that estimates 6.2 million marketplace enrollees may be improperly enrolled, potentially costing taxpayers up to $25 billion in federal subsidies [16][17]. Paragon highlights Florida, where over 3 million enrollees reported incomes between 100% and 150% of the federal poverty level, yet only 636,000 Floridians plausibly fall within that range [16][17]. A separate Paragon analysis found that 12 million exchange enrollees in 2024 generated no insurance claims [16][17].

Health policy experts strongly dispute this explanation. Cynthia Cox, director of KFF’s Program on the ACA, stated: “The main takeaway is that enrollment is down 13% from last year. While the Trump administration attributes this drop in enrollment to their attempts to address fraud, this coverage loss happened at the same time millions of people faced double or even triple digit increases in their premium payments with the expiration of enhanced tax credits” [1][2][3]. Stacey Pogue of the Georgetown Center on Health Insurance Reforms added: “I don’t see data that point to that conclusion that a 5 million person drop can be explained by allegations of fraud. There’s lots of evidence pointing to people making decisions based on what they can pay each month” [1][2][3].

Market Stability and Insurer Participation

Insurer participation in ACA marketplaces declined for the first time since the enhanced subsidies were introduced. The average number of issuers per state fell from 9.6 in 2025 to 9.0 in 2026, with net decreases in 18 states [18]. The number of counties with only one participating insurer rose from 93 to 165 [18]. For 2027, six insurers—Cigna, CareSource, PacificSource, Scott and White, Providence Health, and Taro Health—have announced full or partial exits [18]. Despite these withdrawals, KFF analysts do not foresee any “bare” counties with no insurers, though Cynthia Cox warned: “If there are fewer customers, then that makes the market less appealing to insurance companies” [1][2][3].

Insurer Impacts: Revenue, Margins, and Strategic Responses

Centene Corporation

Centene, the largest ACA marketplace insurer, has been the most visibly affected. Its Ambetter-branded ACA membership plummeted from 5.54 million at the end of 2025 to 3.58 million at the end of Q1 2026—a loss of approximately 2 million members [19][20][21]. The company expects ACA membership to fall nearly 40% by year-end 2026 [19][20]. Total membership declined 6% year-over-year to 26.3 million, with Medicaid enrollment also slipping from nearly 13 million to 12.4 million [20][21].

Despite the membership losses, Centene swung to a $1.5 billion profit in Q1 2026 as its Medicaid business improved [19][20]. The health benefits ratio (medical loss ratio) improved slightly to 87.3% from 87.5% a year earlier, but the shrinking risk pool makes cost control more challenging [19][20]. Centene forecasts 2026 revenue of approximately $189.5 billion at the midpoint, a decline of roughly 3% from 2025 [20][21].

On June 15, 2026, Centene announced a companywide voluntary separation program offering buyouts to most of its 61,000 employees. CEO Sarah London stated: “When our membership shifts, we need to shift our organization accordingly” [19][20][21]. The stock fell 4.2% on the announcement but had gained 58% in 2026 through the prior close [20][21]. Centene is also bracing for the impact of more than $900 billion in Medicaid cuts over a decade, with an estimated 10 million people expected to lose coverage by 2034 under the One Big Beautiful Bill Act [20][21].

Cigna

Cigna announced on April 30, 2026, that it will fully withdraw from the ACA individual health insurance market nationwide, effective January 1, 2027. The exit affects 369,000 members across 11 states, including 40,853 in Colorado [22]. Cigna is the largest insurer to exit Colorado’s individual market in four years, joining five other insurers that have pulled out since 2022 [22]. Colorado Insurance Commissioner Michael Conway stated: “We continuously warned that the failure of the federal government to extend tax credits would have huge market disruptions and sadly our warnings are coming true” [22]. KFF policy analyst Matt McGough noted that “these smaller insurers and Cigna could potentially act as a weathervane for how insurers are thinking about the profitability of the marketplaces” [18].

Elevance Health

Elevance Health (formerly Anthem) announced on June 23, 2026, that it will exit the small-group ACA market in one state, though the specific state was not disclosed [23]. The company is also navigating significant regulatory headwinds. On May 27, 2026, Elevance paid $342 million to CMS to settle allegations of overcharging Medicare Advantage, following a February 2026 enforcement action that threatened to halt new enrollments due to “substantial and persistent noncompliance” with billing regulations [24][25]. The company’s SEC filing estimated potential exposure in a separate False Claims Act lawsuit at approximately $935 million [24][25]. CMS later lifted the enrollment freeze threat after Elevance submitted new data and completed corrective actions [26].

Molina Healthcare

Molina Healthcare’s specific ACA marketplace enrollment and financial data for 2025–2026 were not publicly available in the search results. However, Molina executives participated in an AHIP 2026 conference session on Medicaid work requirements alongside Centene, indicating the company’s focus on the evolving Medicaid landscape [27]. As a major Medicaid managed care organization, Molina faces similar exposure to the $900 billion in projected Medicaid cuts and the implementation of work requirements beginning in 2027.

Kaiser Permanente

Kaiser Permanente, a vertically integrated nonprofit serving 12.6 million members, remains a participant in ACA markets and is relatively insulated from marketplace volatility [28]. In Colorado, Kaiser is one of six insurers remaining in the individual market after Cigna’s exit [22]. In Oregon, Kaiser requested the smallest premium increase in the small-group market at 9.5% for 2027 [29]. Kaiser Permanente Northern California achieved 5-star NCQA ratings for both Medicare and commercial plans in 2025, one of only two U.S. health plans to do so [28]. The organization launched its first new brand platform in 25 years in 2026, signaling continued investment in its market position [30].

Other Insurer Trends and 2027 Rate Filings

Major health insurers have submitted rate requests for 2027 seeking premium increases of up to 30% on ACA plans, driven by soaring medical costs and the expiration of enhanced subsidies [31]. In Connecticut, ConnectiCare filed for a 22.7% average increase on individual plans, Anthem requested 17.4% for small group, and UnitedHealthcare sought 18.9% for off-exchange small-group plans [31]. Washington insurers requested an average 22.4% increase in the individual market, while Maine saw proposed spikes as high as 32% [31]. In Oregon, proposed individual market increases average 17.5%, with Moda Health seeking 25% [29]. These rate filings suggest continued enrollment shrinkage and market instability heading into 2027.

Spillover Effects on Hospitals and Uncompensated Care

Uncompensated Care Trends

The coverage losses are directly increasing uncompensated care costs for hospitals. According to Kaufman Hall’s monthly benchmark data, daily bad debt and charity care rose 5% from March to April 2026 and jumped 22% year-to-date [32][33]. As a percentage of gross operating revenue, bad debt and charity increased 3% month-over-month and 13% year-to-date [32][33]. Kaufman Hall warned that “year-over-year climbs in bad debt and charity care reflect broader shifts in payer mix, shifts in coverage, and growth in uninsured populations, requiring hospitals to proactively adapt and manage long-term revenue risks” [32][33].

The American Hospital Association’s 2026 “Costs of Caring” report found that total hospital expenses grew 7.5% in 2025, more than twice the rate of growth in hospital prices [34]. Hospitals spent $43 billion in 2025 trying to collect payments insurers already owed, including $18 billion overturning claim denials alone [34]. Policy risks include $940 billion in projected Medicaid cuts, potentially leaving 14 million more uninsured and adding $85 billion in uncompensated care costs [34].

Payer Mix Shifts

The erosion of commercial and subsidized coverage is shifting the payer mix toward self-pay and Medicaid. Kaufman Hall noted that the continuously eroding payer mix is a key concern, with daily bad debt and charity reflecting growth in uninsured populations [32][33]. The uninsured rate in the U.S. remained nearly flat at 8.3% in 2025, representing about 28 million uninsured individuals, up from 27.2 million in 2024 [15]. However, KFF estimates that the full spectrum of changes in the One Big Beautiful Bill Act could lead to an additional 17 million people becoming uninsured [15]. A federal report projects that Medicaid work requirements and enrollment rule changes will raise the uninsured population to over 33 million by 2034 [35].

Hospital Operating Margins

Hospital operating margins improved slightly from March to April 2026 but remain below 2025 levels. The sector-wide single-month operating margin index rose from 3% to 3.4%, but the calendar year-to-date index reached only 2.5% through April—well below the 3.6% operating margins logged across 2025 [32][33]. Month-over-month, daily net operating revenue rose 1% and gross operating revenue increased 2%, while daily total expenses increased 2% [32][33]. Year-to-date, both revenues and expenses are up 7% versus early 2025, with non-labor expenses rising 8% [32][33]. Kaufman Hall noted that “hospitals’ expense growth has been outpacing broader inflation driven by both cost and utilization as the population ages” [32][33].

For-Profit Hospital Systems

HCA Healthcare, the largest for-profit hospital chain with 189 hospitals, has seen its stock gain 3.6% over the past 12 months, outperforming the industry’s 1.2% decline [36]. The company is investing in workforce development, acquiring The College of Health Care Professions to strengthen its pipeline, and expanding internationally with a £17 million outpatient centre in London [36][37]. HCA also announced the sale of 31 home health and hospice locations to Deaconess, streamlining its portfolio [38].

Tenet Healthcare carries a Zacks Rank of “Buy,” with consensus earnings estimates for 2026 rising [36]. Community Health Systems, by contrast, sold four hospitals in a $110 million deal as part of a strategy to boost its bottom line, reflecting ongoing financial strain [39].

Nonprofit Hospital Systems

The 10 largest nonprofit health systems by 2025 operating revenue collectively increased revenues by 7.7% year-over-year, but many continue to face margin pressures [40]. Kaiser Permanente reported $127.7 billion in revenue (+10.3%) and an operating margin of 1.1% [40]. CommonSpirit Health posted its fourth straight year of operating losses, though the adjusted operating loss improved to -$225 million (-0.6% margin) from -$875 million [40]. Providence St. Joseph Health reported an operating loss of $486.3 million (-1.7% margin), though it achieved its first positive operating quarters in years heading into 2026 [40]. Ascension’s operating loss improved to -$490.9 million (-1.9% margin) from -$1.9 billion, and the system closed a $3.9 billion acquisition of AmSurg to pivot toward ambulatory care [40].

Hospital Layoffs and Service Reductions

Financial pressures are forcing workforce reductions. Washington Regional Medical System in Arkansas eliminated 86 positions, citing a nearly 15% increase in uncompensated care in fiscal 2025 and the fact that 40% of Arkansas hospitals operate at a loss [41]. Mankato Clinic in Minnesota laid off nearly 100 employees, approximately 10% of its workforce [42]. UPMC eliminated 500 positions [43]. An April 2026 analysis identified 446 hospitals across 44 states at high risk of closing or reducing services because of Medicaid funding cuts [44].

Emergency Department Utilization

Indiana hospitals reported a 17% increase in emergency department visits in 2025, far higher than the 1.4% national average, with some hospitals projecting a doubling of bad debt in 2026 [11][12]. The Indiana Hospital Association forecasts $3.3 billion in uncompensated care over the next decade [11][12]. Nationally, year-to-date daily emergency department visits fell 2% year-over-year according to Kaufman Hall, but the shift toward higher-acuity uninsured visits is straining resources [32][33].

Spillover Effects on Medicaid Budgets

Medicaid Work Requirements and Coverage Losses

The One Big Beautiful Bill Act, signed in July 2025, requires all Medicaid expansion states to implement work requirements by January 1, 2027 [45][46]. The final rules, released by CMS on June 1, 2026, mandate that able-bodied adults aged 19–64 complete 80 hours per month of qualifying activities—work, job training, volunteering, or education—to maintain coverage [47][48]. Exemptions exist for children, pregnant individuals, those with disabilities, and the “medically frail,” but the definition of medical frailty is restrictive, and by 2028, proof such as pay stubs or doctors’ notes will be required [47][48].

The Congressional Budget Office projects that 5.2 million adults will lose Medicaid coverage by 2034 due to these requirements, while KFF estimates more than 5 million will lose insurance [35][47]. The Robert Wood Johnson Foundation projects up to 10 million could lose coverage in 2028 [48]. A survey conducted in April 2026 found that 55% of Medicaid enrollees were completely unaware of the new work requirements, and 85% did not know eligibility checks would shift from annually to every six months [44].

State Budget Pressures

States are facing significant upfront costs to implement the work requirements, ranging from $4 million to over $30 million per state for IT system upgrades, staffing, and compliance [45][46]. While the federal government provided $200 million in implementation funding, states report it is insufficient [45][46]. North Carolina expects to spend $31.2 million annually but received only $1.9 million in federal aid [45][46]. Arizona is cutting other programs to fund $14 million in implementation costs [45]. Pennsylvania needs $7.8 million for IT upgrades plus 400 new staff [45][46]. Ohio estimates $28 million over two years, and New Mexico projects $24 million over 18 months [45][46].

Beyond work requirements, states face a projected $664 billion collective decline in Medicaid budgets through 2034 due to other provisions in the same bill, including caps on provider taxes and reduced federal matching [45][46]. Provisions in the One Big Beautiful Bill Act would reduce state-directed Medicaid spending by $911 billion over the next decade [49].

State-Level Policy Responses

Some states are attempting to mitigate the damage. New Mexico allocated $40 million in state funds to replace expired federal subsidies, resulting in an 18% enrollment gain [1][3]. California budgeted $190 million for 2026 to subsidize coverage for those up to 165% of the federal poverty level, and Governor Gavin Newsom proposed $300 million for 2027 to expand eligibility to 200% of the poverty level [13][14]. Los Angeles County joined a coalition of California public hospitals requesting a $500 million emergency one-time payment from the state, projecting a $700 million annual loss by fiscal year 2028–29 due to Medicaid cuts [50].

Conversely, many states are making painful budget cuts. Republican Sen. Brad Hudson of Missouri stated: “We don’t have a bunch of extra money to go around. We had to make cuts this year. We’re probably going to have to make cuts next year” [45][46]. Democratic State Sen. Matt Klein of Minnesota warned: “The reason it saves money on Medicaid is because they know we’ll be kicking people off of health care. And when people don’t have health care coverage, they will come in sicker, and they’ll come in later” [45][46].

Broader Medicaid Spending Projections

A federal report released June 25, 2026, projects U.S. health expenditures will approach $9 trillion by 2034, up from $5.7 trillion in 2025, consuming 20.6% of GDP [35]. Medicaid spending is projected at $1.52 trillion by 2034, while Medicare spending will rise 7.7% annually to $2.35 trillion [35]. The uninsured population is expected to rise from approximately 28 million in 2024 to over 33 million by 2034, with the insured rate dropping from 91.8% to 90.5% [35].

Investment Implications

Insurers: Winners and Losers

Losers (Most Exposed to Negative Trends):

• Centene (CNC): The largest ACA marketplace insurer has lost 2 million members and expects a 40% decline by year-end. The company is implementing companywide buyouts and faces significant Medicaid cut exposure. While the stock gained 58% in 2026 prior to the buyout announcement, the long-term headwinds from both ACA and Medicaid membership losses are substantial [19][20][21].
• Cigna (CI): Exiting the ACA individual market entirely signals a lack of confidence in marketplace profitability. The 369,000-member exit, while small relative to Cigna’s overall book, acts as a “weathervane” for broader insurer sentiment [18][22].
• Elevance Health (ELV): Facing a $342 million Medicare Advantage overpayment settlement, a small-group ACA market exit, and potential False Claims Act exposure of $935 million, Elevance is navigating multiple regulatory and market challenges [23][24][25].
• Molina Healthcare (MOH): As a major Medicaid managed care organization, Molina is highly exposed to the $900 billion in projected Medicaid cuts and work requirement implementation, though specific ACA enrollment data was unavailable.

Winners (Relatively Better Positioned):

• Kaiser Permanente: As a vertically integrated nonprofit with 12.6 million members, Kaiser is insulated from ACA marketplace volatility. It remains a stable participant in markets where others are exiting and has requested the smallest premium increases in some states [22][28][29].
• UnitedHealth Group (UNH): While facing some ACA market headwinds, UnitedHealth’s diversified portfolio—spanning commercial, Medicare Advantage, and Optum health services—provides a buffer. The company is seeking significant premium increases for 2027, which could improve margins if enrollment stabilizes [31].
• Insurers with Limited ACA Exposure: Companies with minimal ACA marketplace participation and strong employer-sponsored or Medicare Advantage books are better positioned to weather the storm.

Hospitals: Winners and Losers

Losers (Most Exposed to Negative Trends):

• Community Health Systems (CYH): The ongoing sale of hospitals to boost the bottom line reflects financial distress. Rising uncompensated care and Medicaid cuts will further pressure this highly leveraged system [39].
• Nonprofit Hospitals in Non-Expansion States or Rural Areas: Hospitals in states that did not expand Medicaid or those serving rural populations face the greatest risk. The 446 hospitals identified as at high risk of closing are disproportionately in these categories [44]. Systems like CommonSpirit Health and Providence St. Joseph Health, which are already reporting operating losses, will struggle to absorb additional uncompensated care [40].
• Safety-Net Hospitals: Los Angeles County’s request for $500 million in emergency state funds illustrates the existential threat to safety-net providers. Without state intervention, service cuts, layoffs, and facility closures are likely [50].

Winners (Relatively Better Positioned):

• HCA Healthcare (HCA): The largest for-profit chain has outperformed the industry, with stock up 3.6% over 12 months. Investments in workforce development, international expansion, and portfolio optimization (selling non-core assets) position HCA to manage margin pressures better than peers [36][37][38].
• Tenet Healthcare (THC): With a Zacks Rank of “Buy” and upward earnings revisions, Tenet appears well-managed. Its focus on high-acuity services and ambulatory surgery centers aligns with the shift toward outpatient care [36].
• Large, Diversified Nonprofit Systems: Systems like Advocate Health, UPMC, and AdventHealth, which reported strong operating margins (4%, 0.9%, and 13.1% respectively in 2025), have the scale and financial reserves to absorb near-term shocks [40]. Their investments in complex service lines and ambulatory care provide growth avenues.
• Ambulatory Surgery Centers and Outpatient Providers: The pivot toward outpatient care, exemplified by Ascension’s $3.9 billion acquisition of AmSurg, benefits companies in this subsector. As hospitals shift services to lower-cost settings, ambulatory surgery centers and related providers stand to gain [40].

Broader Healthcare Sector Considerations

The expiration of ACA subsidies and the implementation of Medicaid work requirements are accelerating several structural trends. The shift toward high-deductible health plans and bronze-tier coverage is increasing patient financial responsibility, but hospitals are struggling to collect these payments, as evidenced by rising bad debt despite higher patient payments [51]. This dynamic benefits revenue cycle management companies and technology vendors that help providers improve collections.

Health services M&A remains resilient, with deal value holding steady in the first half of 2026 despite a dip in transaction volume [52]. PwC’s Dan Farrell noted: “We’re not seeing a retreat from healthcare deals. We’re seeing a repricing of risk” [52]. Physician medical groups captured a record 46% of Q1 2026 deal volume, reflecting the ongoing consolidation of ambulatory care [52]. A U.S. Bank report found that 64% of healthcare finance leaders are more likely to pursue acquisitions in the next 12 months, the highest among all industries, as scale becomes essential to absorb technology costs and manage financial complexity [53].

The political landscape adds further uncertainty. With rising health costs a top voter concern ahead of the November 2026 elections, Republican lawmakers are promising to take on “Big Insurance,” though few concrete bills have been introduced [54]. The potential for policy reversals or new interventions creates both risks and opportunities for investors. States that have stepped in with their own subsidies—such as New Mexico, California, and Massachusetts—demonstrate that sub-federal action can partially mitigate federal policy damage, potentially making healthcare companies with concentrated exposure in those states more attractive.

In summary, the withdrawal of federal ACA subsidies has set in motion a cascade of coverage losses, insurer retrenchment, hospital financial strain, and Medicaid budget pressures that will reshape the U.S. healthcare landscape for years to come. Investors should focus on companies with diversified revenue streams, strong balance sheets, and strategic positioning in outpatient and value-based care, while remaining cautious about those with concentrated exposure to ACA marketplaces, Medicaid, and rural or safety-net hospital operations.