By Josh Nathan-Kazis

Ever since President Donald Trump won a return ticket to the White House last November, investors have been anticipating the end of federal subsidies that have slashed the prices of health insurance premiums for millions of Americans.

The subsidies, created in 2021 by Democrats, are set to expire at the end of this year. They steeply discount the cost of the insurance plans offered on the Affordable Care Act exchanges for most people. Insurers like Centene and Oscar Health were bracing for major drops in enrollment in the plans they sell on the ACA exchanges, and hospital companies like HCA Healthcare and Tenet Healthcare were expecting to treat fewer patients.

Democrats' gambit to tie an agreement to end the federal government shutdown to an extension of the subsidies could now scramble those expectations. Any deal would still likely come too late to change the outlook for insurers, though hospital companies could see a boost.

Where the shutdown negotiations go from here is far from certain. Raymond James healthcare policy analyst Chris Meekins put the odds of an extension of the subsidies at 40% in a note to investors, while Jefferies analyst Brian Tanquilut wrote he thinks the credits "will get extended in some form." Separately, Jefferies analyst David Windley wrote that experts convened by the firm expected a two-year extension to the subsidies.

The launch of the enhanced credits roughly doubled the number of people enrolled in marketplace plans, according to healthcare policy group KFF. Today, more than 90% of people enrolled in marketplace plans benefit from the credits. If the subsidy program isn't renewed, KFF says the average premium payment for families on marketplace plans will double.

Investors started pricing in an end to the subsidies after Trump won the presidential election. Shares of Oscar, which offers most of its plans through the marketplaces, fell 26% in the two days after the vote.

Nearly a year later, efforts by the Democrats to rescue the subsidies may come too late for the insurers.

One problem is that the companies have already designed the insurance plans they will offer on the ACA exchanges next year, and have rolled out premiums that assume the subsidies will end as planned at the end of December.

"While we don't know the exact number of members that will disenroll in 2026 (estimate range from 25-45%), we do expect substantial shifts in the risk pool," Bank of America analysts wrote in September.

According to a report from KFF, premiums for marketplace plans are set to climb by 18% in 2026, the biggest increase the insurers have asked for since 2018. Since insurers expect healthy people to leave the plans, they anticipate higher costs for the members remaining in the marketplace. In an essay posted on Wednesday, KFF expert Cynthia Cox, who is director of KFF's program on the ACA, says that with an extension of the subsidies, the premiums would likely have increased by 14%. She wrote that it is likely too late for the insurers to change their premiums before the open enrollment period begins over the coming weeks.

That timing could make it hard for companies to recapture members who already decided not to re-enroll for next year, and will cause other complications.

A one- or two-year extension, meanwhile, won't change the long-term outlook for companies. Even with an extension, the firms will find themselves in the same position next year or the year after. Raymond James analyst John Ransom wrote in September that Oscar executives had told him that it "sees limited utility in a one-year reprieve."

Insurers with significant exposure to the health insurance marketplaces include Oscar and Centene. Centene shares are down more than 45% over the past 12 months. Oscar shares are up nearly 20% over the past 12 months.

For the hospitals, the situation isn't quite so fraught. Shares of HCA and Tenet are both climbing this year, with HCA up 42% and Tenet up nearly 60%. In July, Leerink Partners analyst Whit Mayo wrote that the loss of the insurance subsidies would amount to a $1.15 billion Ebitda headwind in 2026, but that "any Congressional movement would likely serve as a material catalyst."

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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October 08, 2025 17:01 ET (21:01 GMT)

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