Carriers filing 2027 ACA rates face work they have not done since 2017: pricing a structurally sicker pool rather than a temporarily disrupted one. Blue Shield of California's 2026 filing, submitted July 30, 2025, documents a 225 basis point gross morbidity increase attributed to enhanced subsidy expiry, offset to a net 150 basis point premium impact by a 75 basis point favorable mix adjustment from reduced Silver cost-sharing reduction enrollment. Most 2026 filings disclosed a single aggregate increase. This one showed the structure beneath it.

Key Takeaways

  • 225 basis points of gross morbidity load nets to 150 only after a 75 basis point favorable mix credit from falling Silver cost-sharing reduction enrollment. The two components share a root cause and move in opposite directions.
  • 48% of the 2026 plan-selection decline came from enrollees above 400% of the federal poverty level, a cohort that was 7% of 2025 enrollment. Price elasticity ran steepest exactly where the subsidy cliff bit.
  • Risk adjustment coefficients are calibrated to the prior year's pool, so they still reflect the 4 to 5 million lower-morbidity enrollees who have since exited. The 225 basis point load is the residual the formula does not reach.
  • Bronze share rose from 30% to 40% of plan selections while Silver fell from 57% to 43%. The 2027 payment notice widens actuarial value bands further, moving the same mix that generated the 75 basis point credit.
  • Average deductibles rose $1,027, from $2,759 to $3,786, a 37% increase that suppresses induced utilization in the enrolled pool independently of any change in member health.

The 225 Basis Points, Decomposed

The filing's two morbidity figures are not a gross and a rounding. They are distinct phenomena running in opposite directions from the same event, and only one of them repeats.

The 225 basis point increase is what happens to the expected cost distribution when healthier enrollees leave. The remaining population costs more per member, not because any individual's health changed, but because the composition shifted toward higher utilizers. Nothing in that number is a trend assumption or a utilization forecast. It is arithmetic on a changed denominator.

The 75 basis point favorable offset comes from benefit design rather than health status. The enrollees who chose Silver enhanced cost-sharing reduction plans for their low out-of-pocket costs are largely the same healthier, price-sensitive members now exiting. When that enrollment falls, the induced utilization embedded in those richer benefit designs falls with it, producing a cost credit that partially counteracts the morbidity deterioration.

The distinction decides how the number rolls forward. An actuary who carries the net 150 basis point figure into 2027 as a single factor is assuming both halves persist at the same ratio. They do not. Morbidity deteriorates further as additional contraction arrives from administrative enrollment barriers, while the mix credit is close to spent: the cost-sharing reduction eligible population has already contracted, and a second round of healthy attrition does not generate another favorable credit of comparable size.

Where Risk Adjustment Stops Short

The 225 basis points is not the total morbidity increase in the remaining pool. It is the portion that survives risk adjustment and has to be recovered through premium, which is why the size of the load depends on how the transfer formula is calibrated rather than on how sick the pool actually is.

The HHS-HCC formula is calibrated to the prior year's national risk pool distribution. Its coefficients translate diagnosis codes into risk scores using claims experience from a period when the population still included the 4 to 5 million higher-income, lower-morbidity enrollees who have since left. When they exit, the remaining pool's actual condition distribution shifts upward while the coefficients stay anchored to the older calibration. Risk scores across every plan in the market therefore understate current morbidity relative to that baseline, and the correction arrives after the rate year closes.

Which cells drove the exit is not a matter of assumption. Consumers between 400% and 500% of the federal poverty level were 3% of 2025 sign-ups but 27% of the decline into 2026, with selections down 44%, roughly 321,000 people. Those above 500% contributed another 21%. Together the above-cliff cohort was 7% of 2025 enrollment and nearly 48% of the decrease. Adults 18 to 34 accounted for 542,000 fewer sign-ups, 46% of the total decline.

That gradient is why a uniform lapse rate misprices the load. Within any income band the healthier enrollee is the more price-sensitive one: a member at 450% of poverty managing a chronic condition cannot drop coverage, while an equivalent member with no ongoing needs can.

The residual also varies by market structure. Where one carrier holds 60% to 70% of exchange enrollment there are few transfer counterparties, so the undercompensation lands on the dominant carrier. In a market with four or five comparable carriers it redistributes across a larger pool. The 225 basis point statewide figure blends both, which means a book concentrated in single-carrier rural counties should price above it.

The 2027 Rule Reopens the Plan Mix

The federal payment notice for 2027 adds a variable the 2017 to 2019 adverse selection cycle did not have. It expands de minimis flexibility around metal tier actuarial values and permits bronze and catastrophic plans to exceed the statutory maximum out-of-pocket limit where the required actuarial value and the cost-sharing structure cannot both be satisfied.

That matters because plan mix is already moving hard. Bronze share rose from 30% of plan selections in 2025 to 40% in 2026 while Silver fell from 57% to 43%, and average annual deductibles rose from $2,759 to $3,786, an increase of $1,027 per person, or 37%.

Bronze migration works on both sides of the morbidity equation. Higher deductibles suppress induced utilization, which pushes cost down, while bronze enrollees also self-select for health relative to Silver, which pushes the residual pool's morbidity up. Widening the actuarial value bands lets carriers reprice into that gap, and the enrollment response feeds directly back into Silver cost-sharing reduction volume, the same quantity that produced the 75 basis point credit in the first place.

Aetna's exit at the end of 2025, affecting roughly 1 million enrollees across 17 states, compounds the problem rather than sitting beside it. The standard assumption is that an exiting carrier's book skews healthy and its migrators are more likely to drop coverage than to switch. In 2026 that population faced the same affordability threshold as everyone else, with the average net premium moving from $113 to $178 per month, a 58% increase. Carriers now hold six to eight months of claims on those members, which makes a retrospective comparison of actual utilization against formula-assigned scores the one empirical check available before the 2027 load is set.

Further Reading

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