Obamacare's health insurance markets are (again) in turmoil, with premiums spiking, insurers exiting and millions of enrollees dropping out. Amid the wreckage, one detail gives the game away: in the average ACA marketplace, a silver health plan now costs more than a gold plan. This is not a glitch, and it’s not fraud. Rather, it is the predictable consequence of a broken subsidy formula that pays more when insurers charge more. And last month, almost unnoticed, the federal government finally moved to expose the game.
Federal premium credits have always been pegged to a benchmark silver plan: the bigger the benchmark premium, the bigger the credit. The trouble began in 2017, when Washington stopped reimbursing insurers for the cost-sharing discounts that the law requires them to provide to low-income enrollees. But the legal requirement didn't disappear. In response, insurers recovered the costs by raising silver premiums, thereby inflating subsidies for everyone.
This quirk was tolerated, and even encouraged, by regulators for years. The practice came to be known as “silver loading.” Analysts have argued that silver loading helped stabilize markets during the tumultuous 2017-18 period and increase affordability for consumers, especially in bronze and gold plans.
But silver loading is prone to abuse, and in recent years states began to cash in. Under the guise of “premium alignment,” a growing number of states now order insurers to inflate silver prices to maximize federal payouts. Texas mandates a 40% markup on silver plans. Arkansas goes further, mandating insurers apply a standardized 46% markup. Combined with expiring subsidies and rising healthcare costs, drove benchmark silver premiums up nearly 70% in 2026. The result: an inflated benchmark, inflated premium credits, nearly free bronze plans and gold plans that cost less than silver, all courtesy of taxpayers.
That arrangement just ended. In its newly finalized rules for 2027, the Centers for Medicare and Medicaid Services will require every insurer to report exactly how much it pays out in cost-sharing discounts, and exactly how much extra revenue it collects through the silver load. Loads that “materially exceed” actual costs invite federal consequences: public determinations that rates are unreasonable, federal takeover of a state's rate review, even expulsion from the marketplace. Actuaries estimate the accurately calculated load to be roughly 21% to 32% of silver premiums, depending on the state. Texas's 40% and Arkansas's 46% sit conspicuously above those levels, which will become visible to all when the data are made public later this year. Note the irony: the same administration that created silver loading by cutting off cost-sharing payments in 2017 is now policing the loads that resulted. Also note that this is not a red state/blue state story. It is a story about what any state will do when a formula pays it to inflate prices.
The coming collision serves no one. Taxpayers keep funding an unscored, unvoted, automatically growing outlay while enforcement crawls forward one actuarial memo at a time. The marketplaces absorb the reputational damage as the gap between the loads and their actual costs becomes public. And low-income consumers stay caught in silver loading's trap: they cannot take the cheap gold or bronze plans without forfeiting the cost-sharing protections tied to silver.
The repair comes in two steps. First, Congress should fund the cost-sharing subsidies directly, as the law originally envisioned. Recent estimates suggest this would save $50 billion or more over a decade by eliminating the inflated credits, while resolving the federal-state standoff overnight. Those savings can be redirected toward temporary, targeted premium relief for Americans facing the steepest increases, stabilizing the risk pool by bringing back the young and healthy consumers most likely to have dropped coverage.
Second, as the market stabilizes, the link between the premium subsidy and the benchmark premium needs to be cut. Replace the price-linked credit with a fixed-dollar credit that neither insurers nor state regulators can manipulate. When a family’s subsidy no longer rises automatically with premiums, a $20 difference between plans becomes something the insurer must justify to the enrollee, rather than a cost the Treasury quietly absorbs. That is what price competition looks like, and the exchanges have never had it.
Critics will say this raises costs for middle-income families now buying near-free bronze plans. Those families are the right people to worry about, and temporary relief should be aimed squarely at them. The lowest-income enrollees, meanwhile, remain protected by the law's cost-sharing discounts, and funding those discounts directly makes that protection more secure, not less. A visible subsidy is worth more than a sneaky one.
Insurers have just filed their 2027 rates under the new disclosure regime, and the collision between federal scrutiny and state mandates is now coming. Congress can watch that fight grind out in rate filings, at enrollees’ expense, or it can fix the formula that started it. Markets work when prices signal value. In American health insurance, gold now costs less than silver. Everyone inside the system profits from the absurdity, and everyone else pays for it. Only Congress can end it.
Tony Lo Sasso is the Robert F. and Sylvia T. Wagner Professor of Public Affairs at the La Follette School of Public Affairs at the University of Wisconsin–Madison.
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