Healthcare costs shifting back to employers

New Kaiser Family Foundation data shows healthcare costs shifting back to employers

New data from the Kaiser Family Foundation (KFF) provides a detailed look at the impact of ending enhanced ACA Marketplace subsidies, including how employers may be affected.

As coverage becomes less affordable, a portion of last year’s 24 million ACA enrollees are moving into employer-sponsored plans, shifting costs from federal subsidies to employer budgets and wages. In effect, costs that were previously absorbed through ACA subsidies are now shifting back to employers.

The affordability shock is real

The KFF data shows this isn’t marginal. After subsidies expired, most ACA enrollees saw costs rise, in many cases sharply. About half report their premiums or out-of-pocket costs are “a lot higher.” Many are cutting back on basic household spending to keep coverage,while others are dropping coverage altogether.

When coverage gets more expensive, people change behavior. KFF finds:

• 28% switched Marketplace plans

• 22% moved to other coverage, including employer plans

• 9% became uninsured

Much of the attention has focused, understandably, on those becoming uninsured. But another meaningful group is moving into employer-sponsored coverage, those who were recently subsidized by federal dollars and are now covered through employer contributions.

Employers are absorbing the shift

For many households, employer coverage becomes the fallback when the individual market breaks down. But that shift carries real implications for employers:

• Higher healthcare spend

• Increased pressure to keep coverage affordable

• Tradeoffs between wages, hiring, and benefits

Healthcare costs ultimately come out of the same pool as wages and total compensation. As more individuals shift into employer plans, employers inherit not just more covered lives, but also more financial risk.

That alone would be significant. But it’s colliding with another large cost trend.

Cancer is now the number one driver of employer healthcare costs

As ACA plan members move into employer-sponsored plans, employers are already facing a structural rise in cancer costs driven by a few persistent trends:

Cancer incidence is rising among working-age adults

More diagnoses are occurring in working-age adults, not just retirees, moving costs from Medicare into employer-sponsored plans.

Treatment is improving, and costs are rising alongside it

Breakthrough therapies are extending lives, often at costs of $150K–$400K+ per patient, with treatment continuing over years. Cancer is increasingly a long-term condition, not a one-time event.

Survivorship is growing

There are 18.6 million cancer survivors today, projected to reach 26 million by 2040. More people are living, and working, with ongoing care needs, from monitoring to managing long-term side effects. For employers, survivorship extends the duration of both care needs and cost.

What this means for employers

As ACA coverage becomes less affordable, costs are shifting from federal subsidies to employer balance sheets at the same time cancer continues to drive a growing share of employer healthcare spend.

The organizations and benefits leaders that get ahead won’t be those managing costs only at the margins. They’ll be the ones tackling the cost shifts underway at a foundational level, and acting earlier to address factors within their control, beyond plan design, especially in high-cost clinical areas like cancer.

For more on how employers are addressing the cost of cancer, read our blog here.