By David Wainer

Healthcare politics and investing might as well be living in alternate universes.

President Trump and some Republicans have been describing Obamacare as a gravy train for insurers. Trump's latest broadside slammed "big, fat, rich insurance companies who have made trillions," and he urged Congress to send healthcare subsidies directly to patients instead.

Wall Street sees it another way. Many Affordable Care Act plans are losing money this year and investors have grown increasingly bearish. "This is the worst of the five businesses managed-care companies participate in," says John Ransom, an analyst at Raymond James.

Profitability has deteriorated sharply in 2025 as sicker patients -- many of them transitioning from Medicaid -- have driven up medical costs. Insurers have responded by implementing substantial premium increases for 2026 in an effort to restore viability, but the business remains far from attractive to investors because the enrollee pool is becoming sicker and smaller. The looming expiration of Biden-era enhanced subsidies for these insurers next year is making matters worse.

Centene, the largest carrier in the ACA marketplaces, is down more than 40% year to date, while Molina Healthcare has lost over half its market value (both also face problems in the Medicaid business).

The challenging outlook also helps explain why broader diversified insurers such as CVS Health (through its Aetna subsidiary) have fled the ACA.

The outlook is unlikely to improve quickly. Some Republicans are advancing proposals to redirect the soon-to-be lapsed ACA subsidy enhancements away from insurers and straight into consumers' hands. There are a few ways to do this, but the most prominent proposal is Sen. Bill Cassidy's idea to convert the enhanced subsidies into money for health savings accounts that could be paired with high-deductible Obamacare plans.

The ideas rest on the longstanding conservative belief that patients spend more prudently when the dollars feel like their own. So far, HSAs and FSAs (flexible spending accounts) have mostly benefited higher-income, healthier workers in the employer-provided insurance market. Applied widely to a lower-income population, they could, hypothetically, foster more consumer choice. But they would do little to help patients with higher premiums.

On Wall Street, the uncertainty surrounding these Republican proposals is fueling investor anxiety -- not so much over their potential mechanics, but over how they complicate bipartisan compromise. Without an extension of the enhanced tax credits -- which cost roughly $30 billion annually -- more than 20 million Americans are now set to face sharp premium increases in 2026, and millions are expected to drop out of coverage. With the shutdown over and Trump publicly rejecting a straightforward extension, the odds of a deal by year-end appear slim, says Ransom. That impasse has hammered pure-play ACA insurer Oscar Health, whose shares have plunged over 40% from their October peak.

The ACA individual market has never been very attractive to large insurers. Compared with the relatively more stable, higher-margin employer and Medicare Advantage segments, the exchanges are small, volatile and serve a lower-income population that churns frequently.

Price competition can be ferocious: Plans are displayed side-by-side online, and consumers routinely switch carriers to save a few dollars. On top of that, the ACA's risk-adjustment program caps profitability by transferring payments from insurers with healthier enrollees to those with sicker ones.

Layer in a decade of political uncertainty -- repeated Republican repeal efforts followed by Democratic patchwork fixes -- and it is easy to see why most national carriers have stayed on the sidelines or fled altogether.

CVS Health's Aetna offers a case study: After sustaining heavy losses, it exited the exchanges in 2018, tentatively re-entered select markets in 2022, and announced a full withdrawal again for 2026. Far from "making trillions," the ACA marketplace has proved to be a difficult business.

Looking ahead, there are more questions than answers concerning the Republican ideas being floated. As JPMorgan analyst John Stansel notes, the mechanics matter: If those accounts can be paired with low-premium, catastrophic-insurance plans, healthier people could peel off, hollowing out the exchange risk pools.

A more realistic scenario -- given congressional gridlock and the coming midterms -- is a stabilization of these programs at a lower base. Without enhanced subsidies, premiums will jump, a few million people will drop coverage or downgrade to bare-bones "bronze" plans, and enrollment in both ACA and Medicaid will drift back toward pre-2021 levels. The bigger picture is that America's uninsured rate, which had fallen to record lows, will start to rise again.

Insurers won't collapse as higher premiums will eventually restore margins. Just don't expect them to get big or fat anytime soon.

Write to David Wainer at david.wainer@wsj.com

(END) Dow Jones Newswires

November 23, 2025 05:30 ET (10:30 GMT)

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