Are Employers Ready to Engage the Health Industry Head On?

Last week, Kaiser Family Foundation (KFF) released its Annual Employer Health Benefits Survey which included a surprise:

The average annual single premium and the average annual family premium each increased by 7% over the last year.

In 2022 as post-pandemic recovery was the focus for employers, the average single premium grew by 2% and the average family premium increased by 1%. Health costs and insurance premiums were not top of mind concerns to employers struggling to keep employees paid and door open. But 7% is an eye-opener.

The rest of the findings in the 2023 KFF Report are unremarkable: they reflect employer willingness to maintain benefits at/near pre-pandemic levels and slight inclination toward expanded benefits beyond mental health:

• “The average annual premium for employer-sponsored health insurance in 2023 is $8,435 for single coverage and $23,968 for family coverage. Comparatively, there was an increase of 5.2% in workers’ wages and inflation of 5.8%². The average single and family premiums increased faster this year than last year (2% vs. 7% and 1% vs. 7% respectively).
• Over the last five years, the average premium for family coverage has increased by 22% compared to an 27% increase in workers’ wages and 21% inflation.
• For single coverage, the average premium for covered workers is higher at small firms than at large firms ($8,722 vs. $8,321). The average premiums for family coverage are comparable for covered workers in small and large firms ($23,621 vs. $24,104) …
• Most covered workers contribute to the cost of the premium for their coverage. On average, covered workers contribute 17% of the premium for single coverage and 29% of the premium for family coverage, similar to the percentages contributed in 2022…
• 90% of workers with single coverage have a general annual deductible that must be met before most services are paid for by the plan, similar to the percentage last year (88%).
• The average deductible amount in 2023 for workers with single coverage and a general annual deductible is $1,735, similar to last year…
• In 2023, among workers with single coverage, 47% of workers at small firms and 25% of workers at large firms have a general annual deductible of $2,000 or more. Over the last five years, the percentage of covered workers with a general annual deductible of $2,000 or more for single coverage has grown from 26% to 31%.
• While nearly all large firms (firms with 200 or more workers) offer health benefits to at least some workers, small firms (3-199 workers) are significantly less likely to do so. In 2023, 53% of all firms offered some health benefits, similar to the percentage last year (51%).”

My take:

These findings show that employers are not prone to drastic changes in health benefits for their employees despite recognition it is expensive and unaffordable to small companies and for many of their own employees.  But many large self-insured employers (except those in government, education and healthcare) are poised to make significant changes next year. They recognize themselves as the primary source of profits enjoyed by insurers, hospitals, physicians, drug companies and others.  

They’re developing multi-year at risk direct contracts, value-based purchasing arrangements, primary care gatekeeping, narrow networks, restricted formularies, alternative care models and more to that leverage their clout. They’re going on offense.

The KFF Benefits Survey is a snapshot of where employer benefits are today, but it’s likely not the same next year. It appears employers are ready to engage the health industry head on.

PS Last week, the feud between Senate Health, Education, Labor and Pensions (HELP) Committee Chair Bernie Sanders and Not-for-Profit Health Systems heated up. On Oct. 10, he released a Majority Staff Report that said NFP hospitals do not deserve their tax exemptions as they spend “paltry amounts” on charity care. “Hospitals have gladly accepted the tax benefits that come with nonprofit status but have failed to provide the required community benefits. Non-profit hospitals spent only an estimated $16 billion on charity care in 2020, or about 57% of the value of their tax breaks in the same year.”

The same day, the American Hospital Association (AHA) released its analysis of hospital Schedule H filings concluding that tax-exempt hospitals provided $130 billion in community benefits in 2020 and called the HELP report “just plain wrong”.

In response to the AHA report, Sanders noted that AHA had not included CEO Compensation for NFPs in its analysis though featured prominently in his Majority Staff Report: “In 2021, the most recent year for which data is available for all of the 16 hospital chains, those companies’ CEOs averaged more than $8 million in compensation and collectively made over $140 million…

The disparities between the paltry amounts these hospitals are spending on charity care and their massive revenues and excessive executive compensation demonstrates that they are failing to live up to their end of the non-profit bargain.”

This tit for tat between the Committee Chairman and AHA is notable for 2 reasons: it draws attention to the Schedule H information goldmine about how not-for-profit hospitals operate since they’re now required to attach their S-10 Medicare cost report worksheets. Quantifying charity care in Exhibit 3B (for which there’s no expectation of payment) and the myriad of claimed community benefits including bad debt in Schedule 3C will likely intensify scrutiny of NFPs even more.  Second, it draws attention to Executive Pay in hospitals: in this regard the Majority Staff Report commentary on CEO pay is misleading: by combining Column B (wages, bonuses) with Columns C (Deferred compensation) and D (non-taxable benefits), the total is significantly higher than one-year’s actual take-home pay for the CEOs. But it makes headlines!

If not-for-profit systems wish to lead transformational change in U.S. healthcare, not-for-profit system boards and their trade associations must be prepared to address the storm clouds gathering above. The skirmish between the Senate HELP Chair and AHA mirrors an increasingly skeptical public who, with Congress, believe the system is being gamed.