1. A Historic Shift: Employers Leaving ACA‑Structured Plans
Across Northern California, more small employers—especially those with healthier risk profiles—are moving away from ACA fully insured group plans in favor of level‑funded and partially self‑funded arrangements. These alternatives allow for underwriting, more control over claims, and often lower costs for healthy groups. While they can be a lifeline for some, they also remove those employers from the ACA risk pool.
2. ACA Premiums Poised to Surge in 2026
Nationwide filings show insurers proposing median premium increases of around 15 % for ACA plans in 2026—some reaching 20 % or more—marking the steepest hikes since 2018 (KFF). These hikes are driven by:
- Scheduled expiration of enhanced premium tax credits after 2025, which helped lower premiums by up to 75 % for many
- Rising clinical and drug costs along with uncertainty over tariffs and policy changes like Marketplace Integrity rules
3. Why This Matters for Small Employers and ACA Risk Pools
- Adverse selection intensifies: Healthy small groups exiting ACA plans leave a heavier concentration of sicker, more expensive enrollees, worsening the overall risk pool (Actuary.org).
- California’s market is especially vulnerable. Approximately 2.37 million Californians are enrolled through the individual ACA market. If subsidies expire, 74 % of them would face large premium increases—averaging $967/year for subsidized enrollees and $253/year even for those unsubsidized—causing around 69,000 more Californians to go uninsured (laborcenter.berkeley.edu).
When small groups flee the fully insured market, the remaining risk pool tilts even more toward higher‑cost individuals, further compounding premium increases for those who remain.
4. What California Small Employers Should Consider
- Stable enrollment matters: Level‑funded plans may save costs short‑term, but if your group remains healthy, you still play a vital role in supporting ACA pool stability.
- Risking destabilization: As more small employers opt out, premiums for the remaining ACA insured—notably low‑participation or high‑claims small groups—could become unsustainable.
- Policy flux adds uncertainty: With enhanced subsidies due to sunset at the end of 2025, insurers are pricing in worst‑case outcomes—a signal that final rate approvals may bring even higher hikes (Reddit, Reddit).
5. The Real Impact in California
In California, the loss of small‑group participation in ACA structured pools means:
- Fewer healthy adults to subsidize the broader risk pool.
- Higher premiums for small employers and employees who rely on Covered California or off‑exchange plans.
- Destabilization at the margins, where groups that feel like they are being “stabbed by rate hikes” may in fact be paying to prop up a worsening ACA pool.
6. Action Steps for Advisors and Employers
- Assess health demographics carefully before switching plans. If your group is relatively healthy, staying in a fully insured ACA plan could support long‑term stability.
- Model costs under both scenarios: compare projected claims under level‑funded vs ACA insulated group plans and consider the impact on risk pool health.
- Monitor legislative developments: any extension of enhanced subsidies or reform of Marketplace rules could alter the calculus dramatically.
- Communicate transparently with clients: many may not realize that seemingly small plan changes by peers can erode ACA market health—and indirectly hike premiums across the board.
7. Final Thought
While level‑funded and partial self‑funding offer flexibility and cost advantage for some California small employers, their growing popularity threatens the stability of ACA small‑group and individual risk pools. That puts your clients at risk—not just from their own claims experience, but from the cumulative effect of a healthier cohort exiting the fully insured market.
By proactively analyzing demographics, modeling impacts, and staying informed on subsidy legislation, brokers and advisors can guide employers through 2026’s turbulent market while working to sustain even modestly stable ACA enrollment pools.
Let me know if you’d like personalized client‑ready summaries or deeper data on Covered California rate filings as they’re finalized.