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With a new U.S. president taking office, along with a shift in both houses of Congress, business owners are wondering if they’ll get some relief from burdensome health care insurance costs – or if premiums will spiral even higher. We asked some experts to weigh in on the question.

Unlike some previous election years, health care “was not a big issue in the debates,” observed Joel Cantor, director of the Rutgers Center for State Health Policy. “But we can look to the past as a prelude to what we can expect from a second Trump administration.”

The last time he held office, Donald Trump “was one vote away from repealing the Affordable Care Act,” said Cantor. “So, it’s likely that he will, at the very least, seek to reduce funding for subsidies in the ACA coverage exchanges and make other changes likely to undermine affordability and market stability in the exchanges.”

ACA subsidies were significantly increased during the pandemic, but those enhancements are set to expire at the end of 2025.

Some 4 million people would likely lose coverage if the subsidies expire, according to a 2017 report by the Congressional Budget Office. But that same report also estimated that if the ACA mandate had been repealed [at the end of 2017] it would reduce federal deficits by about $338 billion through 2027.

Cantor, though, fears that Trump’s policies could drive increases in health care insurance premiums for everyone. “In recent years, a big driver of health care cost increases has been M&A activity among hospitals,” he said. “Biden was a strong enforcer of antitrust laws, but I don’t think that’s likely under Trump. More M&A among hospitals means more monopoly power, which is likely to lift costs for employers and individuals. And although Trump has said he is in favor of re-importing drugs from lower-cost countries like Canada, he also wants to slap more tariffs on imports, which could lead to cost increases on drug and medical equipment imports.”

Cantor also believes Trump’s decision to nominate Robert F. Kennedy Jr. to lead the federal Department of Health and Human Services could further drive-up costs. “RFK Jr.’s opposition to vaccine mandates and fluoride in our water could lead to more illness, greater hospital use, and could lead to dental issues with children,” he said. “This could lead to even higher health care costs.”

The policies of the incoming president and the new Congress could have a mixed bag of effects on business’ health care premiums, according to Tina Zappile, faculty director of the William J. Hughes Center for Public Policy at Stockton University.

If Trump follows through on reimporting lower-cost drugs from countries like Canada, “That could put pressure on big pharmaceutical companies to reduce their prices,” said Zappile, who is also an associate professor of political science at Stockton. “But of course that would depend on the scope of the drugs covered by any reimportation rules.”

Other messaging from the incoming administration may not be so welcome, she added. “If Trump reduces the ACA subsidies that many people currently use to purchase their medical insurance, it could drive demand for employer-issued insurance,” she noted. “About 86% of private sector companies already offer insurance to their employees, but only about 50% of small businesses do so. What will happen if their employees are forced off of ACA plans?”

Zappile pointed out, though, that health care is a significant tool to attract and retain talented employees, “so given the relatively tight labor market, more companies may step up and offer attractive health care plans, which could reduce the impact of higher prices.”

Still, Zappile is concerned about Trump’s embrace of deregulation. “That could lead to more health care M&A, which may lead to an oligopoly, where a few companies basically control the market. That gives the oligopolies more control over pricing.”

Another insider suggested that Trump’s free-market views could accelerate some existing trends. Similar to the way many companies have replaced defined benefit pension plans with defined contribution schemes, like the 401(k), Trump’s return to the White House could accelerate a move from “DB health care plans to DC” ones, according to Ruchin Kansal, a professor of practice at Seton Hall University’s Division of Continuing Education and Professional Studies, as well as teaching Management at the Stillman School of Business, and is the founder of Kansal & Co., a business advisory practice.

Free-market approach

“Trump is about free markets and deregulation,” Kansal notes. “The DB plans that many companies currently offer — where the employee has an insurance policy, or several policies, with a specific range of health care benefits — dates back to World War II, when wage caps were implemented and employers had to use other kinds of compensation to attract and retain talented employees. Over time, this became the de facto employment model but jumps in health care costs over the past 20 years or so have made these plans burdensome for many businesses, especially smaller ones.”

Under a defined contribution model, an employer typically gives employees a set amount of money to spend on health insurance. The employee can then use the funds to purchase a health insurance plan from a menu of options, such as self-insured or fully insured plans, health reimbursement arrangements, flexible spending accounts or plans with health savings accounts. “If a few large employers do this, then others are likely to follow,” says Kansal.

This kind of shift “would likely result in either no change to employer costs, or perhaps a slight dip,” he added. “But it would likely be more costly for employees who are under 65 years of age [since 65 and older individuals are more likely to be on Medicare].”

Kansal also says Trump is likely to push for a reduction in ACA mandates, which could let businesses offer lighter health care coverage, “or perhaps more individualized plans. Younger, healthier people in particular would probably opt for lighter plans that are less expensive, but the out-of-pocket costs for older employees would likely move higher.”

Trump’s commitment to free-market health care policies could have an unintended consequence: inhibiting new-business formation, Kansal cautions.

“Regardless of the specific approach, linking health insurance to an employer adds costs that ultimately limit entrepreneurship,” he says. “The goal should be to either create some sort of national health insurance or offer enough marketplace choices to create meaningful competition. That would be the best strategy. While a national health insurance plan under Trump will not materialize, hopefully his administration can create more affordable and competitive market choices.”

Editor’s note: This story was updated at 10:02 a.m. EST Dec. 2, 2024, to correct Ruchin Kansal’s title.