This September, a study released by Marsh (formerly Mercer) reached a dire projection: a return to double-digit premium increases for American health insurance in 2027. Premiums will rise 11 percent on a like-for-like basis, though that reduces to “only” eight percent once taking into account intended reduction in plan quality through higher out-of-pocket costs. This is the highest rate of increase since 2003, and the fourth consecutive year of escalating health insurance premiums.
The reasons for this spike in premiums are multifaceted. New methods of fighting diseases such as cancer are constantly innovated, with drug companies initially charging exorbitant costs. Widespread usage of GLP-1 weight-loss drugs (still under an expensive patent) are estimated to contribute a full percentage point to the cost increase alone. Medical providers such as hospitals and doctors are also taking advantage of AI to win more claims against insurers.
However, a major contributor to the rise of private healthcare costs — both now and in past decades — has been the changing fortunes of government-supported healthcare. UE policy has long supported the institution of single-payer health insurance. But even the current patchwork U.S. system, including public-insurance systems like Medicare and Medicaid, along with the Obamacare insurance markets, has lowered costs at private insurers in the past. Trump-era cuts have severely endangered that balance, and are contributing to a worsening of fights with the boss at the table over insurance.
Due to all of the above factors, 2027 looks to be a year where we’ll return to the hard bargaining over healthcare of years past, with the added complication of new strategies by the boss to eliminate employer-provided health insurance in its entirety.
How the U.S. Was Backed Into Employer-Provided Health Insurance
Less than a century ago health insurance didn’t really exist in the U.S. Medical bills were paid directly for services, whether out of pocket, through government spending for select groups (like veterans), or through private charity. However, with the onset of the Great Depression in 1929, hospitals experienced a revenue collapse, as patients defaulted on bills or refrained from getting care altogether.
The vice president of Baylor University Hospital hit upon a novel solution: offering Dallas-area schoolteachers a plan where they could contribute 50 cents a month into a shared pool. In return, any participant was guaranteed up to 21 days of hospital care. As the Depression deepened, the American Hospital Association pushed networks of hospitals to develop similar models stretching across metropolitan areas. These plans eventually federated, forming Blue Cross.
In the earliest years, these Blue Cross plans were policies that individuals purchased, similar to fire, flood, or automobile insurance. However, this changed in 1942, when the U.S. government instituted emergency wage and price controls, and employers began improving fringe benefits such as paid leave, pensions, access to Blue Cross, and separate coverage for physician plans (which became Blue Shield by 1948). As a result, the number of workers in the U.S. who had access to health insurance rose from only nine percent in 1940 to almost 70 percent by 1960.
At first, the burgeoning labor movement had a different goal: The Wagner-Murray-Dingell Act. First proposed in 1943, the Act would have created a single-payer plan attached to Social Security covering all employed workers and their dependents. Endorsed by Harry Truman in 1945, this first attempt at single-payer was strangled by the American Medical Association and reactionary politicians, who used red-baiting to kill healthcare reform. After this defeat, an increasingly conservative AFL and CIO shifted their focus away from transformative legislation and towards negotiating better-quality plans with employers.
So it was that the general shape of private health insurance in the U.S. was set. There were expansions of the provision of public health insurance to those who could not get it through their employer, most notably the establishment of Medicare and Medicaid in 1965, but the basic system of private insurance paid for by employers has remained the norm to this day.
A Quick History of U.S. Healthcare Cost Escalation
Throughout the 1950s, 60s, and 70s, the cost of healthcare (and thus health insurance) escalated rapidly as the range of effective surgeries and medications increased. However, the same sort of cost escalation was seen throughout the developed world. When comparing the amount spent on healthcare per person among Organization for Economic Co-operation and Development (OECD) countries, the U.S. was not an extreme outlier either through measurements of healthcare spending as a total percentage of GDP, or health spending per capita.
Starting in the 1980s, however, the U.S. diverged. Other OECD countries (which have a mixture of socialized medicine, single-payer health insurance, and private systems with price caps) were able to keep healthcare cost increases only slightly higher than inflation. The U.S. was unable to match this. Over the bulk of the following 30-year period, American per-capita healthcare spending kept increasing at two to three times inflation annually, until American healthcare cost twice as much as that of peer nations.
As bad as these trends were in general for American healthcare, the cost growth was worse for private health insurance. The reason is fairly simple: Medicare and Medicaid developed cost containment systems which ensured the government would only pay at a fixed rate per procedure, while private insurers lacked the ability to do so due to limited bargaining power, meaning the cost for private care rose more rapidly.
In addition, in 1986, the Emergency Medical Treatment and Labor Act required any hospital accepting Medicare to offer care in the ER regardless of insurance status, citizenship, or ability to pay. Hospitals developed onerous collection practices, including liens and wage garnishment, to attempt to collect from the uninsured, but most of these costs are ultimately written off as “bad debt.” Providers chose to make up for these “shortfalls” by overcharging the privately insured, who typically pay two and a half times what Medicare patients do for the same services.
Medical providers like doctors’ offices and hospitals have every interest in assuring patients get care, but also that the care is as expensive as possible. However, the interest of private insurers has never been ensuring our comprehensive care was affordable, but instead that costs were kept low overall. The easiest way to do that was denial of claims, which is why insurance shifted to an outright hostile relationship with enrollees. Both sides developed massive bureaucracies to maximize their own returns, with neither pushing for what patients really wanted: coverage which was comprehensive and cost-effective.
The initial period of healthcare cost escalation was largely invisible for insured workers, though as the 1980s and 1990s wore on, employers began demanding that an ever-higher percentage of the total premium be paid for by the workers. A brief shift to Health Maintenance Organizations (HMOs) in the mid-1990s lowered cost growth, but the narrow networks and need for prior authorization to see specialists made the plans unpopular. Soon thereafter costs began spiraling again, and employers shifted tactics towards the diminution of coverage itself through higher out-of-pocket costs. This culminated in the creation of High-Deductible Health Plans (HDHPs) under the presidency of George W. Bush. However, none of this changed the overall arc of unsustainable healthcare spending.
Enter the ACA
The Affordable Care Act (ACA, commonly called Obamacare), passed in 2010, was far from the single-payer health insurance that the U.S. desperately needed to rein in health costs which, by that time, were double that of other OECD countries. It wasn’t even the sort of private-sector, universal health insurance that countries like Switzerland and the Netherlands have. Democrats seemed unwilling to have the fight with the healthcare industry that would have been needed to reduce costs, but made many changes to “bend the cost curve” and slow price increases.
The Act made many regulatory changes, from requiring insurers to cover preventive care at no cost to changing Medicare payments to discourage hospital-acquired conditions and readmissions. However, the sections with the most impact were those designed to increase insurance coverage. This was achieved through a mixture of programs, including allowing young adults to stay on their parents insurance until age 26, an expansion of Medicaid (now accepted by all but ten states), and the healthcare exchanges, which allowed those without access to employer-provided coverage to purchase private coverage at government-subsidized rates.
The percentage of Americans 64 and under without health insurance fell from 16 percent in 2010 to only nine percent by 2016. The Biden Administration added to the effectiveness of these policies through provisions of the American Rescue Plan Act and the Inflation Reduction Act which made marketplace plans more affordable, lowering premiums and removing income caps. By 2025, a record 45 million Americans were covered by an Obamacare plan.
The cumulative policies of the ACA and its Biden-era extensions were able to bend the cost curve. Although still increasing higher than inflation, post-ACA health insurance costs increased at roughly half the rate as during the prior period. Nearly halving the uninsured rate meant less bad debts to be written off by hospitals and doctors, which in turn meant less costs passed on to the rest of us. Trends from the 2000s in private health insurance (particularly the rise in out-of-pocket costs) still proceeded, but the overall rate that premiums grew slowed for a time.
The Second Trump Term and the Great Unwinding
As the UE convention outlined in our Medicare for All policy last year, the Trump Administration made two key decisions which, while not outright destroying publicly-supported health insurance in the country, weakened it gravely.
First, the Biden-era expansion of ACA subsidies was allowed to expire, doubling or tripling premium costs for enrollees. As a result, as many as five million Americans dropped out of ACA marketplaces. But the Administration doesn’t seem to think that these cuts went far enough. In September, Vice President Vance announced plans to remove over 760,000 people from the ACA exchanges over alleged “fraud.” The details of the fraud allegations are still unclear, but according to CMS Administrator Mehment Oz, one of the supposed ways they detected “fraud” was individuals who signed up for plans but never had any claims, meaning the Trump Administration may be ejecting healthy people from the risk pool who helped to keep average premium costs lower. As a result of these and further changes adding additional red tape to the ACA, enrollment is expected to drop two million more in 2027.
At the same time, the bulk of the over $900 billion in Medicaid cuts which Trump signed into law as part of his One Big Beautiful Bill Act (in order to pay for tax cuts and the wealthy) go into effect next year. These cuts establish new work requirements for most recipients and require those enrolled to now file new paperwork every six months. Estimates from the Center for Medicare and Medicaid Services suggest the work requirements alone will result in 2.3 million less enrollees next year, and that 10 percent of the remaining Medicaid-eligible population will lose coverage simply because they don’t comply with the new paperwork. This is on top of a drop of five million in Medicaid coverage between mid-2025 and mid-2026.
While the Affordable Care Act remains the law of the land on paper, the cumulative impact of Trump-era changes to healthcare policy may well result in a higher uninsured rate by the end of his term in 2029 than prior to the passage of Obamacare.
Less people insured is a disaster for the individuals losing coverage, but as numbers pile into the millions, it’s also a disaster for providers, particularly hospitals and clinics in rural and lower-income communities where Medicaid recipients make up a large proportion of patients. Less insurance will mean less demand, except when care becomes critical and people seek an emergency room. Those bills, as noted above, largely go unpaid, even given the liens and lawsuits often levied against patients, resulting in higher claims for the rest of us.
The Destruction of Employer-Provided Health Insurance
Even prior to the passage of the ACA, employers were running out of workable tools to shift costs onto their workers. The average employee may now pay as much as $7,000 annually in premium contributions for a family plan. Even on out-of-pocket costs, the average family deductible — the amount they must pay before a single dollar of coverage — is now between $3,000 and $5,000. This isn’t even considering further sticks, including spousal surcharges and forcing employees to pay more if they don’t complete a wellness program and quit smoking. Employers have also begun experimenting more with “narrow network” models (which exclude many hospitals and doctors) or pharmaceutical formularies which exclude entirely the most expensive prescriptions — changes which are very hard for a worker (or a negotiating committee) to understand until after the fact when claims are denied.
But the newest, and increasingly most popular option, is simply to get out of the business of providing health insurance entirely.
A relatively little-notice aspect of Trump’s first term was the development of what were initially termed Individual Coverage Health Reimbursement Arrangements (ICHRAs) and recently renamed CHOICE Arrangements. HRA accounts have existed since 2001 when paired with high-deductible health plans. These HRAs work similar to a Health Savings Account (HSA), though with less risk to the individual worker. However, they were only meant to help pay for out-of-pocket expenses like deductibles, coinsurance, and copays, and could not be used to pay for premium shares.
ICHRAs changed that, as they are explicitly designed to help pay for premiums for an individual health plan (generally a marketplace plan). The employer still gets the benefit of a tax deduction for “providing health insurance,” and if they contribute enough to be equal to an “affordable” plan under the ACA, avoid any fines for breaking the employer mandate. However, bosses are let off the hook for any aspect of the provision of health insurance, from negotiating rates with an insurer to choosing plan options. All onus is placed on the individual worker to find the plan that works for their family. This is not unlike the transition from defined-benefit pension plans to 401(k)s, with employers abandoning most responsibilities other than the value of money contributed into an account.
As of last year, the total number of workers covered by these plans was still relatively small (four percent). However, according to an EBRI study released this summer, one third of employers are actively evaluating and/or planning a shift within the next two years. UE employers small and large have begun proposing such plans across the table.
The Single-Payer Solution
The escalation of healthcare costs has reached an untenable level. A study earlier this year by the Commonwealth Fund found that in nineteen states (overwhelmingly right-to-work states concentrated in the South), the total cost of employee premium shares and deductibles had exceeded 10 percent of household income. At levels this high, just the regular annual increase in healthcare costs (even without additional cost shifting) eats up any real wage growth that higher prices haven’t already eliminated.
High costs do change the behavior of Americans compared to other developed nations. The Kaiser Family Foundation has found across a 20-year study that Americans utilize less healthcare than people in peer nations. We go to the doctor about half as much, we’re less likely to go to the hospital, and we are discharged three days earlier when we do. We’re less likely to receive needed medical care like angioplasties and knee and hip replacements. Outside of a few key areas like medical scans, we use less healthcare across most measured areas. But we pay two to three times what peer nations do for surgeries, and often even more for brand-name prescriptions. It’s little wonder we have worse healthcare outcomes despite spending more on healthcare, as the U.S. system charges just enough to ensure people will forgo needed care, but not so much to stop healthcare costs from growing faster than the general economy or take-home wages.
There are numerous models for universal healthcare across the developed world, from British-style socialized medicine to private systems with true universal mandates and strict cost controls. However, the reason many healthcare reform advocates (including UE) have continually returned to Canadian-style single-payer (“Medicare for All”) as a solution is the relative simplicity of extending Medicare, which is already a limited single-payer system that sets prices much lower than private insurance. With everyone covered by Medicare, the Centers for Medicare & Medicaid Services (CMS) would have leverage to set rates for every procedure and prescription, ratcheting down costs over time. This would be analogous in some ways to collective bargaining, with one big insurer acting as the primary negotiator to limit costs, rather than hundreds of insurance plans doing so on a piecemeal basis.
Between the Wagner-Murray-Dingell Act and the passage of the ACA, the U.S. had several missed opportunities on healthcare reform, from the mid-1970s push by Ted Kennedy for single payer (sidelined by Watergate) to healthcare reform in the early 1990s (far from single payer, but considerably better than what was ultimately passed by Obama). In every case, insurers and providers organized against healthcare reform, raising the boogeyman that the changes healthcare reform would make to people's costs and quality of care would result in worse coverage. These are understandable fears, given nearly every time in living memory that someone’s insurance has changed, it’s changed for the worse
A legislative opening to revisit the crisis in American healthcare may come in 2029 under a new presidency, and there is increasing recognition even in the mainstream of the Democratic Party that Obamacare is an insufficient base to fix our system. An increasing number of mainstream Democrats are endorsing hybrid proposals, like Andy Kim’s (D-NJ) proposal to create a universal healthcare program through Medicaid to cover all children and adults under 26. More importantly, calls are growing once again for Medicare for All, from the Democratic Socialists of America to progressives like Abdul-El Sayed, the Democratic nominee for Senate in Michigan. As citizens, as workers, as patients, we must stay loud with our demands, stay organized to demand accountability once that opening again arises, and not let corporate forces again sell us out for the sake of the continued existence of insurance companies.