Even more innovation would be welcome
Readers of this blog will know that I am on a bit of a transformation in terms of how I view coverage. I have always been a comprehensive coverage guy. I have backed reasonable subsidies as well as coverage that ensures people to access primary care and prevention upfront.
But the problem is that coverage and benefit design in this country appear to be more broken than not. I recently have made the argument that coverage and strong benefits on paper do not mean people can truly access healthcare benefits with massive repercussions for people’s health and the nation’s quality statistics. I think this will continue to be true and almost certainly worsen if we do not reform price. And there is good reason to believe that even if we did reform price, looking at newer models to incentivize primary care and prevention should be tried as well. Mom’s and Dad’s old-line insurance just may not drive the results we would like to see in the future, especially among younger generations.
Two recent events in healthcare focus a light on these issues. They really tie together in a big way. The Affordable Care Act (ACA) and Exchange rule for 2027 has now been finalized. It was proposed in early February. And late last year and into this year, entrepreneur Mark Cuban has been weighing into the debate on how traditional insurance may be broken. He made a somewhat radical proposal with regard to how Exchange subsidies should be used. With the Exchange rule, it would mark another meaningful step in the ongoing evolution of the individual market and healthcare coverage in general. Together, they highlight a broader shift in how policymakers and innovators are beginning to think about affordability, access, and the role of insurance.
Let’s examine both issues.
The 2027 ACA Exchange rule
The 2027 Exchange rule is extensive, and I have previously written in detail about its implications in a February 12 blog post available here: The 2027 ACA Exchange Rule – The Good and Bad. Rather than revisit every provision, it is more useful here to step back and focus on the overarching direction of the reforms.
At its core, the rule introduces greater flexibility into Exchange plan design. It expands the role of catastrophic coverage, including allowing broader eligibility and the potential for multi-year plan structures that can stabilize premiums over longer periods. It removes prior constraints on standardized benefit designs, enabling insurers to offer a wider array of non-standardized products tailored to different consumer needs. It also allows for more sophisticated value-based insurance design, including the ability to cover certain preventive and primary care services before a deductible is met within the high-deductible catastrophic plan framework.
In addition, the rule opens the door to more innovative approaches to networks and pricing, including models that move away from traditional contracted networks toward reference-based or non-network structures, provided they can demonstrate sufficient access to providers. The combined effect of these changes is a marketplace that is less prescriptive and more permissive — one that places a greater emphasis on affordability, consumer choice, and alternative benefit structures.
Democrats are apoplectic about the changes. It fundamentally erodes the big benefit and coverage agenda they have promoted. The answer for them to the affordability crisis is to double down on subsidies and even richer benefits. But as I have noted, the system as we know it is not working:
- Utilization and costs are growing at 6% to 10% a year (higher for small group employers and the nation’s actuary says we will see 7% average annual growth over the next decade.
- In the commercial, Exchange, and employer worlds, more and more consumers are being moved to leaner benefit plans because costs are so high.
- Our uninsured crisis is stubbornly at 8% to 10%.
- And the underinsured crisis – having insurance but being unable to access it meaningfully and being cut off from primary care – is growing and now impacts tens of millions of Americans.
All this reflects growing recognition that the current ACA and Exchange model, while successful in expanding coverage, has also produced unintended consequences. The chief problem is underinsurance. Many individuals, even with subsidies, face high deductibles and out-of-pocket costs that limit their ability to access routine care. Again, as I often note, coverage exists on paper, but major financial barriers to care remain in practice.
Cuban on the march
At roughly the same time, Mark Cuban is advancing a number of ideas aimed at reshaping how coverage and care are financed. Several months ago, he proposed a particularly notable concept: redirecting a portion of Exchange subsidies to fund Direct Primary Care (DPC). His idea is relatively straightforward: take a portion of the premium subsidy — on the order of one hundred dollars per month per individual — and redirect it into a restricted account as part of a Health Savings Account — that can only be used to pay for a DPC.
Direct Primary Care offers an alternative model. Typically structured as a monthly subscription, DPC provides patients with direct access to a primary care physician, often including unlimited visits, same-day or next-day appointments, and a high degree of care coordination. Administrative overhead is minimal, and the model operates largely outside of traditional insurance billing. While it does not replace insurance, it addresses a critical gap by making routine care both accessible and predictable in cost.
The remainder of the Exchange subsidy would continue to support the insurance premium and/or go into an HSA for other costs. The concept preserves catastrophic protection while adding a dedicated funding stream for primary care.
The rationale behind this approach is rooted in a critique of how subsidies currently function. Today, subsidies primarily reduce the cost of insurance premiums, but they do little to ensure access to care once a person is enrolled. High-deductible plans, particularly at the Bronze and catastrophic levels, often require individuals to pay significant out-of-pocket costs before coverage begins. As a result, many enrollees defer or avoid primary care, even though these services are among the cheapest and most important for maintaining health and preventing more serious conditions.
Cuban’s proposal effectively combines these elements into a two-layer system. Insurance remains in place to cover high-cost, unpredictable events, while primary care is funded separately and delivered in a more direct and accessible manner. The expectation is that improved access to primary care would lead to earlier intervention, better chronic disease management, and ultimately lower downstream costs. Over time, this could exert downward pressure on premiums and improve overall system efficiency. Indeed, studies of DPC’s impact show that over time it saves between 10% and 20% on total healthcare costs for those enrolled. Fewer emergency department visits and hospitalizations are documented. There also appears to be less overuse of specialists and better chronic disease management at the PCP level.
The proposal is notable not because it offers a fully formed solution, but because it identifies a fundamental misalignment in the current system. It builds on an earlier reform nationally that allows dollars from an HSA to be used for DPC. Some Republicans championed converting subsidies into HSAs for people to buy in the market. The beauty of Cuban’s plan is the primary care focus.
There are, of course, practical challenges to implementing such a model. Regulatory constraints around subsidy use and HSAs would need to be addressed. The availability of DPC providers varies across markets, and scaling the model nationally would require significant infrastructure and provider participation. There are also questions about how to integrate DPC with existing insurance products in a way that is seamless for consumers and sustainable for insurers.
Taking the two issues together
Cuban’s concept and the 2027 ACA rule begin to come together. The rule has pre-deductible coverage of primary care, expanded catastrophic options, and greater benefit design flexibility. By loosening the constraints on plan design and encouraging more targeted approaches to coverage, the rule implicitly acknowledges that the traditional model of comprehensive, standardized insurance may not be the only — or even the most effective—way to achieve affordability and access.
The paradigm shift
Back to my transformation. This raises a broader question about the direction of healthcare policy. For many years, the emphasis has been on expanding comprehensive coverage, supported by subsidies that make premiums more affordable. This approach has clear merits and has significantly reduced the number of uninsured individuals. However, it has also contributed to rising premiums and increasing complexity, and it has not fully resolved the issue of access to care.
As I have said, I have recognized that coverage and benefits at any cost do not seem to work. Even with price reform, the cost of care would not come down fast enough to make the current model work. And our tech-enabled world and changes in consumer sentiment suggest that new models are needed.
In practice, a growing number of individuals find themselves in a difficult position. They are insured, but their coverage comes with high deductibles and cost-sharing requirements that discourage utilization. They may delay care, skip medications, or rely on emergency services when conditions worsen. In this sense, the distinction between being uninsured and underinsured becomes less meaningful. The underlying issue is not simply whether coverage exists, but whether it is usable.
The emerging alternative, reflected in both the rule and Cuban’s proposal, is to rethink the allocation of resources within the system. Rather than directing the majority of funding toward comprehensive insurance coverage, a portion is redirected toward ensuring access to primary care. Insurance, in turn, is focused more narrowly on catastrophic protection. This division of roles aligns more closely with how insurance functions in other sectors, where it is designed to protect against large, unpredictable losses rather than to finance routine expenses.
It is important to note that this does not represent a rejection of comprehensive coverage. There will always be a place for more robust plans, particularly for individuals with complex medical needs. However, it does suggest that a more diverse set of options may be necessary to meet the needs of a heterogeneous population. Some individuals may prefer lower premiums and are willing to accept higher cost-sharing in exchange for predictable access to primary care. Others may prioritize comprehensive coverage despite higher costs. A more flexible marketplace can accommodate both preferences.
Democrats as well as some plan CFOs and actuaries may argue the two cannot work together as all sorts of gnarly issues like adverse risk selection and premium death spirals enter the picture. Fair enough — but that is increasingly on us now. Utilization has increased, costs and premiums are rising considerably, many people drop coverage or move to leaner packages to afford it, and the sick remain in richer coverage given their conditions. And Democrats are wrong that this is the result of expiration of enhanced subsidies. This was a clear trend in employer and exchange coverage before the sunset. So, plans and the healthcare system will have to grapple with all this one way or another. The advantage of the new model is that it does focus on primary care.
The issues we have discussed point toward a future in which coverage is more modular, with distinct components for primary care, catastrophic protection, and consumer-directed spending. Whether this approach ultimately succeeds will depend on a range of factors, including regulatory follow-through, market adoption, and consumer behavior. It will also require careful attention to equity and access, ensuring that new models do not inadvertently create gaps in coverage or exacerbate existing disparities. These are not trivial concerns, and they underscore the need for thoughtful implementation.
At the same time, it is increasingly difficult to argue that the current trajectory is sufficient. Rising costs, persistent affordability challenges, and the prevalence of underinsurance all suggest that incremental adjustments may not be enough. The combination of regulatory flexibility and innovative financing models offers a potential path forward — one that seeks to balance coverage, access, and cost in a more sustainable way.
In that sense, the convergence of the 2027 Exchange rule and Cuban’s DPC proposal is more than coincidental. It reflects a broader shift in thinking about how healthcare should be structured and financed. While the details will continue to evolve, the underlying direction is becoming clearer: a system that places greater emphasis on accessible primary care, more targeted use of insurance, and a more deliberate allocation of resources.
#coverage #healthcare #healthcarereform
— Marc S. Ryan
