Impact of ACA Subsidies Phasing Out on Health Insurance Costs

As subsidies under the Affordable Care Act (ACA) phase out, the U.S. health insurance landscape is undergoing significant changes. The decline in ACA enrollment could lead to increased premiums, creating financial challenges for families, employers, and the healthcare system. Policyholders still enrolled in ACA plans are likely to face rising costs, compounding the pressures of regulatory compliance and healthcare accessibility.

In 2026, ACA enrollments dropped by approximately 1.2 million compared to the previous year, bringing total enrollments to about 23 million. This shift is largely due to escalating costs deterring individuals from purchasing insurance. With the phasing out of subsidies, average annual premiums in the marketplace could jump significantly, from around $888 in 2025 to $1,904 in 2026. The reduced enrollment by healthier individuals creates a smaller, higher-risk insurance pool, leading to inevitable premium hikes.

Causes of Rising Premiums

The expiration of ACA subsidies has led to fewer participants, particularly healthier individuals, increasing the concentration of high-cost claims. As insurers encounter heightened risks, they adjust premiums to compensate, resulting in a cycle of rising costs and reduced participation. Industry experts warn that this could lead to further strain on the healthcare system as regulatory compliance requirements tighten.

In parallel, employer-sponsored health insurance costs are surging. In 2025, the average premium for family coverage was nearly $27,000, reflecting a six percent increase from the previous year, with employees contributing about $6,850. Over five years, family premiums have risen approximately 26 percent, outpacing inflation rates. This growth trajectory pressures employers and adds complexity to risk management strategies in an ever-evolving market.

Stability Through Self-Funded Plans

As traditional health insurance models become unsustainable, employer-sponsored self-funded health plans offer a more stable alternative. These plans enable employers to manage financial risk for claims independently, maintaining control over plan design, provider selection, and cost management. This autonomy fosters more personalized and flexible solutions compared to traditional insurance carriers.

Paul Ford, CEO of Quilt Benefits, highlighted this trend: “Employers and plan sponsors are tired of being told they cannot access their own data to manage programs effectively and implement beneficial solutions. Self-funded arrangements can potentially save employers up to 30%.”

The shift from fully insured to self-funded models continues, with the proportion of U.S. employees in self-funded plans rising from 44 percent in 1999 to over 65 percent in 2023. This transition allows employers to better control spending, manage risks, and fine-tune benefits to meet workforce needs. With ACA subsidies ending and group insurance premiums soaring, self-funded health plans offer a viable solution for cost stabilization while ensuring comprehensive healthcare coverage.

For more insights into self-funded models and flexible healthcare solutions, visit Quilt Benefits.