Medicaid Cuts and the Employer Group Market: What C-Suite Leaders Need to Know

Since North Carolina expanded Medicaid eligibility in December 2023, nearly 630,000 residents have gained health insurance, providing a critical safety net for low-income workers and rural populations. However, proposed federal budget cuts could reverse these gains, leaving hundreds of thousands uninsured. The consequences of this shift extend far beyond those losing coverage—employers will feel the financial impact as hospitals shift the cost burden to private insurers, leading to higher premiums and healthcare expenses for businesses.

Medicaid expansion has reduced uncompensated care costs for hospitals by ensuring more individuals have access to routine and preventive healthcare. If Medicaid expansion is rolled back due to federal funding cuts, many of these individuals will not transition to employer-sponsored plans or ACA marketplace coverage. Research consistently shows that when Medicaid coverage is lost, most people become uninsured. Chronic conditions, however, do not go away simply because insurance does. Without access to affordable care, uninsured individuals will delay treatment, resulting in more advanced illnesses, increased emergency room visits, and higher hospitalization rates.

When hospitals and healthcare providers treat uninsured patients, they absorb the cost of uncompensated care. But this financial burden doesn’t just vanish—it gets passed on to private insurers through higher reimbursement demands. In turn, employers will see the cost of their group health plans rise as insurers adjust premiums to compensate for the growing share of unpaid hospital bills. The more uninsured patients hospitals must treat, the more private employers will pay for healthcare coverage.

For HR and business leaders, these changes mean rising healthcare costs will become an even greater financial strain. Industries that rely on lower-wage or hourly workers—such as hospitality, retail, and healthcare—could be particularly vulnerable as more employees fall into the coverage gap. Even businesses with predominantly full-time, benefits-eligible employees will feel the impact as insurers increase rates across the board to cover losses incurred from hospitals’ uncompensated care.

The Medicaid expansion rollback will not only increase employer healthcare costs but also contribute to a sicker workforce. Employees without access to regular medical care are more likely to experience absenteeism, decreased productivity, and higher instances of preventable medical emergencies. The financial ripple effect will be significant, stretching beyond insurance premiums to impact overall business operations and economic stability.

What Employers Should Do Now

Business and HR leaders must be proactive in understanding how Medicaid cuts will affect their workforce and healthcare costs. Conducting an analysis of how many employees or prospective hires currently rely on Medicaid can help forecast potential shifts in employer-sponsored plan enrollment. Exploring cost-containment strategies—such as direct primary care partnerships, self-funded insurance models, or value-based care initiatives—can help mitigate rising premiums.

Additionally, educating employees about their healthcare options is crucial. Many individuals who lose Medicaid eligibility may not realize they qualify for ACA marketplace subsidies or other employer-sponsored options. Providing clear guidance on available plans and encouraging early enrollment can help reduce the number of uninsured workers.

Finally, business leaders should engage in advocacy efforts to promote policies that stabilize employer healthcare costs. Working with industry associations like NABIP or local business coalitions can help ensure that legislative decisions support both businesses and employees.

The reality is that Medicaid cuts do not eliminate healthcare costs; they shift them to businesses. Employers will ultimately bear the burden through higher insurance premiums, reduced workforce productivity, and an increased strain on HR benefits management. Understanding and preparing for these shifts now will be critical in maintaining a financially sustainable benefits strategy in the years ahead.