Federal policy changes that decrease risk pooling will lead to higher insurance premiums for less-healthy populations and greater numbers of uninsured Americans
Funding cuts and policy changes by the Trump administration affect which Americans are eligible for low-cost health care coverage through Medicaid and the Affordable Care Act (ACA) marketplaces. These will have consequences for the health insurance “risk pool”: with fewer people likely to be enrolled in Medicaid or in ACA plans, expected health care costs (risk) will be spread (pooled) across a smaller population.
This explainer describes how these policy choices affect risk pooling and what the implications are for those seeking health care coverage.
What is risk pooling?
In health insurance, risk refers to how much and what kind of health care a person, or group of people, is expected to use. The use of health care services translates into costs for the insurer. Risk pooling is the process of sharing health care costs across a population.
When the risk pool is broad, health care costs are spread across a diverse group of people, including low-risk, healthy people as well as higher-risk, sicker people. A large risk pool that’s reflective of the population as a whole also tends to be more predictable.
Risk pooling differs from risk segmentation, which separates low-risk individuals from higher-risk individuals when allocating health care costs. When risk is segmented, people who are more likely to require medical care typically pay more for insurance and more in out-of-pocket medical costs, while people who are healthy pay less.
How does risk pooling affect the cost of health insurance and health care?
Increasing risk pooling and increasing risk segmentation generate different “winners” and “losers.” Greater risk pooling tends to make health care services more affordable and accessible for people when they need services. Although risk pooling often leads to higher spending on health insurance premiums, particularly for healthy people, subsidies (like the premium tax credits included in the ACA) can counteract these higher premiums.
In contrast, greater risk segmentation will often lead to lower insurance premiums and lower overall costs for people who are healthy. However, it can increase costs and make care less accessible when people have significant health needs.
Because most people are reasonably healthy at any moment, the higher costs that risk segmentation imposes on the sick tend to be large compared to the savings created for the healthy. Plus, people who are healthy today will not necessarily be healthy tomorrow. So, risk pooling has the potential to help most people over the course of their lives, even if it increases costs when they need fewer health services.
How do the recent Medicaid changes affect risk pooling?
H.R. 1, last year’s massive tax and spending law, imposed large funding cuts and eligibility restrictions on Medicaid, the public insurance program for people with low income. The program is paid for through broad-based tax revenues, which means that the health care costs of Medicaid enrollees are spread broadly across the taxpaying population.
Funding cuts to Medicaid mean that the health care costs of those losing benefits will no longer be pooled broadly through the tax system. These cuts translate into greater costs for people with low income, many of whom won’t be able to afford necessary care. The nonpartisan Congressional Budget Office (CBO) estimates that changes in H.R. 1 will cut federal funding for Medicaid by $990 billion over 10 years. The law’s cuts to Medicaid and marketplace coverage combined are projected to increase the number of uninsured people by 10 million by 2034.
How does the discontinuation of enhanced ACA premium tax credits affect risk pooling?
From 2021 to 2025, eligible consumers received additional financial help, in the form of enhanced premium tax credits, which made marketplace coverage much more affordable than it had been. While Congress could have kept these enhanced tax credits in place beyond 2025, it chose not to. Yet providing such assistance increases enrollment, especially for healthy people with modest incomes.
As more healthy people join the insurance pool, the average health expense of each person enrolled falls, spreading health care risk across a larger, more diverse population. Eliminate the extra financial help, and fewer healthy people will enroll, driving premiums back up and placing higher costs disproportionately on those in need of care.
With the enhanced tax credits now expired, the CBO estimates 3.8 million people will eventually become uninsured. And with healthy people disproportionately losing insurance, marketplace premiums will climb.
Another policy change will increase enrollment costs, further pushing healthier people out of the insurance pool: a provision in H.R. 1 requires all people who receive premium tax credits to repay any excess premium tax credits received. This change eliminates safeguards previously in place for low- and middle-income consumers between 100 percent and 400 percent of the federal poverty level, thereby exposing them financially for underestimating their future income.
Meanwhile, congressional Republicans have floated legislation that, in lieu of extending the enhanced premium tax credits, would further increase premium costs for marketplace enrollees who get subsidized coverage. These bills would reverse a 2017 Trump administration policy that led insurers to include costs of subsidies specifically designed to lower enrollees’ out-of-pocket costs in silver-level plan premiums. The upshot of the earlier change was that premium subsidies expanded for all eligible enrollees. The new bills, by contrast, would eliminate these gains and make coverage less affordable.
How do policies that reduce ACA marketplace enrollment affect risk pooling?
As it implements H.R. 1, the Trump administration is also changing federal regulations in ways that narrow eligibility for ACA coverage and deter enrollment in the marketplaces. Policies that reduce enrollment tend to lower the number of healthy people in an insurance pool and increase risk segmentation, in the same way that policies increasing consumers’ costs do. As the average health care expenses of enrollees rise, premiums increase in response. Healthier individuals then decide not to enroll, causing premiums to increase further while more people go uninsured.
Specific regulatory and legislative changes that will likely decrease enrollment in the marketplace insurance pools include:
- Shortening annual open enrollment for marketplace coverage for all states.
- Eliminating rules that allow the lowest-income people eligible for premium tax credits to enroll throughout the year.
- Ending automatic reenrollment, which allowed people to maintain coverage without having to shop for a new plan.
- Requiring additional verification of income, family size, and immigration status to enroll in subsidized coverage.
- Terminating marketplace eligibility for people covered by the Deferred Action for Childhood Arrivals (DACA) program.
- Removing subsidized marketplace eligibility for many lawful immigrants, including those with incomes below the federal poverty level.
In an earlier move to reduce enrollment, the Trump administration eliminated 90 percent of funding for “navigators” — individuals trained to help people understand their eligibility for subsidies and assist them with the enrollment process.
Every action that decreases enrollment in marketplace coverage will also decrease risk pooling, placing growing financial burdens on people who have greater health care needs.
How do new policies that lower the value of marketplace coverage affect risk pooling?
The financial value of a health plan to people diminishes as fewer benefits are covered or out-of-pocket costs increase. As a plan’s value falls, health care risk pooling decreases, because coverage exclusions create greater costs for enrollees needing those services instead of sharing them across all those insured. In addition, as the value of coverage diminishes, fewer people find the plan worth the cost, and more people become uninsured.
The Trump administration issued regulations in 2025 that would decrease the value of coverage and reduce risk pooling, and recent regulatory proposals intended to take effect in 2027 are likely to produce the same results. Unless the provisions are overturned in the courts, they will decrease the value of nongroup coverage by:
- Loosening rules within insurance tiers (for example, allowing insurers to categorize plans as “silver level” coverage while requiring higher out-of-pocket costs).
- Giving insurers freedom to sell marketplace plans that don’t follow federal law limits on consumer cost sharing.
- Changing cost-sharing calculations in the employer and nongroup markets to allow more out-of-pocket costs to be passed on to consumers.
- Prohibiting coverage of gender-affirming care as an essential health benefit.
What’s the key takeaway here?
Risk pooling promotes greater access to affordable, adequate care. Risk segmentation reduces that access, worsens families’ financial burdens, and increases unmet health care needs. While risk segmentation has short-term appeal for people who are currently healthy, risk pooling is better for providing lifelong access to affordable health care for the population at large.
