ACA Individual Market Enrollment Cliff: Wakely Models 47 to 57 Percent Contraction and the Morbidity Consequences for 2027 Rate Filings

Wakely Consulting Group's May 2026 white paper puts ACA individual market enrollment reduction at 47 to 57 percent if the enhanced premium tax credit expiry and H.R. 1 both take full effect. That is 11.2 to 13.6 million people leaving a market with a baseline near 23.8 million.

The range is not a confidence interval around a point estimate. It is the base case for two policy shocks landing inside a single rate filing cycle, and the exit is already visible in January 2026 payment data.

Key Takeaways

• 47 to 57 percent enrollment reduction is Wakely's combined projection, with H.R. 1 alone accounting for 22 to 27 percent, or 5.2 to 6.4 million people.

• The January 2026 first-premium payment rate was 86%, against 90-plus percent in prior years, and the morbidity differential between enrollees who paid and those who did not was 10.2%.

• Young adults 18 to 34 were 46% of plan-selection losses while representing roughly 30% of enrollment, with 542,000 leaving, an 8% drop in that cohort.

• Wakely models 2.9 to 6.5 percent higher morbidity in the residual pool, producing 7 to 11.5 percent of gross premium pressure before any medical trend is applied.

• Carrier morbidity adjustments in the 2027 filings available from eight states range from 3% to 19.5%, a spread that is scenario uncertainty expressed as point estimates.

What the Effectuation Data Already Shows

The 2026 experience base is not a smaller version of 2025. It is a differently composed one, and the composition is measurable.

Wakely's April 2026 "Who Paid and Who Stayed" analysis drew on 75 carriers representing more than 80% of the ACA individual market across 30-plus states, covering approximately 238 million member-months of 2025 experience. It compared utilization for January 2026 enrollees who paid their first premium against those who did not. The morbidity differential was 10.2%.

The asymmetry is structural rather than incidental. An enrollee managing a chronic condition, a scheduled procedure, or a standing prescription pays even when the net premium jumps, because expected claims exceed the annual premium at almost any subsidy level. An enrollee whose subsidized premium had been close to zero does not, because the expected benefit no longer justifies the price. Average net premiums rose 58% when the enhanced credits expired at year-end 2025, and 14% of plan selections then failed to effectuate.

State variation tracks premium variation closely. State-based exchanges averaged 14% increases for 2026 against 27% at federally facilitated exchanges, and payment rates ran from 81.9% in the bottom quartile of states to 93.6% at the top. That 12-point spread is a 12-point spread in first-year morbidity deterioration, concentrated in the federally facilitated markets that also filed the steepest increases.

Who Left, and What It Does to the 2027 Base

Aggregate exit percentages do not price a book. The demographic and income composition of the exit does, and both cut the same way.

Young adults aged 18 to 34 accounted for 542,000 of the 2026 plan-selection decline, an 8% drop in that cohort and 46% of total plan-selection losses, against a roughly 30% share of enrolled population. The ACA's 3:1 age band compresses the morbidity gradient, but the age-sex curve still steepens above 45. When exit concentrates in the youngest bands, the pool's age-weighted morbidity index rises with no change in the health status of anyone who stayed.

Income does the same work at the other end. Enrollees above 400% of the federal poverty level made up 48% of plan-selection losses while representing only 3% of 2025 enrollment. That is the subsidy cliff returning: full unsubsidized premiums before ARPA, subsidies during it, no subsidy after. Below 200% FPL, where meaningful premium tax credits survived, retention held up.

Inside the pool that remains, metal-tier migration runs the same mechanism again. Bronze rose from 30% to 40% of plan selections between 2025 and 2026 while silver fell from 57% to 43%, a record low, and the average marketplace deductible rose 37% to $3,786. Higher cost sharing suppresses utilization among healthy enrollees and does not suppress it among enrollees whose claims will clear any deductible.

This is what a 2027 morbidity adjustment has to carry, and the filings show actuaries reaching very different conclusions about how much. Across the eight states with 2027 rate requests available, carrier-level morbidity adjustments span 3% to 19.5%. Anchoring a 2027 assumption to unadjusted 2025 experience is not the conservative choice in that setting. The 2025 pool is not the 2027 population.

Filing Into a Zero-Sum Transfer Mechanism

The harder problem is that the morbidity judgment is also a competitive bet, and risk adjustment prices the bet against the actuary who gets it wrong in either direction.

Carriers are filing scenario-based rate development: a base case without the most disruptive H.R. 1 provisions, a central case with subsidy tightening but not full immigration eligibility removal, and an adverse case with full enactment layered onto the post-expiry market. The premium gap between base and adverse can span 10 to 15 percentage points for a single carrier. Section 71302 of H.R. 1 alone removes premium tax credit eligibility for lawfully present immigrants below 100% FPL, which CBO scored at $69.8 billion of reduced federal marketplace spending over ten years and 900,000 more uninsured by 2034.

The certification still attaches to one point estimate inside that range, and the two errors are not symmetric. A carrier filing at the adverse case loses price-sensitive healthy members to a competitor filing at the base case, degrading its own pool regardless of what Congress does. A carrier filing at the base case books a 2027 loss ratio well above target if the provisions land in full.

Risk adjustment then converts that divergence into cash. Transfers net to zero across each state market in each rating period, so a carrier that priced high and retained the sicker book collects from the carrier that priced low and kept the healthier one, whichever way the legislation resolves.

Carrier exit tightens the same screw. Oregon went from six carriers to four after Providence and PacificSource withdrew, Maine from five to four after Mending Health left, and Cigna is exiting Illinois individual coverage for its 2,885 enrolled members. Departing carriers tend to hold the middle-risk segments that damp variance between the remaining competitors, so concentration widens the risk-score spread that transfers are computed across. The projected transfer position becomes less certain in exactly the filing cycle where the morbidity assumption underneath it is least certain.