Downstream Effect of the ACA Subsidies that Went Away

Healthcare costs keep climbing because utilization is rising and high-cost drugs are changing the baseline, not because of a one-time post-COVID bump. We break down what the end of enhanced ACA subsidies means for the individual market and why employers feel the pressure next. 
• employer-sponsored health plans facing 8% to 9% cost increases 
• inflation not the only driver, with wages and hospital consolidation raising costs 
• higher utilization as the lasting shift, including more screenings and more prescriptions 
• specialty drugs and new therapies reshaping pharmacy spend, including GLP-1s and gene therapy 
• ACA subsidy expiration triggering major premium spikes and more uninsured people 
• tighter individual market making employer coverage more critical 
• cost shifting dynamics that will hit employer plans 

What can employers do?

Practical employer moves, including challenging renewals and reviewing loss ratios. Focus on value through utilization management and a clear pharmacy strategy. Curious to explore what's possible? Let's connect. 

Music by Alex Lambert.

Transcript

Why Costs Are Surging Now

Utilization Is The New Baseline

ACA Subsidies Expire And Premium Shock

How Costs Shift To Employer Plans

What Employers Can Do Next

Healthcare Becomes A Leadership Cost

SPEAKER_00 0:19

Welcome to another Tuesday morning with Justin. I'm Justin Putrell, benefit advisor at True North Companies. And today we're talking about why healthcare costs keep climbing and why this moment feels different for employers. So I found an article that I ripped out of The Economist in the late fall, and the headline was blunt. The cost of healthcare is shooting up. And the numbers back it up. Employer-sponsored health plans are seeing cost increases around 8 to 9%, marking multiple years of elevated trend. That's not just inflation. It's driven by higher wages, hospital consolidation, and something that's harder to unwind. Americans are simply using more healthcare. Cancer screenings are dramatically higher than pre-pandemic levels. Prescription drug use is up double digits. We talked last week on the show about selling gene therapy medications costing six figures to millions of dollars. So put all that together with medication spending, surging, rocket, rocket specialty drug prices, and cancer therapies and GLP1 weight loss medications. Well, the key takeaway from The Economist is this. This is no longer pinup demand from COVID. Higher utilization is now built into the system. Now, layer on what's happening right now. As of January, enhanced ACA subsidies expired. You probably saw it in the news. Maybe you looked at it, maybe you didn't. But in March, we're starting to see the real impact. People shopping on the individual market are facing premium increases of hundreds, sometimes thousands, of dollars per month. Some saw their monthly increases double or triple overnight. Mind-boggling. So why does that matter to us? Well, the result is that roughly one in 10 people who previously had ACA coverage are now uninsured. Not because they don't value health insurance, but because they feel like they can't afford it. That matters for employers. When the individual market gets tighter, employer plans become even more critical at the exact moment they're under pressure from rising utilization, specialty drugs, sharp increases in mental health claims. In other words, if the insurance companies aren't getting as good of a premium and they still end up seeing someone who doesn't have insurance, they're going to try to get that money recouped from someone else, someone who does have insurance, an employer-sponsored health plan. So here's the uncomfortable truth. So where does that leave us? What can employers do? First, stop treating healthcare like a passive renewal. Don't accept the 8.5% increase. Second, look beyond premiums and understand what is truly driving claims. Maybe you get a 0% increase and you're happy. Well, should you be? What if the insurance company has a 55% loss ratio? That means they have a healthy profit margin. And so if you get a 0% increase, question it. Should this be a decrease? If you have a big increase, what can we do to control our cost? Lastly, I think we should focus on value. Managing utilization. What's our pharmacy strategy? And what high cost conditions can we manage if we're intentional about it? This is no longer a benefits issue. Healthcare is a workforce, a financial, and a leadership issue. Because behind payroll in technology, it's probably third on the expense list for most companies.