Increase in uninsured could impact employer-sponsored health insurance
June 2, 2025
Summary: Budget proposals that would increase uninsurance rates could increase costs for employer-sponsored health plans
Source: KFF May 14, 2025
Potential changes to the 2026 federal budget in the reconciliation bill recently passed by the House of Representatives are likely to lead to substantial increases in the rate of people that are uninsured in the United States. This is bad for the physical and financial health of those who will be newly uninsured and could also adversely affect employer-sponsored health insurance plans.
The legislative proposal that passed the House of Representatives on May 22 included new work requirements likely to lead to a decline in those covered by Medicaid of close to 8 million people. While most Medicaid recipients who are not children, the elderly, disabled or caregivers already work, requirements to document work often lead to those who remain eligible losing access to benefits. Estimates from work requirements implemented in Arkansas in 2018 suggest that 95% of those removed from the Medicaid rolls due to work requirements were in fact still eligible.
The proposed law would also not extend the pandemic-era enhanced premium subsidy for individual Affordable Care Act exchange plans (set to expire at the end of 2025). Experts estimate that this will increase individual premiums on average 75%, and lead to a membership decline of over 4 million people. Those retaining coverage might be individuals with more illness, and this adverse selection could lead to higher premiums for those with exchange plans whose subsidy is not changed.
Implications for employers:
More employees might seek to add dependents who had previously been insured through Medicaid or subsidized exchange plans to their employer-sponsored plan.
Although hospitals and providers often complain about low Medicaid payment rates, payment rates from those who have no insurance at all are substantially lower. This decrease in provider revenue is likely to threaten hospital viability especially in rural and poor communities. Decreased hospital competition leads to more provider negotiating leverage and higher prices for employer sponsored health plans.
Some employers have been looking at ICHRAs (Individual Coverage Health Reimbursement Arrangements, which may be renamed if the House bill is signed into law) as a way to provide funds to allow their employees to purchase insurance individually. Changes in composition of those in the exchange plans could destabilize this market and make ICHRAs less attractive.
The House reconciliation bill is now under consideration by the Senate, and it’s likely that the final bill will change substantially before reaching the President’s desk.