The New Year is only a few days old, but already things are looking bad for Centene, Elevance, and other big insurers offering plans in the ACA marketplace. Led by Sen. Bill Cassidy, Republicans are pushing a proposal to take some $26 billion in ACA subsidies away from the insurance companies and partially redirect the money into consumer accounts controlled by individual patients.
For more than a decade, we’ve been talking about consumerism as a driving trend in healthcare delivery. Retail clinics, telemedicine, price transparency, direct primary care models – we’ve covered all these topics and more on the Ascendient blog.
But what we’re seeing recently – including Cassidy proposal – is a new manifestation of the trend, as consumerism spills over from healthcare delivery and into healthcare payment. For hospitals and health systems, the implications are uncertain but potentially significant.
The ICHRA Revolution
The clearest signal of this shift is the rapid adoption of Individual Coverage Health Reimbursement Arrangements (ICHRAs). Created during the first Trump administration and available since 2020, ICHRAs represent a wholesale restructuring of employer-sponsored health insurance – from a defined benefit model to a defined contribution model.
If that sounds like retirement planning, it’s no accident. Just as 401(k) plans replaced traditional pensions, ICHRAs may transform how employers fund employee health benefits. Rather than providing employees with a single group health plan, ICHRA allows employers to offer a fixed dollar amount that workers can use to shop for health insurance that best fit their needs. A woman in her 30s would likely select very different coverage than a man in his 50s, for instance.
Up to 1 million Americans are now enrolled in ICHRAs. That’s still just a fraction of the 150 million workers covered by traditional employer plans, but the numbers are shifting fast. From 2024 to 2025, ICHRA adoption grew by 34% among large employers and 52% among small employers, according to the HRA Council. With employer health costs projected to increase nearly 10% next year, I have to think that more and more companies will study the ICHRA model.
The Subsidy Model for DTC Drugs
Another, even newer example caught my eye recently, showing how health insurance is being reshaped by consumerism. As pharmaceutical companies move aggressively into direct-to-consumer marketing, at least two startups are encouraging employers to subsidize direct drug purchases rather than providing coverage through traditional insurance.
The catalyst, unsurprisingly, is GLP-1 medications like Wegovy and Zepbound. With prescription costs ranging from $1,000 to $1,500 per month, weight loss drugs now account for 10.5% of total annual claims for companies that offer coverage, according to SHRM. Many employers simply can’t afford to make that investment.
But Eli Lilly and Novo-Nordisk also sell their weight loss drugs directly to consumers at roughly $500 a month, and that has created a whole new model: Employers contribute $50 to $100 per month toward the cash price and employees pay the rest. Andel and WeightWatchers are among the pioneers of this approach, arguing that it increases consumer access to weight loss drugs while employers enjoy lower pricing and more predictable costs.
Critics say the model simply shifts costs to employees while removing important insurance protections like out-of-pocket maximums. But with 64% of employers currently providing no coverage of GLP-1 drugs for weight loss, proponents counter that partial subsidies are better than nothing.
Implications for 340B
It’s too early to know whether DTC drug subsidies will catch on as an alternative to traditional, employer-sponsored drug plans. But the model does provide one more reminder that consumerism is spilling over from the provider side of healthcare to the payer side, and it’s unlikely to stop with GLP-1 medications. Andel, for instance, is already laying the groundwork for a similar approach with Alzheimer’s prevention drugs.
For hospitals participating in the 340B program, the shift toward DTC represents a significant financial threat. In 2023, 340B hospitals generated $66.3 billion in outpatient drug purchases, with individual facilities averaging $2.5 million in annual profits from the program. When patients are incentivized to bypass hospital outpatient pharmacies and purchase their medications directly from manufacturers, health systems lose both the 340B discount benefit and the dispensing revenue – a double blow to margins.
If your hospital or health system counts 340B as a major revenue stream, we recommend that you begin stress-testing your financial models against various scenarios for DTC adoption, particularly in high-volume therapeutic areas such as weight management and diabetes.
Broader Implications for Healthcare Strategic Planning
If consumers continue to gain more agency in their healthcare payment decisions, I see three potential implications for hospitals and health systems that go well beyond the 340B program:
- Payer Mix Complexity – Hospitals already have to juggle the details of numerous employer-sponsored health plans, a task that is complex, inefficient, and expensive. ICHRAs may fragment the traditional employer-sponsored insurance market into thousands of additional individual policies, making it harder to predict revenue and payer mix. This will increase risk as well as administrative burdens.
- Revenue Pressure – Both trends push more healthcare costs directly onto patients. ICHRA plans often come with higher deductibles and narrower networks than traditional group coverage, while the pharmaceutical subsidy model explicitly increases patient out-of-pocket spending. For hospitals already struggling with bad debt and patient collections, this could accelerate revenue cycle challenges.
- Competitive Dynamics – As patients bear higher direct costs, they will become more selective and more price-sensitive. The numbers will be small at first, but as consumerism gains momentum, those spending decisions will have a real financial impact. At some point, health systems may need to think about branding and marketing in a new, more expansive way, adding yet another layer of cost and complexity.
For now, we think all of this calls for awareness rather than action (except for the issue of declining 340B revenue, as mentioned above). Ascendient can’t predict exactly how these consumerism trends will play out, but we do believe that hospitals and health systems should prepare for an environment where patients bear more risk, make more choices, and expect more value than ever before.
