Individual market meltdown could destabilize employer health plans, expert warns

Related: House passes health benefits package with a 216 to 211 vote

Harris — who serves as the head of the CBIZ national health care innovation practice as well as head of the Tennessee benefits business — said employers need to "keep a close eye on the news" coming out of Washington and "prepare for several outcomes."

"If there is no extension provided, rising marketplace premiums could significantly impact employer-sponsored health plans," Harris said.

Upheaval in the market for individual and family coverage could have the most obvious, immediate effect on employers and workers trying to use individual coverage health reimbursement arrangement plans, or ICHRA plans, Harris said.

But upheaval in the individual market could also affect ordinary employer-sponsored group health plans, by making group health coverage provided by employers much more popular, he said.

That could create major enrollment shifts, Harris said.

Rapid growth is a blessing in many industries, but insurance companies and their regulators worry that spikes in enrollment in health plans could swamp them with new enrollees with very high claim costs.

It's possible that severe disruption in the individual market could cause high-claim families to be more likely to seek out employers with good health benefits than low-claim families are. That could put pressure on employer plans' claim ratios.

The legislative backdrop: Congress increased ACA premium subsidy levels in response to the COVID-19 pandemic.

Supporters of an ACA premium subsidy boost extension argue that letting the subsidy levels snap back to pre-COVID levels is cruel, because it could cause many families' share of the premium payments to double and some relatively high-income families' share of the premiums to soar to more than $30,000 per year, from less than $10,000 per year now.

Opponents of an extension, including President Donald Trump, contend that letting the subsidy boost expire is important, because, they argue, the ACA subsidy system itself is encouraging health insurers to push total premiums higher.

Some policymakers in Washington seem to think that Congress could still pass an ACA premium subsidy boost extension.

One reason is that Congress is facing a fiscal cliff as well as a subsidy cliff.

"U.S. government funding currently runs out for most agencies on Jan. 30, 2026," according to Jeffrey Roach, the chief economist at LPL Financial.

The need for congressional leaders to avert the looming Jan. 30 shutdown could lead to dealmaking.

Members of Congress continue to introduce ACA subsidy cliff fix proposals. Rep. Mike Thompson, R-Calif., introduced a 423-page package Thursday that includes an ACA premium subsidy boost provision along with provisions related to housing costs, energy costs and assistance for disabled veterans.

Charlene MacDonald, a lobbyist who is taking over for Chip Kahn as head of the Federation of American Hospitals, said in a statement that the subsidy cliff issue will not go away just because members of the House have left town.

"In the New Year, thanks to pragmatic lawmakers listening to their constituents' concerns, the House will return and vote to extend the tax credits," MacDonald predicted.

Topher Spiro, a health policy specialist at the Center for American Progress, put out a plea for donations to support a campaign to press members of the Senate to support an ACA premium subsidy boost extension.

Spiro noted that four House Republicans have agreed to help put a three-year ACA subsidy boost extension bill on the House floor in January.

"The Senate is the last obstacle standing between nearly 22 million people and massive premium hikes," Spiro said in a fundraising letter. "After passing the Big Beautiful Bill and rubber-stamping the president's tariffs, congressional Republicans are already on the defensive — on health care costs, on the cost of living, and on who they're really fighting for. This latest development in the House proves this fight is winnable."