Will The ACA Marketplace Fade With OBBBA? We Think Not

There’s no letup in the headwinds facing Affordable Care Act (ACA) insurers. Political and regulatory challenges are mounting, including debate surrounding enhanced premium tax credits and various provisions under the One Big Beautiful Bill Act (OBBBA). Uncertainty in the political sphere significantly impacts how insurers balance pricing discipline, benefit design, and operational efficiency.

At the same time, rising medical costs and specialty drug spending resulted in many carriers reporting losses across multiple business lines during second quarter earnings calls. We are actively monitoring what happens as third-quarter results are reported in late October and early November.

While these issues pose real threats to carriers, they do not spell the end for ACA Marketplace plans. We believe the Exchanges will not only survive but thrive in the years ahead. For carriers planning to be in the Marketplace for the long run, investments now to bolster performance and master some of the fundamentals outlined below will pay outsized dividends and enable them to pull ahead of margin constrained, conservative competition.

Why the Marketplace will continue to survive and thrive

At the time this article was posted, Congress had not voted on extending the enhanced premium tax credits instituted in 2021 in response to the COVID-19 pandemic. We acknowledge that a vote may not occur before the subsidies expire on Jan. 1, 2026. The Commonwealth Fund predicts that 7.3 million people could leave the ACA next year if the subsidies are not extended. However, it’s important to understand that the ACA Marketplace was thriving before the enhanced tax credit was implemented. Marketplace enrollment reached 12 million in 2021, and plans were profitable. We believe this trend can continue if carriers maintain discipline in fundamental health plan management.

Several states have acted to mitigate the impact of reduced subsidy funding. These state-level actions range from premium relief programs, increased state premium subsidies, restructuring of existing consumer assistance programs, enhancing access for specific needs, and continued advancement of consumer protection. In Colorado, for instance, a new law will provide $80 per member per month premium wrap subsidy for each enrollee and $29 for each dependent under 400% of the federal poverty level (FPL).

Additionally, Oliver Wyman Actuarial estimates that individuals with lower incomes — below 400% of the FPL who make up over 80% of enrollees — will see an average post-subsidy premium increase of less than $80 per month compared to those higher incomes — above 400% FPL—an average increase of more than $450 per month if the federal subsidies expire. This difference will likely enhance retention among those most impacted by the expiration of subsidies, allowing carriers to increase member engagement to improve overall outcomes thereby mitigating current medical loss trends.

Two other factors could drive ACA enrollment. Under the OBBBA, an estimated 10 million people could lose Medicaid coverage. While not all those individuals are expected to switch to an ACA plan, various reports suggest that some will. Growth of Individual Coverage Health Reimbursement Arrangements (ICHRA) could also spur ACA enrollment. Since their launch in 2020, ICHRA adoption surged by more than 1000%, according to the HRA Council. And an analysis from health-benefits company Gravie found that group coverage rates in many states will be higher in 2026 than rates for the individual market. This dynamic could encourage more companies to offer ICHRA to their workers who can then use the funds to buy an ACA plan. “We are seeing widespread exploration and adoption across both public sector and private sector organizations — from counties and school districts to healthcare systems and service industries. More and more employers are turning to ICHRAs for the predictability they offer, both in cost and in coverage options for employees,” said Mimi Sibley, General Manager of ICHRA at Gravie, who attended our Oliver Wyman Health Innovation Summit in September.

Strategic responses for health plans

In recent years, federal and state subsidies, responses to the pandemic, and overall Marketplace growth have enabled health plans to overlook fundamental practices and still maintain margins. This approach is no longer viable given the current headwinds. We’ve identified five core principles plans should adopt to not only maintain, but sustain performance:

Institute disciplined pricing: Plans must ensure they have the right processes in place to accurately forecast trends and ramp up the sophistication of their strategic pricing capabilities. While plans should continue to be cautious, they should not be overly conservative and identify opportunities to be selectively aggressive. It is essential to acknowledge the clear challenges posed by coverage losses and rising average claims in order to protect margins, but at the same time take advantage of the opportunities created to win share from others who are being conservative as well

Monitor $0 claimants: In 2024, $0 claimants were up to 35%, from 20-25% in the early 2020s. This in part contributed to unexpected risk score increases in 2025, and the revised margin guidance posted by major marketplace players. Plans should closely monitor this trend to better understand cost drivers, impacts on risk score uncertainty as well as other factors likes eligibility integrity to price accurately and prioritize other related enrollment, risk adjustment, and care management initiatives.

Optimize risk adjustment processes: With the expected shift of people between plans, maintaining top-tier risk adjustment processes is more critical than ever. For example, our clients are actively pressure testing vendors for adequate code capture, conducting diagnostics of their own risk adjustment capabilities, and benchmarking performance against competitors.

Get creative with community engagement: This year there will be changes for how consumers will sign up, and what they need to do to remain enrolled. We anticipate many unintentional dropouts and disenrollments driven by consumers who are not aware of the options available to them like zero-dollar bronze plans. Plans must proactively build trusted relationships with their participants, delivering culturally relevant education and providing tailored support to improve enrollment, retention, and member experience. For example, one notable Medicaid plan achieved a 90% text message response rate to successfully educate $0 premium enrollees around re-enrollment.

Understand the population at risk of losing: Plans should assess which members they are most likely to lose if the enhanced subsidies expire, what is their relative lifetime value, and who they have the ability to influence and keep. Notable groups that are disproportionately impacted include zero-premium customers who will now be actively billed nominal monthly rates, disengaged individuals not using healthcare and immigrants who do not qualifying for subsidies Understanding these pools will further assist plans in accurate pricing and help determine where there is ROI in retention and engagement efforts.

For new market entrants, today’s uncertainty presents a prime opportunity to capture market share. Several incumbents have exited the ACA Marketplace, and pricing conservatism is relatively higher than it was in the past, with plans focusing on maintaining margins rather than expanding membership. Health plans traditionally absent from the Exchange should strongly consider launching new products to take advantage of the evolving dynamics.

Overall, we believe the underlying outlook for the ACA Marketplace is stable, with continued participation and membership recovery anticipated within the next five years. Plans must prioritize mastering the fundamentals to maximize value during this evolving phase in the ACA’s history.