This episode of Vital Viewpoints on Healthcare explores the growing coverage gap across the health insurance landscape and the pressures shaping affordability, enrollment, and access to care. The discussion covers coverage churn between Medicaid and ACA Marketplace plans, the operational and financial realities faced by states, and the warning signs emerging for consumers, providers, and health plans alike. Zach Sherman, managing director at Health Management Associates and former head of state marketplaces in PA and RI, shares his perspective on current state challenges for insurance affordability and coverage pressures, and the policy decisions that could shape the next phase of healthcare coverage across Medicaid, Marketplace, and employer-sponsored insurance.
Zach Sherman
More tools in education are helpful, but I think it behooves policymakers to be thinking about ways to simplify that. You shouldn't need an advanced degree in health policy to know how to use your health care plan.
Jennifer Colamonico
You're listening to Vital Viewpoints on Healthcare. Let's get started. Today's conversation focuses on one of the most complex challenges facing states and the federal government alike. How to ensure a more seamless and affordable health insurance system. Joining me today is my colleague Zach Sherman, a leader who has been at the center of this issue shaping the Affordable Care Act marketplace, policy and strategy.
As the marketplace director in two different states, Pennsylvania and Rhode Island. Zach is a managing director at Health Management Associates, where he has focused his work on improving access to and affordability of health insurance across all programs. Together, we'll examine the warning signs emerging across the coverage landscape, where the biggest affordability and access gaps remain and what policymakers, states and healthcare leaders should be watching and doing.
As the next phase of Medicaid marketplace and employer sponsored coverage takes shape. So Zach, welcome.
Zach Sherman
Thanks. And thanks so much for the opportunity to be here.
Jennifer Colamonico
This past year and a half, the Affordable Care Act has really been in the headlines. ACA marketplaces way more than I think. Well, we had had a reprieve for a while. And they were certainly back in the headlines this past year. So lots of disruption of coverage. So when we think about, who is in the marketplace, you know, we know that the marketplace was originally set up, the Affordable Care Act was originally set up to fix gaps, and there's a segment of people, who do tend to bounce back and forth between maybe Medicaid, employer sponsored coverage.
They were uninsured. And the marketplaces, I think, filled that gap. So as all of these programs shift, we talk a little bit about the conundrum. I mean, states are it's like trying to, you know, plug different holes at the same time. What's the conundrum, really that states face in, in trying to fix this seemingly still somewhat broken part of the health insurance market.
Zach Sherman
The creation of the ACA marketplaces came about, trying to address lack of access to affordable health insurance for a large group of Americans who couldn't get it. Through their employer or through, or through power, public health care programs like Medicaid or Medicare. The uninsured rate prior to the ACA coming into existence was incredibly, it was much higher than it is today, something like 15%.
And a lot of the people who were uninsured were those who couldn't get it through public assistance programs like Medicaid or through their employer. They didn't have access to employer coverage. And importantly, we saw a pretty big, pretty big dip in the uninsured rate through people coming into the individual market and enrolling in coverage, as well as the expanded category of Medicaid for childless adults.
That came apart, came about as a part of the ACA as well. So, there's been many trials and tribulations with the ACA, with marketplace coverage since then, since 2014. But we've seen a lot more people get covered. And in 2021, with the American Rescue Plan, there was a real need for, trying to address coverage gaps and, and the, the impact of, Covid, which, created a real fear that people are going to lose employer coverage.
So the American Rescue Plan expanded the availability and the value of those tax credits and and really increased the number of people enrolled through marketplace. So as I think enrollment growth from 2020 to 2025, with those enhanced subsidies grew from 12,000,000 in 2020, up to nearly 25 million. Depending on your situation, you could be enrolling in Medicaid. You could be getting coverage to your employer, you could be getting coverage through the marketplaces.
Things change when circumstances changed for consumers. They may have to change up and navigate to another program. And the ability to do that is not simple. And it's something that requires a lot of upkeep and maintenance and attention.
Jennifer Colamonico
I mean, let's put affordability aside because I want to come back to that, of course, because we know that's a huge issue. All right. You mentioned increased subsidies, increased enrollment. So obviously affordability matters. But what else have states learned? I mean you talked about sort of the complexity. You know, there was an individual market before the ACA came along and it didn't work really well.
And so do you think that we've learned other lessons about how individuals seek insurance? Again, affordability aside, because we know it's a huge issue. But beyond that, what else have we learned about how to get people to, you know, to enroll and then to stay enrolled.
Zach Sherman
For a lot of the consumers who, enrolled in coverage for the first time through the marketplaces, there's been a real learning curve, whether you're accessing a regular primary care visit or going to the emergency room. We're paying for a prescription, how the health insurance pays for that and what your obligation is, is not easy, is not straightforward.
And I think that we've seen, particularly with the marketplaces, people buying just based on their monthly premium, people purchasing plans specific to what you can afford on in a, on a day to day basis. And of course, the challenge with that is that everyone has different health care needs and how their overall total cost of care and coverage plays out is specific to how how many health care you know, the types of health care services that they need throughout the year.
It's really hard to predict what that will be, particularly the unknown services, the potentially catastrophic or the unknown illnesses. But generally speaking, understand knowing how health insurance plan is going to be the best tool for providing access to care is is something that, is a steep learning curve, like I said, and something that requires a whole lot of education and support.
So, through the history of the ACA, which is very short today, it's only, you know, just over ten years at this point, there's been a whole lot of supports and tools created to help people navigate that, to help people understand, how much you know, different scenarios that could play out and how much your total cost to care could be in a year.
And, and the education and the health literacy that have gone into that, is still very much a work in progress. It is very complex. I think more tools in education are helpful, but I think it behooves policymakers to be thinking about ways to simplify that, because I don't think you need it. You shouldn't need an advanced degree in health policy to know how to use your health care plan.
Jennifer Colamonico
Well, and I think even people with advanced degrees in health policy don't always know how to use their health care plans. I mean, I always feel like you know, health insurance is a is confusing for everybody. It's just if you have an employer who provides your insurance, they do part of the work for you. You know, people think that more choice is better and some cases maybe that's true.
But these are not easy choices. And, you know, this is certainly one that's put directly and entirely into the laps of people who may or may not have the resources, for whatever reason, to make those choices. I think we've I'd like to think we've learned lessons there. But to your point, yeah. We'll see if policymakers have learned lessons.
I think probably insurers and navigators and brokers have learned quite a bit. So then let's come back to the topic of affordability. And, and sort of in the moment that we're, we're in now, you know, on the, on the heels of the, OB 3AI guess is how we're calling it these days, formerly H.R. one, where we saw, the expiration of the those enhanced subsidies and, you know, as kind of one step among many, that the current federal government is taking around how to deal with access and affordability.
And it kind of seems like they're saying, like, you know, okay, states, you know, figure it out. We're not going to do this anymore. You guys are going to figure this out. So maybe talk a little bit about how and where this is working or not working. And how are states kind of filling the gaps there.
Zach Sherman
The enhanced tax credits really were a boon for marketplace enrollment. Not only did we see more people get covered, but we also saw, an increase in enrollment in plans with richer benefits, people buying from bronze plans that have well or premium but much higher out-of-pocket costs up to silver and gold, and even in some cases, platinum plans, which cost more on a gross premium basis but have much lower deductibles and lower pocket expenses.
The benefit of that is putting the actual cost of care in reach for many more consumers. So that's been really kind of, broadly beneficial for a lot of people. It of course cost the taxpayer, more money. These are these are premium tax credits. And in the debate over the last year around this, which led to the the very long government shutdown, has been around, I think those issues, access to health care, taxpayer dollars for some program integrity concerns.
But ultimately there was no deal, forged and those subsidies expired. The impact of that has been very significant and real and is playing out throughout this year. And we've already seen, you know, our colleagues at Wakely put out a report, an early, early look at enrollment drops. And, just in January alone, they identified that nationwide, about 14% of people enrolled in January did not pay their premium.
The impact is significant. And to your point is that it's not the same in every state. The the money really certainly the tax credits, the affordability investment really you know, the talks, it has a direct impact on enrollment. And there are several states, like New Mexico, who are trying to find state level funding to pay for premiums, subsidies to address the affordability gap.
But the price tag is significant. I think it was. CBO estimated it to be around $30 billion a year. The cost of extending those subsidies. And when you get down to the state level states, most states cannot come up with the funds to backfill that. There are a select few states that are finding the funds, through legislative efforts to identify premium subsidies and subsidies, the impact is less bad in those states.
In some states it's positive, but in most states it's blunting the impacts of coverage losses. You mentioned Obi three a which I will do my best to remember to say that correctly. But you layer on the, the impact of that, which has a whole lot of reforms in both the Medicaid and the ACA space that, are projected to have, negative impacts on coverage levels.
And I think you'll see both in the ACA space, but with work requirements and other reforms, community engagement slash work requirements in the Medicaid space and in other initiatives. So you're going to see downward pressure on coverage levels. And I think the reforms, both in Medicaid and ACA marketplace, are going to result in the coverage gap getting bigger.
And in us seeing higher rates of uninsured across the country and more and more people showing up in emergency rooms with issues that they've, delayed. And, you know, the, the downstream impact of that is costs, you know, higher rate of uncompensated care and, and, and more costs into the system.
Jennifer Colamonico
Personal debt and etc.. Yeah. So let me kind of come at this from a different angle. So I think we've established, you know, the, Where the market doesn't work well for, for folks that are kind of in this, in the zone of coverage that bounced around and are going to, lose those subsidies and therefore, lose coverage.
But we're also at an interesting time where employers are, I mean, the affordability issue is not, just with ACA or, you know, it's, I mean, employer coverage, if you're lucky enough to have it, you're paying a lot for it. And, you know, with wages gaps and so forth being what they are. You know, I, I've been following employers for a really long time, and I feel like for a really long time we've been saying, oh, employers at some point are going to you know, want to do something differently.
And it hasn't happened yet. I'm kind of wondering if it's going to happen now if the affordability issues have just, you know, reached a tipping point with everything else going on in the economy right now? You know, is this a time where you start to see some employers making big shifts, making big changes from the coverage that they've typically provided?
Just, you know, how are you? What are you seeing there that, you know, do you agree or do you think that that something could start to give there that might add more fuel to the fire of the this affordability concern?
Zach Sherman
I think that framing is exactly right. I think for a long, long time, employer sponsored coverage has, been thought of as very, very, you know, a positive benefit. And has been something that, policymakers have had, you know, tried to avoid reforming employer sponsored insurance. Tax exclusion is something like three, you know, $300 billion a year.
And I mentioned the cost of the enhanced premium tax credit being $30 billion a year. It's so much significantly more in terms of the cost to the taxpayer. It's been something that, that, that there was some reform included in the ACA. You may, recall the Cadillac tax.
The good old Cadillac tax on really rich benefit plans that would kick in and assess a fee on those rich plans over a certain amount of, benefit, certain amount of premium that was delayed a couple of years and then eventually repealed. So like you said, it's been something that policymakers generally have stayed away from. And even when they've, you know, dip their toes in the water, have had what have walked it back.
But like you said, affordability of employer coverage is not there anymore. There's a ton of data and stats showing that, you know, the great growth of car sharing for employer based plans over the last ten, 15 years. And it was really it is really a very similar story in terms of the difference between access to health insurance and access to health care, right?
You can maybe afford your premium, but the ability to actually access the health care you need, given the very high deductible, given the very high out-of-pocket costs, puts the cost of health care out of reach. And so I think the just like you said, there's, less excitement about employer coverage. And there once was, and, and I think that's ripe for reform.
I think in particular, small group coverage has really, really taken a hit. And this is this is employers with 50 employees or less. Total enrollment was about 16.8 million in 2013. It's now down to 10.3 million in 2023, which is a nearly 40% decline in membership over a ten year period. And, the cost of health insurance, the cost of offering it, the cost of accessing it for the employees is a major driving factor that.
Jennifer Colamonico
Well, and let's not forget, the ACA certainly did have a plan for a small group marketplace which never also never got off the ground.
Zach Sherman
There's been a few select states that have been successful with shop exchanges, but by and large, it's not been something that ever took off.
Jennifer Colamonico
We're in an interesting moment right now, in the middle of 2026, heading into a midterm election. I think this administration has, I, you know, unique and different approach to trying to make big things happen. You know, direct negotiating with pharmaceutical companies, for example, to try to extract, you know, price concessions this time of the year. You typically see bipartisan legislation so everybody can go home and, you know, and campaigned, talking about the things that they've accomplished.
I'm just wondering what you're observing. You know, in, in DC or if you have any sense of, any policy scenarios that might come forth this year. For example, I keep hearing Republican talk about, health savings accounts, and I feel like there's, you know, again, that's something that's been around for a long time, maybe a little bit more traction than it has in the past.
And, you know, thinking, you know, maybe once upon a time had limited utility. But given these changes that you're also talking about around affordability, you know, under what circumstances could something like this, you know, be a tool? I mean, is there is there anything like that that may be coming back around for consideration to be helpful here?
Zach Sherman
Yeah, there certainly has been a ton of talk about HSA, including, you know, I think the president has floated converting the premium tax credits, the subsidies through the marketplaces into HSAs. And the challenge with the knock on HSAs historically, has been that they're not necessarily a tool for low income populations who just don't have disposable income to put into a tax.
Deductible account would be nice to have one, but if you're struggling to make ends meet in terms of your rent and childcare and health insurance premiums and groceries and transportation, what's the value of having a tax free vehicle? If I have nothing and I can invest in it, if I don't have the ability to invest in an HSA, it doesn't really do me much.
So and you know, the so that's kind of broadly commentary around HSA is the idea of convert converting the premium tax credits to HSA is the idea. There has been very kind of skimpy on the details, a little bit hard to evaluate that. I think my general sense is that it feels like a mechanism for investing less in affordability, you know, in investing less in premium assistance, and therefore it's less of a reform and more of just a taxpayer cost cutting mechanism.
So but again, I you know, the details are not there on such proposals. And I certainly will evaluate them with, an open mind when they come out.
Jennifer Colamonico
So let's talk about ICHRA, which is the individual coverage health reimbursement arrangement models. So super wonky term. I never remember what it means, but I have a written in front of me. But talk about what that is. It seems like there's some excitement, at least among folks I know who know what they're talking about.
They seem to get excited about this. So why should people be excited about this? What could this potentially do?
Zach Sherman
ICHRA or another type of account based plan option? They specifically are for, employers interested in contributing to the cost of health insurance and health care for their employees. But, not interested in offering a traditional employer plan. An extra is specifically for buying plans on the individual market, which is where the ACA marketplaces operate. And what this allows is for employers to contribute through that, that tax deductible, the employer sponsored insurance tax exclusion.
So it's still, tax free for the employer. It allows them to contribute to that account. And then it gives the employer the ability to go to the individual market and find the right plan for their health needs of their budget. It is a flavor of the shop idea, but through an HRA mechanism and not through the marketplace, or it doesn't have to be through the marketplace.
There is a lot of interest in this in the context of the earlier conversation we had about how hard it is to, maintain costs and affordability through traditional employer insurance. And what this is, is more portability for the consumer, the ability for the employer to still offer. And then health insurance like benefit, which is a very important thing in terms of overall compensation packages.
It still preserves the tax deductibility of that employer contribution for the employer and in some cases allows, the employees to have access to more affordable options and certainly allows them to shop around for the specific health plan for their needs. It's been slow on the uptake in terms of interest and enrollment in the last couple of years.
Like you said, there's been a ton of excitement and interest in this. I certainly see the value. I think the kind of the idea of portability and getting away from being tied to your employer plan, or to one plan that fits all is attractive to consumers. It's still kind of in its infancy. It also, very importantly, requires an individual market that is stable, and lasting and unfortunately for ICHRA, we're not in a period of, certainty for the future around the ACA, the individual market.
And that has real impacts on, stability and importantly, premiums. Right. For this to be an affordable option, premiums cannot skyrocket. The individual market has seen really, really bad. I think it was on average from 25 to 26, a 25% premium increase. We've in a period of instability from the individual market, and that makes the attractiveness of it as an option, harder.
Jennifer Colamonico
Why has it been slow getting off the ground?
Zach Sherman
It's complicated. I mean, the name itself, right. Individual coverage health reimbursement arrangements, are really about the name, but but it's kind of a symbol for the complicated nature of it, for kind of operators in this space, it's a different way of delivering employer benefits. And importantly, most employer benefits are delivered through a distribution model that includes a health insurance broker.
Just think about the insurance broker. You can sell one kind of policy for a group of 100. You know, the administrative work associated with that is X. If you go to an extra, then it's 100 different policies for each individual member. And in some cases the broker commission structure themselves is much different and could be lower. And, you know, the level of effort for that broker and the return on that investment of their time is Y.
And could be significantly more if most health plan enrollments are through brokers. You need the brokers on board. And I think there's a faction of the broker community that is warming up. But it is still not something that is widespread. And is seen as like a critical piece of the overall employer benefits portfolio. So that's just a piece of that.
There's other complicated things associated with it, but that's a big part of it.
Jennifer Colamonico
I didn't realize. So they're still trying to keep it with the brokers. So the brokers aren't going to lose the business. They're just going to get it differently.
Zach Sherman
Importantly, in the individual market, brokers play such an important role. Brokers do the bulk of the individual market enrollment, assistance and plans and are the only ones who can give advice legally on the rate plan. And so they play a huge role in the employer space, but they play, you know, a very significant role in the individual space.
And, and I, you know, there are vendors that are spending up with their crowd that are doing decision support. But I don't know that they, I don't know that the successful ones are going to be able to navigate that space without their direct partnerships with the broker community.
Jennifer Colamonico
We know all of this is complicated. We know health care is complicated. This particular segment of the market seems to be even more complicated, right. Because it wasn't working before. There were lots of reasons for that. Let me ask you, if you had a magic wand, given it, given everything you know and have experienced in this market for as long as you've been involved, if you had a magic wand and you could shape coverage, let's say ten years from now, what changes would you make today to make sure that we get it right?
This time, that we, you know, it? That I guess maybe the ACA market, but maybe your magic wand would do something different, but, you know, to so that we can, kind of reverse, these negative trends and get to a more stable place in this market.
Zach Sherman
Well, there is the Brazilian dollar question. Right. I think, you know, I know first thing I'll say is it's not one thing. I think that if I could only.
Jennifer Colamonico
Get one magic wand, though. So.
Zach Sherman
Yeah, but I mean, I think the first thing I would do is try and do what I can to make, to make it a little simpler for consumers, the amount, you know, we talked about coverage transitions to the extent that we could simplify that and ensure there are less of them. That would go a long way towards continuity of access and continuity of coverage.
And so, you know, like we talked about the small group market, being in dire straits, one, you know, one solution would be to, transition people in, you know, consumers who work for employers with 50 employees or less to just no longer be in the business of offering health insurance and move those members over to the to the individual market, that would make the individual market a little bigger.
Look, it would make the viability and stability of the marketplaces bigger. And it would kind of solve for, the question of small employers trying to figure out how to offer affordable health insurance benefits to their employees. A couple other things I would do is do something about the tax exclusion for employer sponsored insurance. Maybe not do away with it.
Jennifer Colamonico
Say do something about what? What can be done.
Zach Sherman
Yeah, well, I mean, the Cadillac tax from the ACA is an example, right? Put a cap on it. Where above a certain generosity, you have to you have to start contribute in, I think, a more aggressive thing is just to do away with it. And, that seems I try to be a pragmatist and it seems very unlikely.
So I think trying to trying to cap that, maybe bring back some version of the Cadillac tax would go a long way towards generating revenue. And, that can be invested in affordability and access. And then the last thing I think I throw out there is, there is a, barrier to access to the subsidies through the marketplace, through the ACA marketplaces, around whether or not you have access to affordable, quote unquote, affordable coverage through some other means include including employer coverage.
I think a way to improve the portability and choice of health insurance is to get rid of that requirement on the employer coverage side, allow people to enroll in their employer plan if they want to, but if they want to go to the marketplace and get subsidies based on their household income, give them the ability to do so and don't shut them out because they have access to affordable, to employer coverage.
Jennifer Colamonico
All right. I'll give you a I'll give you the three. Those are all I could see how they're all interrelated. Maybe I'll just ask you one last question, because it's interesting that in a conversation and I sort of alluded to it, you know, there was a lot, a lot that the ACA intended to do. That would have been more transformative.
Some of the things didn't come to fruition for a whole bunch of reasons, but if you, maybe either could go back in time and, and write the ACA differently, what would you have done differently in that, in that legislation and that plan and that program to make it more successful?
Zach Sherman
I would have written the coverage continuum for the expansion population to the individual market, with subsidies through the marketplaces differently in a lot of ways, the kind of from Medicaid to marketplace is, is a coverage continuum that based on your income, you're in a different program. But, it doesn't really that that's what the federal rules, that's what the federal law says.
But for the consumer, for the family, those eligibility distinctions are really not that important. And, but are have significant consequences on access, particularly if you have fluctuating income or your family size changes. You can find yourself one day on Medicaid, the next day on marketplace and moving back and forth. It is truly an eligibility coverage continuum, and I would have just made it simpler.
Just one set of eligibility standards, maybe for Medicaid. If you don't want to call it that, call it something else, call it marketplace coverage, but just make it so families who don't have the access to affordable employer coverage or something else have an ability to apply for and enroll in coverage simply through one program instead of two.
Yeah. Certainly doable. I think that the stigma associated with Medicaid coverage has come a long way and is less of a, a fraught thing. So I certainly think it's possible if the right policy makers and leaders get together on it.
Jennifer Colamonico
One can hope. One can hope. Well, thank you for all the work you do. Thank you for the conversation today. And, we'll stay tuned because there will be more twists and turns in the Affordable Care Act marketplace. Because there have been plenty and there are more to come. So we'll come back to you when there's more news to break.
Zach Sherman
All right. John, thanks so much for having me.
Jennifer Colamonico
Thank you very much.
This episode of Vital Viewpoints on Healthcare is sponsored by HMA Information Services. HMAIS is a subscription based service that provides state level data on publicly sponsored programs like Medicaid from the latest managed care enrollment, market share, and financial performance data to up to date RFP calendars, and state by state overviews. HMAIS has all the information you'll need to power your initiatives to success.
This podcast was produced by myself, Jennifer Colamonico along with Tiffany McKenzie in collaboration with our guests. The content is the property of Health Management Associates.
More tools in education are helpful, but I think it behooves policymakers to be thinking about ways to simplify that. You shouldn't need an advanced degree in health policy to know how to use your health care plan.
Jennifer Colamonico
You're listening to Vital Viewpoints on Healthcare. Let's get started. Today's conversation focuses on one of the most complex challenges facing states and the federal government alike. How to ensure a more seamless and affordable health insurance system. Joining me today is my colleague Zach Sherman, a leader who has been at the center of this issue shaping the Affordable Care Act marketplace, policy and strategy.
As the marketplace director in two different states, Pennsylvania and Rhode Island. Zach is a managing director at Health Management Associates, where he has focused his work on improving access to and affordability of health insurance across all programs. Together, we'll examine the warning signs emerging across the coverage landscape, where the biggest affordability and access gaps remain and what policymakers, states and healthcare leaders should be watching and doing.
As the next phase of Medicaid marketplace and employer sponsored coverage takes shape. So Zach, welcome.
Zach Sherman
Thanks. And thanks so much for the opportunity to be here.
Jennifer Colamonico
This past year and a half, the Affordable Care Act has really been in the headlines. ACA marketplaces way more than I think. Well, we had had a reprieve for a while. And they were certainly back in the headlines this past year. So lots of disruption of coverage. So when we think about, who is in the marketplace, you know, we know that the marketplace was originally set up, the Affordable Care Act was originally set up to fix gaps, and there's a segment of people, who do tend to bounce back and forth between maybe Medicaid, employer sponsored coverage.
They were uninsured. And the marketplaces, I think, filled that gap. So as all of these programs shift, we talk a little bit about the conundrum. I mean, states are it's like trying to, you know, plug different holes at the same time. What's the conundrum, really that states face in, in trying to fix this seemingly still somewhat broken part of the health insurance market.
Zach Sherman
The creation of the ACA marketplaces came about, trying to address lack of access to affordable health insurance for a large group of Americans who couldn't get it. Through their employer or through, or through power, public health care programs like Medicaid or Medicare. The uninsured rate prior to the ACA coming into existence was incredibly, it was much higher than it is today, something like 15%.
And a lot of the people who were uninsured were those who couldn't get it through public assistance programs like Medicaid or through their employer. They didn't have access to employer coverage. And importantly, we saw a pretty big, pretty big dip in the uninsured rate through people coming into the individual market and enrolling in coverage, as well as the expanded category of Medicaid for childless adults.
That came apart, came about as a part of the ACA as well. So, there's been many trials and tribulations with the ACA, with marketplace coverage since then, since 2014. But we've seen a lot more people get covered. And in 2021, with the American Rescue Plan, there was a real need for, trying to address coverage gaps and, and the, the impact of, Covid, which, created a real fear that people are going to lose employer coverage.
So the American Rescue Plan expanded the availability and the value of those tax credits and and really increased the number of people enrolled through marketplace. So as I think enrollment growth from 2020 to 2025, with those enhanced subsidies grew from 12,000,000 in 2020, up to nearly 25 million. Depending on your situation, you could be enrolling in Medicaid. You could be getting coverage to your employer, you could be getting coverage through the marketplaces.
Things change when circumstances changed for consumers. They may have to change up and navigate to another program. And the ability to do that is not simple. And it's something that requires a lot of upkeep and maintenance and attention.
Jennifer Colamonico
I mean, let's put affordability aside because I want to come back to that, of course, because we know that's a huge issue. All right. You mentioned increased subsidies, increased enrollment. So obviously affordability matters. But what else have states learned? I mean you talked about sort of the complexity. You know, there was an individual market before the ACA came along and it didn't work really well.
And so do you think that we've learned other lessons about how individuals seek insurance? Again, affordability aside, because we know it's a huge issue. But beyond that, what else have we learned about how to get people to, you know, to enroll and then to stay enrolled.
Zach Sherman
For a lot of the consumers who, enrolled in coverage for the first time through the marketplaces, there's been a real learning curve, whether you're accessing a regular primary care visit or going to the emergency room. We're paying for a prescription, how the health insurance pays for that and what your obligation is, is not easy, is not straightforward.
And I think that we've seen, particularly with the marketplaces, people buying just based on their monthly premium, people purchasing plans specific to what you can afford on in a, on a day to day basis. And of course, the challenge with that is that everyone has different health care needs and how their overall total cost of care and coverage plays out is specific to how how many health care you know, the types of health care services that they need throughout the year.
It's really hard to predict what that will be, particularly the unknown services, the potentially catastrophic or the unknown illnesses. But generally speaking, understand knowing how health insurance plan is going to be the best tool for providing access to care is is something that, is a steep learning curve, like I said, and something that requires a whole lot of education and support.
So, through the history of the ACA, which is very short today, it's only, you know, just over ten years at this point, there's been a whole lot of supports and tools created to help people navigate that, to help people understand, how much you know, different scenarios that could play out and how much your total cost to care could be in a year.
And, and the education and the health literacy that have gone into that, is still very much a work in progress. It is very complex. I think more tools in education are helpful, but I think it behooves policymakers to be thinking about ways to simplify that, because I don't think you need it. You shouldn't need an advanced degree in health policy to know how to use your health care plan.
Jennifer Colamonico
Well, and I think even people with advanced degrees in health policy don't always know how to use their health care plans. I mean, I always feel like you know, health insurance is a is confusing for everybody. It's just if you have an employer who provides your insurance, they do part of the work for you. You know, people think that more choice is better and some cases maybe that's true.
But these are not easy choices. And, you know, this is certainly one that's put directly and entirely into the laps of people who may or may not have the resources, for whatever reason, to make those choices. I think we've I'd like to think we've learned lessons there. But to your point, yeah. We'll see if policymakers have learned lessons.
I think probably insurers and navigators and brokers have learned quite a bit. So then let's come back to the topic of affordability. And, and sort of in the moment that we're, we're in now, you know, on the, on the heels of the, OB 3AI guess is how we're calling it these days, formerly H.R. one, where we saw, the expiration of the those enhanced subsidies and, you know, as kind of one step among many, that the current federal government is taking around how to deal with access and affordability.
And it kind of seems like they're saying, like, you know, okay, states, you know, figure it out. We're not going to do this anymore. You guys are going to figure this out. So maybe talk a little bit about how and where this is working or not working. And how are states kind of filling the gaps there.
Zach Sherman
The enhanced tax credits really were a boon for marketplace enrollment. Not only did we see more people get covered, but we also saw, an increase in enrollment in plans with richer benefits, people buying from bronze plans that have well or premium but much higher out-of-pocket costs up to silver and gold, and even in some cases, platinum plans, which cost more on a gross premium basis but have much lower deductibles and lower pocket expenses.
The benefit of that is putting the actual cost of care in reach for many more consumers. So that's been really kind of, broadly beneficial for a lot of people. It of course cost the taxpayer, more money. These are these are premium tax credits. And in the debate over the last year around this, which led to the the very long government shutdown, has been around, I think those issues, access to health care, taxpayer dollars for some program integrity concerns.
But ultimately there was no deal, forged and those subsidies expired. The impact of that has been very significant and real and is playing out throughout this year. And we've already seen, you know, our colleagues at Wakely put out a report, an early, early look at enrollment drops. And, just in January alone, they identified that nationwide, about 14% of people enrolled in January did not pay their premium.
The impact is significant. And to your point is that it's not the same in every state. The the money really certainly the tax credits, the affordability investment really you know, the talks, it has a direct impact on enrollment. And there are several states, like New Mexico, who are trying to find state level funding to pay for premiums, subsidies to address the affordability gap.
But the price tag is significant. I think it was. CBO estimated it to be around $30 billion a year. The cost of extending those subsidies. And when you get down to the state level states, most states cannot come up with the funds to backfill that. There are a select few states that are finding the funds, through legislative efforts to identify premium subsidies and subsidies, the impact is less bad in those states.
In some states it's positive, but in most states it's blunting the impacts of coverage losses. You mentioned Obi three a which I will do my best to remember to say that correctly. But you layer on the, the impact of that, which has a whole lot of reforms in both the Medicaid and the ACA space that, are projected to have, negative impacts on coverage levels.
And I think you'll see both in the ACA space, but with work requirements and other reforms, community engagement slash work requirements in the Medicaid space and in other initiatives. So you're going to see downward pressure on coverage levels. And I think the reforms, both in Medicaid and ACA marketplace, are going to result in the coverage gap getting bigger.
And in us seeing higher rates of uninsured across the country and more and more people showing up in emergency rooms with issues that they've, delayed. And, you know, the, the downstream impact of that is costs, you know, higher rate of uncompensated care and, and, and more costs into the system.
Jennifer Colamonico
Personal debt and etc.. Yeah. So let me kind of come at this from a different angle. So I think we've established, you know, the, Where the market doesn't work well for, for folks that are kind of in this, in the zone of coverage that bounced around and are going to, lose those subsidies and therefore, lose coverage.
But we're also at an interesting time where employers are, I mean, the affordability issue is not, just with ACA or, you know, it's, I mean, employer coverage, if you're lucky enough to have it, you're paying a lot for it. And, you know, with wages gaps and so forth being what they are. You know, I, I've been following employers for a really long time, and I feel like for a really long time we've been saying, oh, employers at some point are going to you know, want to do something differently.
And it hasn't happened yet. I'm kind of wondering if it's going to happen now if the affordability issues have just, you know, reached a tipping point with everything else going on in the economy right now? You know, is this a time where you start to see some employers making big shifts, making big changes from the coverage that they've typically provided?
Just, you know, how are you? What are you seeing there that, you know, do you agree or do you think that that something could start to give there that might add more fuel to the fire of the this affordability concern?
Zach Sherman
I think that framing is exactly right. I think for a long, long time, employer sponsored coverage has, been thought of as very, very, you know, a positive benefit. And has been something that, policymakers have had, you know, tried to avoid reforming employer sponsored insurance. Tax exclusion is something like three, you know, $300 billion a year.
And I mentioned the cost of the enhanced premium tax credit being $30 billion a year. It's so much significantly more in terms of the cost to the taxpayer. It's been something that, that, that there was some reform included in the ACA. You may, recall the Cadillac tax.
The good old Cadillac tax on really rich benefit plans that would kick in and assess a fee on those rich plans over a certain amount of, benefit, certain amount of premium that was delayed a couple of years and then eventually repealed. So like you said, it's been something that policymakers generally have stayed away from. And even when they've, you know, dip their toes in the water, have had what have walked it back.
But like you said, affordability of employer coverage is not there anymore. There's a ton of data and stats showing that, you know, the great growth of car sharing for employer based plans over the last ten, 15 years. And it was really it is really a very similar story in terms of the difference between access to health insurance and access to health care, right?
You can maybe afford your premium, but the ability to actually access the health care you need, given the very high deductible, given the very high out-of-pocket costs, puts the cost of health care out of reach. And so I think the just like you said, there's, less excitement about employer coverage. And there once was, and, and I think that's ripe for reform.
I think in particular, small group coverage has really, really taken a hit. And this is this is employers with 50 employees or less. Total enrollment was about 16.8 million in 2013. It's now down to 10.3 million in 2023, which is a nearly 40% decline in membership over a ten year period. And, the cost of health insurance, the cost of offering it, the cost of accessing it for the employees is a major driving factor that.
Jennifer Colamonico
Well, and let's not forget, the ACA certainly did have a plan for a small group marketplace which never also never got off the ground.
Zach Sherman
There's been a few select states that have been successful with shop exchanges, but by and large, it's not been something that ever took off.
Jennifer Colamonico
We're in an interesting moment right now, in the middle of 2026, heading into a midterm election. I think this administration has, I, you know, unique and different approach to trying to make big things happen. You know, direct negotiating with pharmaceutical companies, for example, to try to extract, you know, price concessions this time of the year. You typically see bipartisan legislation so everybody can go home and, you know, and campaigned, talking about the things that they've accomplished.
I'm just wondering what you're observing. You know, in, in DC or if you have any sense of, any policy scenarios that might come forth this year. For example, I keep hearing Republican talk about, health savings accounts, and I feel like there's, you know, again, that's something that's been around for a long time, maybe a little bit more traction than it has in the past.
And, you know, thinking, you know, maybe once upon a time had limited utility. But given these changes that you're also talking about around affordability, you know, under what circumstances could something like this, you know, be a tool? I mean, is there is there anything like that that may be coming back around for consideration to be helpful here?
Zach Sherman
Yeah, there certainly has been a ton of talk about HSA, including, you know, I think the president has floated converting the premium tax credits, the subsidies through the marketplaces into HSAs. And the challenge with the knock on HSAs historically, has been that they're not necessarily a tool for low income populations who just don't have disposable income to put into a tax.
Deductible account would be nice to have one, but if you're struggling to make ends meet in terms of your rent and childcare and health insurance premiums and groceries and transportation, what's the value of having a tax free vehicle? If I have nothing and I can invest in it, if I don't have the ability to invest in an HSA, it doesn't really do me much.
So and you know, the so that's kind of broadly commentary around HSA is the idea of convert converting the premium tax credits to HSA is the idea. There has been very kind of skimpy on the details, a little bit hard to evaluate that. I think my general sense is that it feels like a mechanism for investing less in affordability, you know, in investing less in premium assistance, and therefore it's less of a reform and more of just a taxpayer cost cutting mechanism.
So but again, I you know, the details are not there on such proposals. And I certainly will evaluate them with, an open mind when they come out.
Jennifer Colamonico
So let's talk about ICHRA, which is the individual coverage health reimbursement arrangement models. So super wonky term. I never remember what it means, but I have a written in front of me. But talk about what that is. It seems like there's some excitement, at least among folks I know who know what they're talking about.
They seem to get excited about this. So why should people be excited about this? What could this potentially do?
Zach Sherman
ICHRA or another type of account based plan option? They specifically are for, employers interested in contributing to the cost of health insurance and health care for their employees. But, not interested in offering a traditional employer plan. An extra is specifically for buying plans on the individual market, which is where the ACA marketplaces operate. And what this allows is for employers to contribute through that, that tax deductible, the employer sponsored insurance tax exclusion.
So it's still, tax free for the employer. It allows them to contribute to that account. And then it gives the employer the ability to go to the individual market and find the right plan for their health needs of their budget. It is a flavor of the shop idea, but through an HRA mechanism and not through the marketplace, or it doesn't have to be through the marketplace.
There is a lot of interest in this in the context of the earlier conversation we had about how hard it is to, maintain costs and affordability through traditional employer insurance. And what this is, is more portability for the consumer, the ability for the employer to still offer. And then health insurance like benefit, which is a very important thing in terms of overall compensation packages.
It still preserves the tax deductibility of that employer contribution for the employer and in some cases allows, the employees to have access to more affordable options and certainly allows them to shop around for the specific health plan for their needs. It's been slow on the uptake in terms of interest and enrollment in the last couple of years.
Like you said, there's been a ton of excitement and interest in this. I certainly see the value. I think the kind of the idea of portability and getting away from being tied to your employer plan, or to one plan that fits all is attractive to consumers. It's still kind of in its infancy. It also, very importantly, requires an individual market that is stable, and lasting and unfortunately for ICHRA, we're not in a period of, certainty for the future around the ACA, the individual market.
And that has real impacts on, stability and importantly, premiums. Right. For this to be an affordable option, premiums cannot skyrocket. The individual market has seen really, really bad. I think it was on average from 25 to 26, a 25% premium increase. We've in a period of instability from the individual market, and that makes the attractiveness of it as an option, harder.
Jennifer Colamonico
Why has it been slow getting off the ground?
Zach Sherman
It's complicated. I mean, the name itself, right. Individual coverage health reimbursement arrangements, are really about the name, but but it's kind of a symbol for the complicated nature of it, for kind of operators in this space, it's a different way of delivering employer benefits. And importantly, most employer benefits are delivered through a distribution model that includes a health insurance broker.
Just think about the insurance broker. You can sell one kind of policy for a group of 100. You know, the administrative work associated with that is X. If you go to an extra, then it's 100 different policies for each individual member. And in some cases the broker commission structure themselves is much different and could be lower. And, you know, the level of effort for that broker and the return on that investment of their time is Y.
And could be significantly more if most health plan enrollments are through brokers. You need the brokers on board. And I think there's a faction of the broker community that is warming up. But it is still not something that is widespread. And is seen as like a critical piece of the overall employer benefits portfolio. So that's just a piece of that.
There's other complicated things associated with it, but that's a big part of it.
Jennifer Colamonico
I didn't realize. So they're still trying to keep it with the brokers. So the brokers aren't going to lose the business. They're just going to get it differently.
Zach Sherman
Importantly, in the individual market, brokers play such an important role. Brokers do the bulk of the individual market enrollment, assistance and plans and are the only ones who can give advice legally on the rate plan. And so they play a huge role in the employer space, but they play, you know, a very significant role in the individual space.
And, and I, you know, there are vendors that are spending up with their crowd that are doing decision support. But I don't know that they, I don't know that the successful ones are going to be able to navigate that space without their direct partnerships with the broker community.
Jennifer Colamonico
We know all of this is complicated. We know health care is complicated. This particular segment of the market seems to be even more complicated, right. Because it wasn't working before. There were lots of reasons for that. Let me ask you, if you had a magic wand, given it, given everything you know and have experienced in this market for as long as you've been involved, if you had a magic wand and you could shape coverage, let's say ten years from now, what changes would you make today to make sure that we get it right?
This time, that we, you know, it? That I guess maybe the ACA market, but maybe your magic wand would do something different, but, you know, to so that we can, kind of reverse, these negative trends and get to a more stable place in this market.
Zach Sherman
Well, there is the Brazilian dollar question. Right. I think, you know, I know first thing I'll say is it's not one thing. I think that if I could only.
Jennifer Colamonico
Get one magic wand, though. So.
Zach Sherman
Yeah, but I mean, I think the first thing I would do is try and do what I can to make, to make it a little simpler for consumers, the amount, you know, we talked about coverage transitions to the extent that we could simplify that and ensure there are less of them. That would go a long way towards continuity of access and continuity of coverage.
And so, you know, like we talked about the small group market, being in dire straits, one, you know, one solution would be to, transition people in, you know, consumers who work for employers with 50 employees or less to just no longer be in the business of offering health insurance and move those members over to the to the individual market, that would make the individual market a little bigger.
Look, it would make the viability and stability of the marketplaces bigger. And it would kind of solve for, the question of small employers trying to figure out how to offer affordable health insurance benefits to their employees. A couple other things I would do is do something about the tax exclusion for employer sponsored insurance. Maybe not do away with it.
Jennifer Colamonico
Say do something about what? What can be done.
Zach Sherman
Yeah, well, I mean, the Cadillac tax from the ACA is an example, right? Put a cap on it. Where above a certain generosity, you have to you have to start contribute in, I think, a more aggressive thing is just to do away with it. And, that seems I try to be a pragmatist and it seems very unlikely.
So I think trying to trying to cap that, maybe bring back some version of the Cadillac tax would go a long way towards generating revenue. And, that can be invested in affordability and access. And then the last thing I think I throw out there is, there is a, barrier to access to the subsidies through the marketplace, through the ACA marketplaces, around whether or not you have access to affordable, quote unquote, affordable coverage through some other means include including employer coverage.
I think a way to improve the portability and choice of health insurance is to get rid of that requirement on the employer coverage side, allow people to enroll in their employer plan if they want to, but if they want to go to the marketplace and get subsidies based on their household income, give them the ability to do so and don't shut them out because they have access to affordable, to employer coverage.
Jennifer Colamonico
All right. I'll give you a I'll give you the three. Those are all I could see how they're all interrelated. Maybe I'll just ask you one last question, because it's interesting that in a conversation and I sort of alluded to it, you know, there was a lot, a lot that the ACA intended to do. That would have been more transformative.
Some of the things didn't come to fruition for a whole bunch of reasons, but if you, maybe either could go back in time and, and write the ACA differently, what would you have done differently in that, in that legislation and that plan and that program to make it more successful?
Zach Sherman
I would have written the coverage continuum for the expansion population to the individual market, with subsidies through the marketplaces differently in a lot of ways, the kind of from Medicaid to marketplace is, is a coverage continuum that based on your income, you're in a different program. But, it doesn't really that that's what the federal rules, that's what the federal law says.
But for the consumer, for the family, those eligibility distinctions are really not that important. And, but are have significant consequences on access, particularly if you have fluctuating income or your family size changes. You can find yourself one day on Medicaid, the next day on marketplace and moving back and forth. It is truly an eligibility coverage continuum, and I would have just made it simpler.
Just one set of eligibility standards, maybe for Medicaid. If you don't want to call it that, call it something else, call it marketplace coverage, but just make it so families who don't have the access to affordable employer coverage or something else have an ability to apply for and enroll in coverage simply through one program instead of two.
Yeah. Certainly doable. I think that the stigma associated with Medicaid coverage has come a long way and is less of a, a fraught thing. So I certainly think it's possible if the right policy makers and leaders get together on it.
Jennifer Colamonico
One can hope. One can hope. Well, thank you for all the work you do. Thank you for the conversation today. And, we'll stay tuned because there will be more twists and turns in the Affordable Care Act marketplace. Because there have been plenty and there are more to come. So we'll come back to you when there's more news to break.
Zach Sherman
All right. John, thanks so much for having me.
Jennifer Colamonico
Thank you very much.
This episode of Vital Viewpoints on Healthcare is sponsored by HMA Information Services. HMAIS is a subscription based service that provides state level data on publicly sponsored programs like Medicaid from the latest managed care enrollment, market share, and financial performance data to up to date RFP calendars, and state by state overviews. HMAIS has all the information you'll need to power your initiatives to success.
This podcast was produced by myself, Jennifer Colamonico along with Tiffany McKenzie in collaboration with our guests. The content is the property of Health Management Associates.
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Vital Viewpoints is hosted by HMA Vice President, Strategy and Communications, Jennifer Colamonico.
