Anthem Inc., the second largest health insurer in the country, announced it is projecting losses on its Affordable Care Act (ACA) plans which will have to be offset by “substantial” premium increases.

Anthem had previously been performing well in its Obamacare exchanges dealings, according to The Wall Street Journal. The optimism was an anomaly though, as major insurers such as Humana and Providence Health Plan were projecting premium increases as high as 30 percent for 2017.

Anthem CEO Joe Swedish told Forbes about plans to acquire struggling insurers Cigna Corp. and Humana to “expand our participation [in the healthcare exchanges] to nine additional state.” The Department of Justice is attempting to block Anthem’s acquisition.

Soaring costs are causing the major instability in the ACA marketplace. In California, where premiums are expected to rise by an average of 13.2 percent next year, costs skyrocketed in part because insurers had incomplete data on the influx of new consumers. As a result, consumers were using more healthcare services than expected and insurance companies raised prices.

Covered California, California’s health insurance exchange, described the troubling projections for 2017 as a “transitional year” to the House Committee on Ways and Means. He added ACA would require “significant adjustments” for insurers across the country.

Anthem said it is working with the Obama administration on easing the transition, according to Forbes. One way to do this is to raise the penalty for not having coverage. In 2014, the penalty per adult was $95 and has risen to $695 in 2016. According to the Anthem CFO, raising the penalties for not purchasing healthcare “obviously has to be done.”

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