Weekly briefing
ACA
Sticker shock in the ACA marketplaces
Open enrollment for the Affordable Care Act in most states starts on Saturday, November 1st, but some states who operate their own exchanges have allowed their residents to start “window shopping,” and the prices are higher. KFF helpfully made this chart:
In fairness, prices are usually higher. Some categories of goods and especially some services get more expensive over time, and healthcare is definitely in this category:
Since insurance has to pay for the healthcare services, its prices need to go up over time too. This year has been especially expensive for medical spending and next year payers are expecting more of the same, so prices are going up a lot. And on top of that, the expiration of the advanced premium tax credits are driving up costs even more because the expiring subsidies have led insurers to conclude that healthy people will skip buying insurance, but sicker people still will. So they need to raise prices even more.
CMS published their Plan Year 2026 Marketplace Plans and Prices Fact Sheet and they did their best to paint a rosy picture of the marketplace:
Similar to 2025, on average, tax credits are projected to cover 91% of the lowest cost plan premium in 2026 for eligible enrollees. This compares to 85% in the 2020 coverage year, which was the last coverage year not impacted by temporary COVID-19 pandemic policies.
For a 50-year-old earning twice the poverty level, tax credits will cover 81% of the premium for a benchmark plan as compared to 93% in 2025.
In 2026, nearly 60% of eligible re-enrollees will have access to a plan in their chosen health plan category at or below $50 after tax credits. This compares to 83% of eligible enrollees in 2025 and 56% in 2020 with equivalent access.
The discrepancy between news reports about premium sticker shock and CMS’ accounting is three-fold:
The averages from this year and next year are very different populations, with a much narrower group eligible for credits next year versus this year.
The absolute level of the premiums has gone up, in part due to the expiration of the tax credits, which means that even holding the % covered by the tax credits constant, the total amount people have to pay is going up.
People tend to overestimate the family level impact of macro level inflation while discounting increases to household own wages, and in general like to complain about prices going up.
It’s a tough spot to be in, and I don’t envy Dr. Oz at the moment.
Analysis
A couple reflections from earnings calls over the past few weeks on the ACA:
First, everyone we’ve heard from so far is trying to price their ACA plans so as to not be the cheapest next year:
From Molina: “We were 1 and 2 in price in 50% of our ACA markets last year and it’s looking like it’ll be 10% in 2026”
UnitedHealthcare is estimating their enrollment will contract by two-thirds
Wesley Sanders, Founder and Principal Consultant at Evensun, shared this analysis on LinkedIn for Centene in Georgia
But someone has to be the cheapest! And that someone is going to get a lot of growth next year. You can imagine a scenario where a payer absorbs the members, the enhanced subsidies get extended, there’s a surprise cooling in MLR, and they look like geniuses. Of course, it’s also easy and probably more likely to imagine the opposite scenario.
Second, on Davita’s earnings call, CEO Javier Rodriguez got a question about the enhanced subsidy expiration and its impact on the business. His response illustrates the adverse selection dynamics pretty well, I think:
And the way that we have it thought out is that if they go away, we would lose that $120 million roughly over a three-year period. But it's not evenly spread out. We would have something estimates are somewhere like $40 million in year one. $70 million year two, and $10 million in year three.
And the reason why it's a little lumpy is because our models divide the population. And so we assume that our existing patients because they are in high need of insurance and understand the need for coverage, would be more likely to retain that coverage and also in many cases, it is the most affordable option. That math changes when you grab the second group, which is those patients that yet don't know that their kidneys are gonna fail. So they're CKD patients. And they might, let their insurance lapse And in that case, when their kidneys fail, they would become Medicare patients. And, of course, there's a spectrum in there because some of these people in CKD four are already pretty ill.
Davita would prefer the patients stayed on commercial insurance, but only the ones who know they need it are likely to do so, and insurance companies need to raise premiums to cover dialysis for these patients.
OB3
A Medicaid sized hole in revenue forecasts
The Congressional Budget Office (CBO) released a supplemental cost estimate on H.R.1 also known at the One Big Beautiful Bill Act. When someone says a bill is going to cost or save money, they’re usually citing a CBO estimate, and they do incredibly detailed and thoughtful work trying to model the impacts of legislation.
This report goes through the mechanics of how H.R.1 is going to save the government gross close to a trillion dollars (net $887b) over the next decade:
And reduce the number of people with insurance by 7.5 million:
Analysis
Work requirements are getting most of the coverage, but looking at these charts has me a lot more worried about state directed payments and provider tax changes on care delivery organizations. It’ll have the biggest impact on rural and safety net hospitals, but it won’t be immaterial for the publicly traded ones either and their data is easier to wrangle:
During UHS’s call, they got asked to size the impact of these changes
At this time, assuming no changes to our Medicaid revenues or other changes to related state or federal programs, we estimate that commencing with the 2028 fiscal years, our aggregate net benefit will be reduced on an annually increasing and relatively pro rata basis by approximately $420 million-$470 million in 2032.
One reason why I think this is getting less attention is that it’s pretty wonky. Lots of formulas and exceptions and math. If, like me, you’d like someone to explain it to you in an accessible manner, HTN is hosting an event with health economist Jonathan Palisoc on November 6th which you can register for here.
The Hickpuff Review2
Georgetown Center for Health Insurance Reforms hosted another event this week called Why Health Care Costs Are Rising: The Role of Corporatization and Bipartisan Solutions to Increase Affordability. Although I’m firmly in the pro-corporatization camp, it was interesting to hear from some critics. However, I would encourage them to try navigating a semi-complicated condition between a bunch of independent, allergic to Capex, always on vacation doctors in France before implementing their agenda.
Earnings call coverage of Centene, CVS, and UnitedHealth Group from HTN’s very own Kevin O’Leary. While reading his reports, I latched on to this quote from Centene CEO Sarah London about their state partners: “We do expect there will be budget pressures. In our world, that's actually an opportunity to help them think about managing care and therefore managing taxpayer dollars. That's really kind of the business that we're in.” State budgets are a fragile thing and when the budgets get crunched, managed care is going to be an increasingly attractive option.
$875 million of the $25 billion dollar Rural Health Transformation Program state funds are contingent on states joining interstate licensure compacts and increasing scope of practice for nurse practitioners, PAs, pharmacists, and dental hygienists. I can’t see these, or any initiatives, making up the $87 billion gap from the OB3 cuts to rural health, but I do think they are good policies on the merits.
We’ve got a doctor shortage in this country and there are concerns that capping federal loans will exacerbate it. Also in supply side health care policy this week, I chatted with Meghan Jewitt of Prax Health earlier this week on how we could unlock more of the NP supply in the US, and I had coffee with Lawson Mansell of the Niskanen Center whose work on healthcare abundance I really enjoy.
Longer Form: Should we be paying MA plans more?
One of the many benefits of living in our nation’s capital is that there’s always interesting conversations happening with earnest policy wonks, even when the government is shut down. On Monday, I attended a panel put on by Georgetown’s Center for Health Insurance Reforms talking about Medicare Advantage Policies on the Horizon. The briefing covered the following pieces of legislation that are under consideration:
Improving Seniors Timely Access to Care Act (ISTACA), a bipartisan bill focused on prior authorization for Medicare Advantage
The No UPCODE Act which would exclude medical diagnoses from chart reviews and HRAs in risk adjustment, requires CMS to fully account for coding pattern difference between FFS and MA
The GUARD Veterans Health Care Act which would allow the VA to recover payments from MA plans which is not the case today1
A quick overview of provider directory accuracy legislation, supplemental benefits transparency, the Prompt and Fair Pay Act which is exactly what it sounds like.
These seem like pretty reasonable proposals, and it’s certainly á la mode to go after Medicare Advantage plans at the moment. But as I reflect on the HealthScape report on regional plans negative operating margins, the earnings calls this past quarter from the big MA payers, and knowing we’ve still got 1 more year of v28 adjustments ahead of us, I’m not sure how much juice there is left to squeeze out of the payers.
Insurance companies are easy to complain about, and managed care is an unusually effective lightning rod for complaints. But insurance is socially useful, and it seems to me like Medicare Advantage companies are getting paid a few pennies on the dollar to do the thankless job of trying to effectively manage health care spending. I’d argue that part of their social utility, the way they earn their pennies on the dollar, is being a sort of sin-eater for the rest of society who isn’t interested in making life or death decisions.
Increasingly, the sin-eating business isn’t so good with margins shrinking in recent years among the largest players and negative for the regional non-profits.
You can also look at the Medical Loss Ratios of the publicly traded insurance companies with MA exposure which are all running hot or see plans exiting the market and projections that MA is going to contract next year, or you can put your investor hat on and compare the major hospitals and major insurers YTD:
Aside from some idiosyncratic stories at CVS and HUM, it’s pretty clear where you would have been better allocating your capital and it wasn’t with the payers. This summer, David Wainer wrote a column in the Wall Street Journal titled “Health Insurance Companies are Becoming Chronically Uninvestable” which is a something we find ourselves talking about a lot at Health Tech Nerds.
The net effect of the legislation discussed at the Georgetown event is to make MA less profitable and make it harder for them to manage spending. I’m not so sure that’s what this moment is calling for.
Hospital operator UHS, who reported earnings this week, shared this:
…net revenue per adjusted admission increased by 9.8% while net revenue per adjusted patient day increased by 11.5%, as compared to the third quarter of 2024. Net revenues generated from our acute care services, on a same facility basis, increased by 12.8% during the third quarter of 2025, as compared to the third quarter of 2024.
The cost of insurance is a function of the volume and prices of the health care services its members use. Those prices have gone up a lot— just ask the shareholders of the major publicly traded hospitals. Short of expanding the Maryland model of all-payer rate setting, I don’t see how we can manage costs in the US healthcare system without insurance companies.
The MA market has real problems. But to me the most interesting and timely are not how we further hem in MA margins and the managed care toolkit, but rather how we could support a more competitive market for health plans in an industry where there are significant returns to scale.
1 I found this pretty fascinating. A veteran might get most of their health care at the VA, but if they’re enrolled in MA, their plan still gets capitated payments for them. Usually Medicare is the secondary payer but Medicare is prohibited from making payments to the VA or seeking payments from Medicare. So some clever MA plans market themselves to veterans who mostly go to the VA meaning the plan gets to keep most all of their capitated payments. You might be thinking this can’t be that much money, but one estimate put savings for closing this loophole at $357 billion over a decade.