Every fall, millions of Americans sit down for the same grim ritual: open enrollment. The insurance logos are familiar, and the email from HR still insists the company is “committed to offering competitive benefits.”Then the sticker shock sets in. Heading into 2027, employer plan costs are projected to jump 9.5 percent, pushing the average past $19,000 per worker. On the Affordable Care Act marketplaces, insurers have proposed a median premium hike of 15 percent.

And for millions buying their own coverage, the math has stopped working altogether. Over the last year, individual market enrollment plunged by more than 4.5 million people — dropping 18 percent from 25.2 million in 2025 to 20.5 million in mid-2026. Driven by the expiration of COVID-era enhanced tax credits and recent federal policy shifts, it is the steepest drop in a decade. When premiums spike and millions lose coverage, it is easy to blame insurers, hospital monopolies or drugmakers.

They bear plenty of responsibility. But the deeper failure is structural: Our health insurance model is an artifact of an era when medicine didn't actually work very well. Tying health insurance to employment and paying for it with pre-tax dollars is an accidental byproduct of World War II wage controls. Back then, medical care was rudimentary. Outside of setting a bone or delivering a baby, you mostly went to the hospital to die. Because effective interventions were rare, pooling risk through the workplace to cover the occasional hospital stay made sense.

Eighty years later, medicine works remarkably well. We have targeted biologics, gene therapies, and revolutionary drugs like GLP-1s that fundamentally alter the trajectory of chronic disease. Millions of people can, and should, take these therapies for a lifetime to stay healthy. The catch is you cannot finance a lifetime of expensive maintenance therapies for half the population through an insurance mechanism built for rare, unpredictable accidents.

Insurance works when a large group pays a little each month to protect against a catastrophe that hits an unlucky few. When almost everyone needs ongoing care to stay healthy, the traditional risk pool breaks. As the system buckles under the weight of new treatments and provider consolidation, employers and insurers fall back on their only playbook: shifting costs onto workers. Deductibles climb so high that millions of Americans are insured on paper, yet avoid the doctor because they cannot afford the bill. Fixing this demands structural reform. We must retire our obsolete employer-sponsored model and rebuild healthcare financing around two distinct pillars.

First, we implement universal catastrophic protection. Insurance should go back to being actual insurance. Every American should have baseline catastrophic coverage — detached from employment — that protects families from the financial ruin of a cancer diagnosis, a major surgery, an intensive care unit stay, or a million-dollar gene therapy.

Second, we need a transparent cash market for routine and preventive care. For everyday medicine — primary care, diagnostics and routine maintenance medications — we should remove the insurance middleman. Routing predictable care through third-party payers adds massive administrative bloat while hiding real prices behind opaque insurer-provider negotiations. When providers and drugmakers have to compete directly for consumer dollars, prices fall fast.

Look at what has happened with GLP-1s. While insurers scrambled to restrict coverage and employers balked at the cost, a direct-to-consumer cash market emerged. Over the last two years, fierce competition for cash-paying patients has driven the price of GLP-1 treatments down from more than $1,500 a month to starting prices around $150 a month. That is what happens when incentives align. Transparent competition replaces bureaucratic rationing, and care actually becomes affordable.

To accelerate this transition, policymakers should stop funneling hundreds of billions of dollars in pre-tax subsidies exclusively into bloated, employer-chosen plans. Instead, tax advantages should go directly to individuals to pair portable catastrophic coverage with flexible accounts they can spend on routine, preventive cash-pay care. In the near term, lawmakers should also mandate that whenever a patient pays cash for a service at or below their insurer's negotiated rate, that spending must count toward their annual deductible.

We are trying to pay for 21st-century medical miracles with a mid-20th-century financing model. As 4.5 million Americans fall off the individual marketplaces and employer costs surge past $19,000 per worker, the cracks in the foundation are impossible to ignore. It is time to build universal protection for the medical catastrophes that could bankrupt us, and unleash transparent cash markets for the everyday care that keeps us healthy. Michael Botta is a healthcare economist and co-founder of Sesame.