Is Obamacare doomed without extended subsidies?

Summary

Podcast Summary: "Is Obamacare Doomed Without Extended Subsidies?"

The Indicator from Planet Money
Date: October 29, 2025
Hosts: Adrian Ma & Darren Woods
Guests: Cynthia Cox (KFF), Brian Blaize (Paragon Health Institute), Sarah Collins (Commonwealth Fund)

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Overview

This episode explores the potential impact if the U.S. Congress lets temporary, enhanced subsidies for Affordable Care Act (ACA, or "Obamacare") insurance expire at the end of 2025. The hosts and expert guests discuss the concept of the "death spiral" in health insurance markets, review the historical context surrounding the ACA, and provide insights into the likely future of the ACA marketplace without those extra subsidies. The central question: Would the expiration of subsidies doom Obamacare?

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Key Discussion Points & Insights

1. The Stakes: Subsidies and Consumer Costs

• Shutdown Context: The federal government is in shutdown, stalemated over whether to extend ACA health insurance subsidies.
  • "Democrats say they won't vote to reopen the government unless Republicans agree to extend subsidies for people who get health insurance through Obamacare." (00:18)
• Consequence of Subsidy Expiration: Millions may see premiums double or more if subsidies expire. (00:30)

2. Adverse Selection & The "Death Spiral"

• Explanation: In insurance, a "death spiral" occurs when rising costs drive out healthier customers, further raising premiums, until a market collapse.
  • Adrian Ma: "A negative cycle where rising prices drive healthier customers out of the insurance pool and companies raise prices more to compensate. And on and on it goes until the market collapses." (04:22)
• Historical Threat: The risk of such a spiral has haunted Obamacare since its inception.

3. ACA’s "Carrots and Sticks" – How It Tried to Prevent Collapse

• Mandate ("Stick"): Required most people to have insurance or pay a penalty.
  • Cynthia Cox: "If you did not buy health insurance or did not get it through Medicare or Medicaid, then you had to pay a penalty." (04:53)
• Subsidies ("Carrots"): Made insurance affordable for low- and middle-income Americans.
  • Cynthia Cox: "Credits, and those were to make health insurance affordable for lower income and middle income people who otherwise would not have been able to afford it." (05:03)
• Goal: Balance the risk pool by attracting healthy enrollees, not just the sick.

4. Early ACA Struggles and Political Shifts

• Messy Launch & Attacks: Technical issues, lawsuits, and political attacks created confusion.
• Low Enrollment: Brian Blaize: "Enrollment was significantly below expectations." (05:45)
• Declining Competition: Some counties had just one or two insurers.
  • Brian Blaize: "Many parts of the country, in fact, more than half of counties only had one or two insurers that were offering coverage. So it was not a competitive, well functioning insurance." (06:05)
• Mandate Repeal: In 2017, Republicans eliminated the penalty for going uninsured.
• No Death Spiral: Despite predictions, the ACA survived—thanks to subsidies.

5. Pandemic Era: Enhanced Subsidies & a "Health Spiral"

• COVID Response: Congress increased ACA subsidy funding in 2021, extended in 2022 through end of 2025.
• Enrollment Doubled: From ~12 million to 24 million.
  • Sarah Collins: "This greater enrollment did what you would expect it to do. It brought more insurers to the marketplaces and increased price competition. In 2024, 96% of enrollees had a choice of three or more plans." (07:48)
• Market Strengthened: More participants meant more choice and price competition.
  • Adrian Ma: "You might argue that Obamacare the past few years has been in a sort of health spiral." (07:18)
  • Sarah Collins: "I would say yes to that. It's an interesting way of phrasing it." (07:26)

6. The Big Question: What if Subsidies Expire?

• Will There Be a Death Spiral? Unlikely. While many will face higher premiums (and some may drop coverage), the original subsidies remain, so collapse is not expected.
  • Darren Woods: "But the original Obamacare subsidies, those original carrots, will stay in place. And for that reason, the ACA market won't collapse." (08:23)
• Diverging Opinions:
  • Brian Blaize (Conservative): Favors letting enhanced subsidies expire, calls for structural reform.
    • "I think what we need to do is reform the underlying structure rather than just continue to send more money to health insurance companies to prop it up." (08:49)
  • Sarah Collins (Progressive): Urges keeping expanded subsidies to ensure universal coverage.
    • "It isn't okay to let this happen. It's not necessary to let it happen. We know that these tax credits work, and we need a country where everybody has health insurance coverage." (09:04)

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Notable Quotes & Memorable Moments

• On Adverse Selection & Death Spiral:
  • Cynthia Cox (KFF):
    "The health insurance premiums to cover that group of people are going to be so expensive that the people who are just a little bit sick might drop out next year. ... Premiums are going up more and more and more each year. And that is where you get into...a death spiral." (03:55–04:22)
• On Marketplace Turnaround:
  • Sarah Collins (Commonwealth Fund):
    "This greater enrollment did what you would expect it to do. It brought more insurers to the marketplaces and increased price competition. In 2024, 96% of enrollees had a choice of three or more plans." (07:48)
• On The Policy Divide:
  • Adrian Ma: “It’s almost like a microcosm of the debate in Congress right now.” (09:15)

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Important Timestamps

• 00:11–00:30: Government shutdown and subsidy impasse
• 02:06–03:38: History of ACA, pre-existing conditions, and adverse selection explained
• 03:55–04:22: Cynthia Cox details how a death spiral can occur
• 04:44–05:12: "Carrots and sticks" (mandates, tax credits)
• 05:27–06:17: Early market struggles, Brian Blaize perspective
• 06:53–07:48: Impact of enhanced subsidies; ACA enrollment nearly doubles
• 08:23–09:04: Updated expert opinions on the risk of a death spiral if subsidies expire
• 08:49: Conservative argument to let subsidies expire (Brian Blaize)
• 09:04: Progressive argument to keep subsidies (Sarah Collins)

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Conclusion

The episode delivers a concise but thorough look at the possible fate of Obamacare if enhanced ACA subsidies expire. Although premiums will rise and some will lose coverage, a catastrophic "death spiral" is unlikely thanks to original ACA subsidies remaining in effect. The discussion ultimately reflects enduring political disagreements over how to sustain and reform American health insurance.

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For listeners seeking to understand the ACA's current crossroads, this episode delivers economic context, policy debate, and clear explanations of why the fate of millions—and the health insurance market overall—hangs in the legislative balance.

Transcript

[Cynthia Cox]

Npr.

[Adrian Ma]

We're about a month into the government shutdown and lawmakers are still at an impasse over health insurance subsidies.

[Darren Woods]

Democrats say they won't vote to reopen the government unless Republicans agree to extend subsidies for people who get health insurance through Obamacare, AKA the Affordable Care Act.

[Adrian Ma]

And if these subsidies expire at the end of the year, millions of Americans could see the amount they pay for premiums double or more. That's according to the nonpartisan health policy think tank kff. And this could just be the start of a cascade of consequences. Theoretically speaking, a big price hike like this could even lead to something called an adverse selection death spiral.

[Darren Woods]

How's that for spooky season? Econ terminology.

[Adrian Ma]

This is the indicator from Planet Money. I'm Adrian Ma.

[Darren Woods]

And I'm Darren Woods. Today on the show, we explain why the specter of a death spiral has haunted Obamacare ever since it began. And we ask, if Congress lets these Obamacare subsidies expire, could a death spiral be in its future?

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[Adrian Ma]

Before we dive into death spirals, a little bit of history is helpful here. So back in 2010, about 20% of Americans had no health insurance, which is double what it is today.

[Darren Woods]

And for many of them, it's not as if they didn't want insurance, it's just that they couldn't afford it or insurance companies wouldn't cover them because they had a pre existing medical condition.

[Adrian Ma]

And during then President Barack Obama's first term, Democrats had an idea. They said, what if we created a government subsidized marketplace for health insurance and we passed a law saying that companies can basically no longer deny people with pre existing conditions. Those ideas would become cornerstones of the Affordable Care Act, AKA Obamacare.

[Darren Woods]

But Cynthia Cox, who conducts research on Obamacare for kff, says those proposals came with their own complications.

[Cynthia Cox]

When an insurance company has to cover people who have pre existing conditions and they have to actually, you know, cover all of the benefits that that person might need. That makes health insurance premiums more expensive.

[Darren Woods]

And why does it do that? Well, if you think about it, people who are young and healthy are less likely to buy health insurance than those who are older or who have chronic illnesses. And people who are sick also use their benefits more to pay for medications and doctors and so on.

[Adrian Ma]

In economics, they call this a problem of adverse selection. And from an insurance company's perspective, it is not good for profits because at the end of the day, their goal is just to collect more in member premiums than they have to pay out in benefits.

[Darren Woods]

And so what does an insurance company do when it's suddenly forced to cover people they would previously have rejected as too sick or too costly? Well, they raise the premiums on all their other customers. And, and here, Cynthia says, is where the slope can get very slippery.

[Cynthia Cox]

The health insurance premiums to cover that group of people are going to be so expensive that the people who are just a little bit sick might drop out next year. Then the market's going to be an even sicker group of people. And then the people who are only moderately sick would drop out the following year. And then you're left with a group of people who are only very, very sick, to the point that, you know, there are fewer and fewer people signing up each year. Premiums are going up more and more and more each year. And that is where you get into.

[Adrian Ma]

A death spir, a death spiral, a negative cycle where rising prices drive healthier customers out of the insurance pool and companies raise prices more to compensate. And on and on it goes until the market collapses. Now, to try and avoid this fate, the ACA included a few incentives to try and get more healthy people into the Obamacare insurance marketplace.

[Cynthia Cox]

As Cynthia puts it, the original Affordable Care act included both carrots and sticks.

[Darren Woods]

The sticks included the so called individual mandate.

[Cynthia Cox]

If you did not buy health insurance or did not get it through Medicare or Medicaid, then you had to pay a penalty.

[Darren Woods]

Meanwhile, the carrots included subsidies and tax.

[Cynthia Cox]

Credits, and those were to make health insurance affordable for lower income and middle income people who otherwise would not have been able to afford it.

[Adrian Ma]

So through a combination of subsidies and mandates, carrots and sticks, the hope was lots of healthy people would enroll in Obamacare plans, thus bolstering the ACA marketplace against any potential death spiral dynamics. That was the theory anyway.

[Darren Woods]

The ACA Marketplace officially launched in 2013, and in the early years, it kind of struggled. The rollout was messy and there were constant political attacks and lawsuits against the individual mandate. It all created a lot of confusion.

[Brian Blaize]

Enrollment was significantly below expectations.

[Darren Woods]

That's Brian Blaize, who's the president of Paragon Health Institute, which is a conservative health policy think tank with ties to the Trump administration. As insurance premiums went up, Brian, like many critics of Obamacare, saw signs of a potential death spiral in the making.

[Brian Blaize]

Many parts of the country, in fact, more than half of counties only had one or two insurers that were offering coverage. So it was not a competitive, well functioning insurance.

[Adrian Ma]

Then in 2017, as part of a big overhaul of the tax code, Republicans finally got their wish and ended the individual mandate's tax penalty. And this was a big blow to Obamacare because it took away the stick, one of the key incentives for healthy people to get insured. During these years, Obamacare enrollment declined about 6%. And yet, a full on Obamacare death spiral never really materialized. And the reason was the carrot, the tax credits and subsidies, which made ACA plans cheaper. For most people, this carrot will grow.

[Darren Woods]

Even larger in 2021, as part of a pandemic spending package, Congress boosted funding for Obamacare subsidies, which made the plans even cheaper. And even though it was only supposed to be temporary, in 2022, Congress extended the subsidies through the end of 2025. Because of those enhanced subsidies, the number of people enrolled in Obamacare plans doubled, reaching 24 million today.

[Adrian Ma]

So far from entering a death spiral, you might argue that Obamacare the past few years has been in a sort of health spiral.

[Sarah Collins]

I would say yes to that. It's an interesting way of phrasing it.

[Adrian Ma]

Maybe a little bit cautious with that.

[Darren Woods]

Interesting is not the word you want to hear sometimes.

[Adrian Ma]

Yeah, well, Sarah Collins is a health policy researcher for the Commonwealth Fund, a nonprofit focused on improving the health care system. And she says the enhanced subsidies, they've actually strengthened the ACA marketplace and given consumers more choice.

[Sarah Collins]

This greater enrollment did what you would expect it to do. It brought more insurers to the marketplaces and increased price competition. In 2024, 96% of enrollees had a choice of three or more plans.

[Adrian Ma]

And this brings us to today, back to our original question we posed at the start of the show, which is if the extra Obamacare subsidies resulted in more people getting insured and kept premium prices lower than they would have been, could letting these subsidies expire do the opposite? And more to the point, could it actually push Obamacare towards a death spiral?

[Darren Woods]

All the experts we interviewed said no. People's premiums will rise. Many may drop out of their health insurance because of that. But the original Obamacare subsidies, those original carrots, will stay in place. And for that reason, the ACA market won't collapse.

[Adrian Ma]

For Paragon Health Institute's Brian Blaise, he says he's in favor of letting the enhanced subsidies expire because he thinks Obamacare has over subsidized the insurance market.

[Brian Blaize]

I think what we need to do is reform the underlying structure rather than just continue to send more money to health insurance companies to prop it up.

[Darren Woods]

The Commonwealth Fund's Sarah Collins has a different view.

[Sarah Collins]

It isn't okay to let this happen. It's not necessary to let it happen. We know that these tax credits work, and we need a country where everybody has health insurance coverage.

[Darren Woods]

It's almost like a microcosm of the debate in Congress right now.

[Adrian Ma]

Totally. And I mean, I guess we'll see who Congress agrees with if they ever reopen the government. This episode was produced by Julia Richie with engineering by Ko Takasugi Chernevan. It was fact checked by Sierra Juarez. Cake and Cannon edits the show and the indicators of production of npr.

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If you watch the music video, you.

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