A health insurance ‘death spiral’ looms if young people drop out as prices spike : Shots
Chloe Chalakani is an entrepreneur who runs an artisan pasta business with her partner in coastal Maine. Fighting the government shutdown is affecting how much she’ll pay for health insurance next year.
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Chloe Chalakani has a lot at stake in the fight for health care amid the government shutdown.
Chalakani runs a small culinary business with his partner in the coastal town of Thomaston, Maine. As temperatures drop and peak tourist season draws to a close, she finds herself faced with her fall administrative to-do list, including signing up for health insurance. She uses CoverME.gov, Maine’s Affordable Care Act marketplace, also known as Obamacare.
His options for 2026 look bleak.
“My premium is already $460 a month, and it’s the highest deductible plan out there,” she says. She is 31 years old and in fairly good health. Additional financial assistance for premiums – in the form of enhanced tax credits – expires in December and rates increase.
“I have no plans to buy insurance next year,” she says. “I just won’t do it, I’ll pay out of my own pocket.”
The prospect of young people dropping out of the ACA marketplaces worries health policy experts — not only because of the personal risk they face of becoming uninsured, but also because of the effect millions of people making the same decision could have on the entire health care system.
How insurance works
Health insurance markets only work when many people pool their resources – young and old, relatively healthy and unhealthy.
“People need to pay into the insurance system when they are healthy so that they can pay into it when they are sick,” says Cynthia Cox of KFF, a nonpartisan health research organization.
Younger, healthier people tend to contribute more to the system than they consume in health care. Older and sicker people often consume health care that costs more than the amount they pay. This dynamic creates a stable insurance system.
Currently, the Affordable Care Act markets appear fairly balanced. A record 24 million people are enrolled, and brokers say their customers are generally satisfied with their plan options and find the premiums affordable.
That may be about to change. The cost of premiums will soon explode for many consumers due to the expiration of some federal subsidies that kept these monthly costs low. That’s the question at the heart of the current federal government shutdown: Democrats want the subsidies extended, Republicans say these negotiations should not be part of the debate over government funding.
The dreaded “death spiral”
If Congress does not extend federal subsidies that expire in December, the Congressional Budget Office estimates that 4 million people will become uninsured over the next few years.
People who choose to go without insurance will likely be younger and healthier, Cox says, “because sicker older people will be more motivated to keep their coverage, even if it means paying a lot more each month.”
It’s easy to find people matching these profiles. Chalakani, a 31-year-old woman from Maine, plans to miss out on coverage, while a 64-year-old woman from West Virginia who needs expensive medications tells NPR she’s saving money now to pay $2,800 each month for her coverage next year.
“If only sick people sign up for a health insurance plan, the average cost of that plan will be very high,” Cox says. “The problem is that the least sick person in that group is going to drop their coverage because it becomes unaffordable, and then the next year, the least sick person in that group that the group could fall their coverage because it becomes unaffordable and so on.
This is what we call a death spiral for an insurance market, she explains. “Premiums get so high that only the sickest people are enrolled, and eventually insurance companies just won’t want to participate in a market like that – it just won’t work.”
Even if a relatively small portion of Americans purchase these plans, it has the potential to harm everyone, regardless of how they are insured. If more and more people in the country become uninsured, it will have detrimental consequences for hospitals and access to health care.
“If hospitals are facing severe financial strain due to the increasing number of uninsured patients coming through their doors, then they might start to change the services they offer,” she says. “They may have to close the maternity ward. They may have to close completely.”
This is already starting to happen in Maine and other parts of the country, where health care markets are under financial pressure. And that pressure is growing with looming Medicaid cuts from President Trump’s budget bill, which are expected to increase the number of uninsured people by millions more.
Open registration is November 1
Weeks after the shutdown began, federal lawmakers have apparently not entered into negotiations to break the impasse. The two sides have been at an impasse since October 1.
Meanwhile, open registration will take place on November 1 – in Idaho, it has already started. Unless Congress acts quickly, enrollees will likely be shocked when they go online to find a plan for 2026. On average, consumers will have to pay double next year for the same plan.
Entrepreneurs like Chloe Chalakani are among the 24 million Americans who get their insurance through the ACA.
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Chloe Chalakani says she’s considering going uninsured, even though she knows car accidents and serious illnesses can happen. “If a disaster happened, I’d probably say, ‘Wow, I should have had insurance,'” she says. “But at this point I don’t have the financial capacity to plan that.”
If lawmakers can break the deadlock and extend the enhanced subsidies so her premiums stay about the same, she says she might reconsider her plan to go without health insurance in 2026.
