Tenet CEO Talks About the ‘Very Positive’ Shift in Tone Around Exchange Subsidies

July’s passage of the One Big Beautiful Bill Act has caused more than a bit of consternation in healthcare circles. Between federal Medicaid spending cuts of more than $1 trillion and projected insurance exchange rates climbing 75 percent or more, the tax and funding law looks to upend several corners of the sector.

Elevance Health Inc. President and CEO Gail Boudreaux and CFO Mark Kaye told analysts their team expects “a much more meaningful Q4 surge” in patients’ use of healthcare services before the expiration of enhanced tax credits for coverage on exchanges. And leaders of behavioral healthcare provider Acadia Healthcare Co. said they’ll pull back on some expansion projects because of uncertainty around the funding picture.

Most executive teams at carriers and providers are still treading carefully and weighing possible responses to an insurance market that might look very different come Jan. 1. Some on the policy front are already acting: In recent days, the U.S. Department of Health and Human Services detailed plans to improve access to catastrophic health coverage and New Mexico Gov. Lujan Grisham has called a special session for legislators to consider responses to federal Medicaid and SNAP funding reductions.

Speaking at the Wells Fargo 20th Annual Healthcare Conference in Boston on Sept. 3, Tenet Healthcare Inc. Chairman and CEO Saum Sutaria noted that the Republican majority on Capitol Hill has in recent weeks appeared to start appreciating the urgency of the conversation around Obamacare exchange subsidies and realize the topic “is politically very important.” He also dug into some of the financial math around them. Here, lightly edited for brevity and clarity, are Sutaria’s comments to Wells Fargo analyst Steve Baxter and the audience at the conference.

“I think it is the most important topic from a policy standpoint that exists—in the near-term environment, anyway. If you think about the last time that we spoke publicly to now, the conversation—and I think many of you have noted this—has really shifted towards the importance of figuring out a pathway to extend the premium tax credits for a variety of reasons.

I think that shift is very positive. I think the range of outcomes has broadened, right? This used to be a discussion of yes versus no. Now it’s a discussion of, “Yes, with what vehicles;” “Yes, with what new terms and conditions;” “Yes, how does it play into what was done in the OBBB to reduce fraud waste and abuse within the program.” But there is an increasing understanding among the majority party that this is politically very important.

I look at this in two ways beyond the industry in terms of what’s driving that change today. First of all, this is a private-sector solution, right? We’re sitting in Massachusetts, where the exchanges were actually developed by Republican Mitt Romney—which is what the Obamacare exchanges were modeled after. But there are really two things driving this from what we can see.

The first is a recognition that the value of the premium tax credit to individuals below 400 percent of federal poverty level is equal to or, in most cases, significantly greater than the benefit of the tax relief that was provided in the OBBB. In simple terms, what that means is essentially that, without the extension of those credits, the talking point that the OBBB tax cuts becomes a benefit for the wealthy rather than for all citizens actually becomes a reality if you’re somebody who’s sitting on the exchanges. And that’s an important point in terms of the midterm elections.

The second thing that’s interesting and is growing in the narrative is how important these exchange premium tax credits seem to be for small businesses. There are on the order of 16 million small businesses in the United States with under 50 employees; the traditional definition would be under 500. But under 50, where you don’t have to statutorily provide health insurance, they employ roughly 30 million, 35 million people in the U.S. every year.

The average small business in America of that size generates no more than $100,000 in net income that’s taxable. So when you take a 22 percent average tax rate and then take a 20 percent benefit on that, you’re talking about a benefit of around $4,000 or $5,000. If those businesses ended up having to provide insurance coverage to their employees, that would run on the order of $8,000 to $9,000 per employee per year.

So if you think about it, the exchange premium tax credits are the most significant federal subsidy to the competitiveness and employment vehicle in small business today. And I think, as you combine that with the politics, you’ll see some polling work released this week from the very respected Fabrizio Ward group looking specifically at Texas and Florida that will show that the Republican backing among voters and the exchanges overlap incredibly significantly.

The No. 1 issue that you see in particular among small business owners—who are three times likelier than the average voter to have voted for the administration today—[is that they] support the extension of these credits. Why? Because of the simple math I just gave you related to how important it is to their small businesses.

So I think there’s momentum building in the dialog that is helping the environment understand the importance of these premium tax credits well beyond the healthcare industry. And I think that’s what’s probably creating more momentum to continue these subsidies.”