Healthcare subsidies now play a key role in the ongoing standoff between Democrats and Republicans over preventing a government shutdown before October 1. Congress has until September 30 to extend healthcare tax credits to prevent sharp premium increases for millions of Americans. With some ACA (Affordable Care Act) subsidies set to expire, employers are facing difficult decisions regarding health benefits. While costs are rising, plan options are shrinking, and employees are asking for more flexibility. 

Healthcare Innovation recently sat down with healthcare policy expert Stacy Edgar, CEO and co-founder of the healthcare benefits startup Venteur, to discuss the impact of ACA cuts on employers and employees. San Francisco-based Venteur leverages the ICHRA (Individual Coverage Health Reimbursement Arrangement) legislation, which allows businesses to provide tax-free funds for employees to purchase their own individual health insurance. Currently, Venteur serves around 1,000 employers, who, collectively, employ over 300,000 people.

What is the current state of the ACA landscape?

This year's been hard. And what I mean by that is, the last five years you've seen a stable and growing ACA marketplace. I was on an individual plan before Obamacare and the ACA. And the thing that the individual market inherited from that era is that it's the place where you go when you have nowhere else to go.

It’s a political hotspot and we're playing. I see a game of chicken going on; there's one camp wanting to expand tax credits that existed during the COVID era. There's one camp that doesn't. And then I would say there's another camp that's very pro-ACA. There's another camp that's always wanted to dismantle it. The political environment basically reopened some debates that I would have hoped were done and settled, especially given how many Americans depend on the ACA for health insurance and for critical care. I'm an optimist by nature, despite all the things I said. This year to date has been one of disappointment. Some of these new battles are here again. But there's an opportunity to address some of them…depending on what Congress does and what regulators do in terms of stabilizing the market and creating a healthier market moving forward for the significant number of Americans who depend on this for a critical safety net.

What are some of the concerns that you're having right now?

I would say the reports on ACA enrollments. There's a report that a researcher at Paragon Institute has been touting that the ACA growth is because of fraud. I don't quite buy the argument. Is there fraud in market? Yes, that's been caught. There are really strong systems to catch them.

I also think that this is a market that's so new that people don't really know the behaviors of consumers. The drumbeat about fraud has meant that it’s become harder and harder to enroll, and there are all these new administrative complexities.

I feel like some of the louder voices in this space are comparing apples to oranges. Then they're drawing huge conclusions that are then informing policy decisions, which in effect destabilize the market and also at worst hurt the American consumer.

I think this is a growing market, and it's inherently disruptive, and insurance loves stability. The more predictable the risk pool, the more actuaries can do their job. I think that's one thing that's been hard about the ACA. If you think about a state like Georgia, where the enrollment growth over the last five years was a million people--how do you underwrite that? I think that's also where you're seeing some of the pricing swings, which tells me that there is an underwriting issue in the market and that people don't know what the consumer behaviors are, and how to price this yet.

This year, what we're seeing in pricing is partially from the policy environment, but also a correction from what we're learning about who's coming into the individual market and what their behaviors are, and what their needs are from a healthcare spend perspective.

This is an important, exciting market that everyone is learning about.

What are your thoughts about the ACA subsidies that are set to expire?

Yes, December 31st. During COVID, this made total sense; Let's get as many people insured as possible. The expanded advanced premium tax credits, which are like expanded Obamacare subsidies, did a few things, such as bringing the cost of care down for many Americans. And 90 percent of people who get an ACA plan receive those kinds of subsidies. And people also correlate this with a surge in enrollment. This incentivized healthy people who wouldn't have spent the money otherwise. It also expanded who could get subsidies. If you made above 400 percent of the federal poverty line, then there used to be a cliff. You didn't receive any benefits…which was a really difficult place to be as a self-employed person. You'd have to basically pay full price for healthcare, but you didn't really have the means to cover the full cost of the premium. The premium tax credits removed that cliff. Those are set to end, and the big assumption is…that it's going to keep healthy people from staying in the market. What is left is a risk pool…that absolutely needs health insurance.

I do wonder: Did COVID change our perception of the value of health insurance?

What do you expect the impact of the ACA cuts would be on employers and employees?

It means that you're going to have a certain profile of consumers who are uninsured overall. And then does that mean if they get sick, will they not get care? No, they will. And they'll end up in the ER, and the ER is not going to turn them away. And then you're going to see health systems get into debt, with unrecoverable expenses on their books. Who's going to pick up the bill? Employers. And it might not be direct, but this kind of implicit tax already exists. It means that it will cause employer rates to go up because they will be absorbing the cost of these kinds of cuts to Medicaid and the ACA. Every employer has the option to absorb the cost or pass the cost to their employees. The majority of them will probably pass the cost to their employees, at least in part.

Could you explain a bit about ICHRA models?

It is for individual coverage, a health reimbursement arrangement. In this model, you would get a budget. Instead of buying a plan from the ACA, you could purchase it from healthcare.gov or directly through the carrier, either one. But you get to decide, do I want to spend all of that money on health insurance? It's money that's pre-tax and that the employee can use for healthcare spending, and depending on how the employer structures their plan, this money could roll over.

It also brings an employer population into the ACA. The more people who adopt ICHRA, the healthier the ACA becomes and the stronger it becomes in terms of pricing. It's a saving for the employer and it's a saving for the individual, as it also helps people who have been historically excluded from the system. It's built on top of the ACA. The health of the ACA determines the health of ICHRA.

Could you speak to policy recommendations for regulators?

I think part of this is that things are coming down to the 11th hour. I would have liked to see the resolution earlier in the year, and that would have helped more employers plan. The biggest thing is: what is the alternate vision? If people are coming off Medicaid and can't afford the ACA plans anymore, what are you proposing as the alternative? Everything seems to be about cutting, reducing, and restricting access. And the cuts would be more palatable if we knew that maybe this is a medicine we have to take to get to the end state.

What do you think will happen, short-term and long-term?

I think the US is in for a world of hurt as these cuts start to materialize and be felt by families. You're already starting to see the healthcare system in shock, and I think it's going to force the question of an alternate vision coming through. It’s such a shock that I think we could see big changes to how health insurance is delivered in the future. What comes next might be the more interesting part.

One of the things I love about ICHRA is that it really puts the consumer at the center. You have true market competition, and with that, you see a drop in pricing, and you see planned variety. I would love to see more employers into the ACA risk pool to stabilize it and to allow us to unlock that competition that works in favor of the consumer. I think that's a really powerful thing in the long term. You change the buyer from the employer to the employee, you change the whole value chain, and so there's an opportunity to really make things much more centered around families rather than businesses and intermediaries.

The cuts are so extreme that we will be forced to answer to them. Whether it's in a year or two, it's going to have a reckoning in the healthcare system.