Category Archives: Employer-Based Health Insurance

91% Of Healthcare Is Government Subsidized. Is Your Coverage Safe?

Posted on by • Posted in 2026 Mid Term Election Issues, 2028 Election Issues, ACA, Artificial Intelligence, Chronic Care Management, Chronic Conditions, Chronic Diseases, Employer-Based Health Insurance, Govt Subsidy, Health Insurance Coverage Adequacy, Health Policy, Healthcare Reform, Medicaid, Medicare, Medicare Advantage, Subisdy, Tricare, Veterans Administration • Leave a comment

https://www.forbes.com/sites/robertpearl/2025/03/24/91-of-healthcare-is-government-subsidized-is-your-coverage-safe/

Most Americans believe their healthcare is private, and the majority prefers it that way. Gallup polling shows more Americans favor a system based on private insurance rather than government-run healthcare.

But here’s a surprising reality: 91% of Americans receive government-subsidized healthcare.

Unless you’re among the uninsured or the few who receive no subsidies, government dollars are helping pay your medical bills — whether your insurance comes from an employer, a privately managed care organization or the online marketplace.

Now, as lawmakers face mounting budget pressures, those subsidies (and your coverage) could be at risk. If the government scales back its healthcare spending, your medical costs could skyrocket.

Here’s a closer look at the five ways the U.S. government funds healthcare. If you have health insurance, you’re almost certainly benefiting from one of them:

  1. Medicare, the government-run healthcare program for those 65 and older, covers 67 million Americans at a cost of more than $1 trillion annually. Approximately half of enrollees are covered through the traditional fee-for-service plan and the other half in privately managed Medicare Advantage plans.
  2. Medicaid and CHIP provide health coverage for around 80 million low-income and disabled Americans, including tens of millions of children. Even though 41 states have turned over their Medicaid programs over to privately managed care organizations, the cost remains public. Total Medicaid spending is $900 billion annually — the federal government pays 70% with states footing the rest.
  3. The online healthcare marketplace is for Americans whose employer doesn’t provide medical coverage or who are self-employed. This Affordable Care Act program offers federal subsidies to 92% of its 23 million enrollees, which help lower the cost of premiums and, for many, subsidize their out-of-pocket expenses. The Congressional Budget Office projects that a permanent extension of these subsidies, which are scheduled to end this year, would cost $383 billion over the next 10 years.
  4. Veterans and military families also benefit from government healthcare through TRICARE and VA Care, programs covering roughly 16 million individuals at a combined cost of $148 billion for the federal government annually.
  5. Employer-sponsored health insurance comes with a significant, yet often overlooked, government subsidy. For nearly 165 million American workers and their families, U.S. companies pay the majority of their health insurance premiums. However, those dollars are excluded from employees’ taxable income. This tax break, which originated during World War II and was formally codified in the 1950s, subsidizes workers at an annual government cost of approximately $300 billion. For a typical family of four, this translates into approximately $8,000 per year of added take-home pay.

With 91% of Americans receiving some form of government healthcare assistance, the idea that U.S. healthcare is predominantly “private” is an illusion.

Now, as the new administration searches for ways to rein in the growing federal deficit, all five of these programs (collectively funding healthcare for 9 in 10 Americans) will be in the crosshairs.

Twelve percent of the federal budget already goes toward debt interest payments, and this share is expected to rise sharply. Many of the bonds used to finance existing debt were issued back when interest rates were much lower. As those bonds mature and are refinanced at today’s higher rates, federal interest payments are projected to double within the next decade, according to the Congressional Budget Office.

With deficits mounting and borrowing costs soaring, most economists agree this trajectory is unsustainable. Lawmakers will eventually need to rein in spending, and healthcare subsidies will almost certainly be among the first targets. Policy experts predict Medicaid, which the House has already proposed cutting by $880 billion over the next decade, and ACA subsidies for out-of-pocket costs will likely be the first on the chopping block. But given the CBO’s projections, these cuts won’t be the last.

A Better Way: Three Solutions To Lower Healthcare Costs Without Cuts

Cutting some or all of these healthcare subsidies may seem like the simplest way to reduce the deficit. In reality, it merely shifts costs elsewhere, making medical care more expensive for everyone and increasing future government spending. Here’s why:

  • Eliminating subsidies doesn’t eliminate the need for care. Under the Emergency Medical Treatment and Labor Act (EMTALA), hospitals must treat emergency patients regardless of their ability to pay. When millions lose insurance, more turn to ERs for medical care they can’t afford. The cost of that uncompensated care doesn’t vanish. It gets passed on to state governments, hospitals and privately insured patients through higher taxes, inflated hospital bills and rising insurance premiums.
  • Delaying care drives up long-term costs. People who can’t afford doctor visits skip preventive care, screenings and early treatments. Manageable conditions like high blood pressure and diabetes then spiral into costly, life-threatening complications including heart attacks, strokes and kidney failures, which ultimately increase government spending.

The solution isn’t cutting coverage. It’s fixing the root causes of high healthcare costs. Here are three ways to achieve this:

1. Address The Obesity Epidemic

Obesity is a leading driver of diabetes, heart disease, stroke and breast cancer, which kill millions of Americans and cost the U.S. healthcare system hundreds of billions annually. Congress can take two immediate steps to reverse this crisis:

2. Enhance Chronic Disease Management With Technology

In every other industry, broad adoption of generative AI technology is already increasing quality while reducing costs. Healthcare could do the same by applying generative AI to more effectively manage chronic disease. According to the Centers for Disease Control and Prevention, improved control of these lifelong conditions could cut the frequency of heart attacks, strokes, kidney failures and cancers by up to 50%.

With swift and reasonable Food and Drug Administration approval, generative AI and wearable monitors would revolutionize how these conditions are managed, providing real-time updates on patient health and identifying when medications need adjustment. Instead of waiting months for their next in-office visit, patients with chronic diseases would receive continuous monitoring, preventing costly and life-threatening complications. Rather than restricting AI’s role in healthcare, Congress can streamline the FDA’s approval process and allocate National Institutes of Health funding to accelerate these advancements.

3. Reform Healthcare Payment Models

Under today’s fee-for-service system, doctors and hospitals are paid based on the how often they see patients for the same problem and the number of procedures performed. This approach rewards the volume of care, not the best and most effective treatments. A better alternative is a pay-for-value model like capitation, in which providers do best financially when they help keep patients healthy. To encourage participation, Congress should fund pilot programs and create financial incentives for insurers, doctors and hospitals willing to transition to this system. By aligning financial incentives with long-term health, this model would encourage doctors to prioritize prevention and effective chronic disease control, ultimately lowering medical costs by improving overall health.

The Time For Change Is Now

If Congress slashes healthcare subsidies this year, restoring them will be nearly impossible. Once the cuts take effect, the financial and political pressures driving them will only intensify, making reversal unlikely.

The voices shaping this debate can’t come solely from industry lobbyists. Elected officials need to hear from the 91% of Americans who rely on government healthcare assistance for some or all of their medical coverage. Now is the time to speak up.

Are Employers Ready to Move from the Back Bench in U.S. Healthcare?

Posted on by • Posted in Cost Management, Cost Transparency, Employee Benefits, Employer-Based Health Insurance, Employer-Sponsored Commercial Health Insurance, Employers, Health Insurance Self Funded, Healthcare Reform, High Drug Prices, High Premiums, High Prices, High Risk Employees, Medicaid, Medicare, Medicare Advantage, Out of Pocket Expenses • Leave a comment
Are Employers Ready to Move from the Back Bench in U.S. Healthcare?

This year, 316 million Americans (92.3% of the population) have health insurance: 61 million are covered by Medicare, 79 million by Medicaid/CHIP and 164 million through employment-based coverage. By 2032, the Congressional Budget Office predicts Medicare coverage will increase 18%, Medicaid and CHIP by 0% and employer-based coverage will increase 3.0% to 169 million. For some in the industry, that justifies seating Medicare on the front row for attention. And, for many, it justifies leaving employers on the back bench since the working age population use hospitals, physicians and prescription meds less than seniors.  

Last week, the Business Group on Health released its 2025 forecast for employer health costs based on responses from 125 primarily large employers surveyed in June: Highlights:

  • “Since 2022, the projected increase in health care trend, before plan design changes, rose from 6% in 2022, 7.2% in 2024 to almost 8% for 2025. Even after plan design changes, actual health care costs continued to grow at a rate exceeding pre-pandemic increases. These increases point toward a more than 50% increase in health care cost since 2017. Moreover, this health care inflation is expected to persist and, in light of the already high burden of medical costs on the plan and employees, employers are preparing to absorb much of the increase as they have done in recent years.”.
  • Per BGH, the estimated total cost of care per employee in 2024 is $18,639, up $1,438 from 2023. The estimated out-of-pocket cost for employees in 2024 is $1,825 (9.8%), compared to $1,831 (10.6%) in 2023.

The prior week, global benefits firm Aon released its 2025 assessment based on data from 950 employers:

  • “The average cost of employer-sponsored health care coverage in the U.S. is expected to increase 9.0% surpassing $16,000 per employee in 2025–higher than the 6.4% increase to health care budgets that employers experienced from 2023 to 2024 after cost savings strategies. “
  • On average, the total health-plan cost for employers increased 5.8% to $14,823 per employee from 2023 to 2024: employer costs increased 6.4% to 80.7% of total while employee premiums increased 3.4% increase–both higher than averages from the prior five years, when employer budgets grew an average of 4.4% per year and employees averaged 1.2% per year.
  • Employee contributions in 2024 were $4,858 for health care coverage, of which $2,867 is paid in the form of premiums from pay checks and $1,991 is paid through plan design features such as deductibles, co-pays and co-insurance.
  • The rate of health care cost increases varies by industry: technology and communications industry have the highest average employer cost increase at 7.4%, while the public sector has the highest average employee cost increase at 6.7%. The health care industry has the lowest average change in employee contributions, with no material change from 2023: +5.8%

And in July, PWC’s Health Research Institute released its forecast based on interviews with 20 health plan actuaries. Highlights:

  • “PwC’s Health Research Institute (HRI) is projecting an 8% year-on-year medical cost trend in 2025 for the Group market and 7.5% for the Individual market. This near-record trend is driven by inflationary pressure, prescription drug spending and behavioral health utilization. The same inflationary pressure the healthcare industry has felt since 2022 is expected to persist into 2025, as providers look for margin growth and work to recoup rising operating expenses through health plan contracts. The costs of GLP-1 drugs are on a rising trajectory that impacts overall medical costs. Innovation in prescription drugs for chronic conditions and increasing use of behavioral health services are reaching a tipping point that will likely drive further cost inflation.”

Despite different methodologies, all three analyses conclude that employer health costs next year will increase 8-9%– well-above the Congressional Budget Office’ 2025 projected inflation rate (2.2%), GDP growth (2.4% and wage growth (2.0%).  And it’s the largest one-year increase since 2017 coming at a delicate time for employers worried already about interest rates, workforce availability and the political landscape.

For employers, the playbook has been relatively straightforward: control health costs through benefits designs that drive smarter purchases and eliminate unnecessary services. Narrow networks, price transparency, on-site/near-site primary care, restrictive formularies, value-based design, risk-sharing contracts with insurers and more have become staples for employers. 

But this playbook is not working for employers: the intrinsic economics of supply-driven demand and its regulated protections mitigate otherwise effective ways to lower their costs while improving care for their employees and families.

My take:

Last week, I reviewed the healthcare advocacy platforms for the leading trade groups that represent employers in DC and statehouses to see what they’re saying about their take on the healthcare industry and how they’re leaning on employee health benefits. My review included the U.S. Chamber of Commerce, National Federal of Independent Businesses, Business Roundtable, National Alliance of Purchaser Coalitions, Purchaser Business Group on Health, American Benefits Council, Self-Insurance Institute of America and the National Association of Manufacturers.

What I found was amazing unanimity around 6 themes:

  • Providing health benefits to employees is important to employers. Protecting their tax exemptions, opposing government mandates, and advocating against disruptive regulations that constrain employer-employee relationships are key.
  • Healthcare affordability is an issue to employers and to their employees, All see increasing insurance premiums, benefits design changes, surprise bills, opaque pricing, and employee out-of-pocket cost obligations as problems.
  • All believe their members unwillingly subsidize the system paying 1.6-2.5 times more than what Medicare pays for the same services. They think the majority of profits made by drug companies, hospitals, physicians, device makers and insurers are the direct result of their overpayments and price gauging.
  • All think the system is wasteful, inefficient and self-serving. Profits in healthcare are protected by regulatory protections that disable competition and consumer choices.
  • All think fee-for-service incentives should be replaced by value-based purchasing.
  • And all are worried about the obesity epidemic (123 million Americans) and its costs-especially the high-priced drugs used in its treatment. It’s the near and present danger on every employer’s list of concerns.

This consensus among employers and their advocates is a force to be reckoned. It is not the same voice as health insurers: their complicity in the system’s issues of affordability and accountability is recognized by employers. Nor is it a voice of revolution: transformational changes employers seek are fixes to a private system involving incentives, price transparency, competition, consumerism and more.

Employers have been seated on healthcare’s back bench since the birth of the Medicare and Medicaid programs in 1965. Congress argues about Medicare and Medicaid funding and its use. Hospitals complain about Medicare underpayments while marking up what’s charged employers to make up the difference. Drug companies use a complicated scheme of patents, approvals and distribution schemes to price their products at will presuming employers will go along. Employers watched but from the back row.

As a new administration is seated in the White House next year regardless of the winner, what’s certain is healthcare will get more attention, and alongside the role played by employers. Inequities based on income, age and location in the current employer-sponsored system will be exposed. The epidemic of obesity and un-attended demand for mental health will be addressed early on. Concepts of competition, consumer choice, value and price transparency will be re-defined and refreshed. And employers will be on the front row to make sure they are.

For employers, it’s crunch time: managing through the pandemic presented unusual challenges but the biggest is ahead. Of the 18 benefits accounted as part of total compensation, employee health insurance coverage is one of the 3 most expensive (along with paid leave and Social Security) and is the fastest growing cost for employers.  Little wonder, employers are moving from the back bench to the front row.

Keeping employers in the health benefits business   

Posted on by • Posted in Employee Benefits, Employee Health Insurance Stipend, Employer-Based Health Insurance, Employer-Sponsored Commercial Health Insurance, Employers, Health Insurance Industry, Health System, Hospital, Hospital Industry, Individual Coverage Health Reimbursement Arrangement (ICHRA), Mutually Beneficial Partnerships • Leave a comment

https://mailchi.mp/09f9563acfcf/gist-weekly-february-2-2024?e=d1e747d2d8

“What if 10 percent, or even five percent, of the employers in our market decide to stop providing health benefits?” a Chief Strategy Officer (CSO) at a midsized health system in the Southeast recently asked.

“Their health insurance costs have been growing like crazy for 20 years. Some of these companies could easily decide to just give their employees some amount of tax-advantaged dollars and let them do their own thing.” An emerging option for employers is the relatively new individual coverage Health Reimbursement Arrangement (ICHRA), which allows employers to give tax-deductible contributions to employees to use for healthcare, including purchasing health insurance on an exchange. 

According to the CSO, “What happens is this: We’ll go from getting 250 percent of Medicare for beneficiaries in a commercial group plan to getting 125 percent for beneficiaries in a market plan. I don’t know any provider with the margins to withstand that kind of shift without significant pain—certainly not us.” 
 


The conversation shifted to a discussion about treating employers like true customers that pay generously for healthcare services, which involves increasing engagement with them and better understanding their specific problems with their employees’ healthcare. What complaints are they hearing about their employee’s difficulties with things like making timely appointments or finding after-hours care?

Provider organizations can help keep employers in the health insurance market by regularly checking in with them about their healthcare challenges, meaningfully focusing on mitigating their pain points, and exploring new kinds of mutually beneficial partnerships. 

They should also carefully monitor the employer market in their region and create financial assessments of the potential impact of employers shifting employees to health insurance stipend arrangements. 

Are Employers Ready to Engage the Health Industry Head On?

Posted on by • Posted in Affordability, Community Benefit, Direct Contracting, Employer-Based Health Insurance, Employer-Sponsored Commercial Health Insurance, Health System, Hospital, Hospital Industry, Out of Pocket Expenses, Tax Exempt Status, Uncompensated Care, Underinsured, Uninsured • Leave a comment
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.

If Economists Chose the Health Care System

Posted on by • Posted in ACA, Adverse Selection, Economist, Employer-Based Health Insurance, Health Insurance Industry, Health Policy, High Drug Prices, Medicaid, Medicaid Block Grants, Medicaid Work Requirements, Medical Loss Ratio (MLR), Medicare, Medicare Age Eligibility, Medicare Based on Income, Pharmaceutical Industry, Preexisting Conditions, Sin Tax, Social Determinants of Health, Voucher Based Health Insurance System • Leave a comment
If Economists Chose the Health Care System
If Economists Chose the Health Care System - YouTube

Health economists study the economic determinants of health. They also analyze how health care resources are utilized and allocated, and how health care policies and quality of care can be improved. In this episode, we discuss what exactly a healthcare system would look like if these professionals were calling all the shots.

Cartoon – Covid Brain Fog Logic

Posted on by • Posted in Asymptomatic Transmission, Brain Fog, Cartoon, Coronavirus, Coronavirus Delta Variant, Coronavirus Mutation, Employer-Based Health Insurance, Evidence Based Decision Making, Evidence-Based Care, Evidence-based Leadership, Evidence-Based Plan, Evidence-Based Policy, Health Insurance Coverage Adequacy, Health Policy, Infection Control, Infection Control Plan, Infectious Virus, Logic, Pandemic, Partisanship, Personal Protective Equipment (PPE), Public Health, Public Opinion, Public Perception, Public Trust, Scientists, Sign of the Times, Social Distancing, Unvaccinated, Vaccination, Vaccine, Vaccine Efficacy, Vaccine Hesitancy Rate, Vaccine Safety, Vaccine Skepticism, Vaccine Supply • Leave a comment
Covid-19 Ward' | Kaiser Health News

Large self-insured employers lack power in hospital price negotiations

Posted on by • Posted in Direct Contracting, Employer-Based Health Insurance, Health Insurance Industry, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power • Leave a comment
https://www.healthcaredive.com/news/large-self-insured-employers-lack-power-in-hospital-price-negotiations/603390/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202021-07-16%20Healthcare%20Dive%20%5Bissue:35503%5D&utm_term=Healthcare%20Dive

Dive Brief:

  • As some employers look to contract directly with hospitals in an effort to lower healthcare costs, researchers found that large self-insured employers likely do not have enough market power to extract lower prices, according to a study published in The American Journal of Managed Care.
  • The study examined the relationship between employer market power and hospital prices every year between 2010 and 2016 in the nation’s 10 most concentrated labor markets.
  • The study found that hospital market power far outweighs employer market power, suggesting employers will not be successful in lowering prices alone, but may want to consider forging purchase alliances with local government employee groups, the research paper said.

Dive Insight:

In recent years, some larger employers have cut out the middlemen to strike deals directly with hospitals.

For example, General Motors entered into an arrangement with Detroit’s Henry Ford Health System in 2018, joining other major employers such as Walmart, Walt Disney and Boeing.

Perhaps most notably, J.P. Morgan, Amazon and Berkshire Hathaway joined forces to bend the cost of care in the U.S. Despite all the fanfare, the venture, named Haven, later fell apart, illustrating how difficult it is to change the nation’s healthcare system.

By circumventing traditional health insurers, companies are hoping they themselves can negotiate better deals.

But this latest study throws cold water on that strategy, at least in part. “Our study suggests that almost all employers, operating alone, simply do not have the market power to impose a threat of effective negotiation,” the paper found.

One of the paper’s main aims is to measure market power of hospitals and employers, and the results are striking. The average hospital market power far exceeds that of the employer in the 10 metropolitan areas researchers examined.

The average hospital market power was more than 80 times greater than that of the employer, putting into context just how askew the power dynamics are.

These employers are not wrong for wanting to strike out on their own, the researchers point out.

Many self-insured employers bear the insurance risk while entering into administrative services only arrangements with insurers which provide just that, administrative type services.

But insurers in these arrangements may not have any incentive to lower prices. The paper pointed to another working research paper that found ASO plans pay more for the same service, at the same hospital compared to those in fully insured arrangements.

“The empirical evidence suggests that insurers, because they lack the incentive, may not be negotiating lower prices for their ASO enrollees,” according to the study.

Even though employers may not have enough market power on their own, researchers offered up a solution: team up with state or local government employee groups to increase market power to obtain lower hospital prices.

Expanding health coverage is good. But we also need to fix stingy plans.

Posted on by • Posted in ACA, Employer-Based Health Insurance, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Policy, Health Savings Accounts, High Deductible Health Plans, Medicare for All, Out of Pocket Expenses, Preexisting Conditions, Primary Care, Public Option, Short Term Health Insurance, Skinny Health Plans, Underinsured, Uninsured • Leave a comment

https://www.washingtonpost.com/outlook/expanding-health-coverage-is-good-but-we-also-need-to-fix-stingy-plans/2021/03/05/5f92b206-7c7d-11eb-a976-c028a4215c78_story.html?

Underinsurance remains a significant barrier to health care, new survey finds

President Biden promised on the campaign trail to expand the Affordable Care Act to cover more of the roughly 29 million nonelderly Americans (about 11 percent of that population) who remain uninsured. He also said he’d strengthen the law by, for instance, providing an accessible and affordable public option and increasing tax credits to make it easier for people who buy insurance on their own to afford monthly premiums. Once in office, Biden immediately moved to reopen the period when people could enroll in the ACA marketplaces.

Unfortunately, the administration is paying little heed to a problem that is in many ways just as insidious as lack of insurance: underinsurance. That’s when people get too little from the insurance plans that they do have.

After passage of the ACA, the number of Americans lacking any insurance fell by 20 million, dropping to 26.7 million in 2016 — a historic low as a percentage of population. The figure began to creep up again during the Trump administration, reaching 28.9 million in 2019. That’s the problem that the current administration wants to address, and it certainly needs attention.

But according to research by the Commonwealth Fund, a foundation focused on health care, 21.3 percent of Americans have insurance so skimpy that they count as underinsured: Their out-of-pocket health-care expenses, excluding premiums, amount to at least 5 to 10 percent of household income. The limits in coverage mean their plans might provide little financial protection in a health-care crisis.

High-deductible plans offered by employers are one part of the problem. Among people covered by the companies they work for, enrollment in high-deductible health plans rose  from 4 percent in 2006 to 30 percent in 2019, according to a report from the Kaiser Family Foundation. The average annual deductibles in such plans are $2,583 for an individual and $5,335 for families.

In theory, high-deductible plans, which make people spend lots of their own money before insurance kicks in, turn people into careful consumers. But research finds that people covered by such plans skip care, both unnecessary (elective cosmetic surgery, for instance) and necessary (cancer screenings and treatment, and prescriptions). Black Americans in these plans disproportionately avoid treatment, widening racial health inequities.

Health savings accounts are designed to blunt the harmful effects of high-deductible plans: Contributions by employers, and pretax contributions by individuals, help to cover costs until the deductible is reached. But not all high-deductible health plans offer such accounts, and many people in lower-wage jobs don’t have them. In the rare cases that they do, they often don’t have extra money to deposit in them.   

In a November 2020 article in the journal Health Affairs, scholars affiliated with Brown University and Boston University found that enrollment in high-deductible plans had increased across all racial, ethnic and income groups from 2007 to 2018; they also found that low-income, Black and Hispanic enrollees were significantly less likely than other groups to have a health savings account — and the disparities had grown over time.    

The short-term health-care plans — a.k.a. “junk” plans — that the Trump administration expanded also contribute to the problem of underinsurance. They often have low premiums but do not cover preexisting conditions or basic services like emergency health care.

Fortunately, proposals like Biden’s that make health care more accessible also tend to address the problem of underinsurance, at least in part. For example, to make individual-market insurance more affordable, Biden proposes expanding the tax credits established under the ACA. His plan calls for removing the cap on financial assistance, now set at 400 percent of the federal poverty level, in the insurance marketplaces and lowering the statutory limit on premiums to 8.5 percent of income (from nearly 10 percent).

The president also proposes to peg the size of the tax credits that subsidize premiums to the best plans on the marketplaces, the “gold” plans, rather than “silver” plans. This would increase the size of these credits, thereby making it easier for Americans to afford more-generous plans with lower deductibles.

The most ambitious Biden proposal is a public option, which would create a Medicare-like offering on marketplaces, available to anyone. Pairing this with allowing any American to opt out of their employer plan if they found a better deal on HealthCare.gov or their state marketplace — which they can’t now — would help some people escape high-deductible plans. The public option would also eliminate premiums and involve minimal to no cost-sharing for low-income enrollees — especially helpful for uninsured (and underinsured) people in states yet to expand Medicaid.

Given political realities, however, this policy may not see the light of day. So it would be best to target underinsurance directly. Most people with high-deductible plans get them through an employer. Yet unlike in the marketplace plans, the degree of cost sharing in these employer plans is the same for low-income as well as high-income employees. To deal with that problem, the government could offer incentives for employers to expand the scope of health services they cover — even in high-deductible plans. Already, many such plans exempt from the deductible some primary-care visits and generic-drug prescriptions. The list could grow to include follow-up visits and certain specialist care.

Instead of encouraging health savings accounts, the government could offer greater pretax incentives that encourage employers to absorb some of the costs that they have shifted onto their lower-income employees; that would help to prevent the insurance equity gap from widening further. The government could compensate employers that cover co-pays or other costs for their low-income employees. It could also subsidize employers that move away from high-deductible plans, at least for lower-income people. 

Health insurance is complicated: ­More-affordable premiums are good only if they don’t bring stingy coverage. Greater investment in well-trained (and racially diverse) “navigators” — the people who help Americans enroll in plans on the federal marketplace, for example — would make it less likely that consumers would choose high-deductible plans without grasping their downsides. But it’s also important that people have options beyond risky high-deductible coverage.

The ACA expanded coverage dramatically — but the government needs to make sure that coverage amounts to more than an unused insurance card.

Perils of High Deductible Health Insurance

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The High Price of Lowering Health Costs for 150 Million Americans

Posted on by • Posted in American Hospital Association (AHA), Data Intelligence, Data Interpretation, Data Mining, Employer-Based Health Insurance, Health Insurance Industry, Health Policy, Health System, Hospital, Hospital Industry, Lobbyist, Market Consolidation, Market Failure, Market Power, Market Share, Market Trends, Medicare, Monopoly, Monopoly Behavior, Negotiation, Price Regulation, Price Transparency, Pricing, Pricing Failure, Purchasing Coalitions, Tiered Networks • Leave a comment
The High Price of Lowering Health Costs for 150 Million Americans
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The Problem

Employers — including companies, state governments and universities — purchase health care on behalf of roughly 150 million Americans. The cost of that care has continued to climb for both businesses and their workers.

For many years, employers saw wasteful care as the primary driver of their rising costs. They made benefits changes like adding wellness programs and raising deductibles to reduce unnecessary care, but costs continued to rise. Now, driven by a combination of new research and changing market forces — especially hospital consolidation — more employers see prices as their primary problem.

The Evidence

The prices employers pay hospitals have risen rapidly over the last decade. Those hospitals provide inpatient care and increasingly, as a result of consolidation, outpatient care too. Together, inpatient and outpatient care account for roughly two-thirds of employers’ total spending per employee.

By amassing and analyzing employers’ claims data in innovative ways, academics and researchers at organizations like the Health Care Cost Institute (HCCI) and RAND have helped illuminate for employers two key truths about the hospital-based health care they purchase:

1) PRICES VARY WIDELY FOR THE SAME SERVICES

Data show that providers charge private payers very different prices for the exact same services — even within the same geographic area.

For example, HCCI found the price of a C-section delivery in the San Francisco Bay Area varies between hospitals by as much as:$24,107

Research also shows that facilities with higher prices do not necessarily provide higher quality care. 

2) HOSPITALS CHARGE PRIVATE PAYERS MORE

Data show that hospitals charge employers and private insurers, on average, roughly twice what they charge Medicare for the exact same services. A recent RAND study analyzed more than 3,000 hospitals’ prices and found the most expensive facility in the country charged employers:4.1xMedicare

Hospitals claim this price difference is necessary because public payers like Medicare do not pay enough. However, there is a wide gap between the amount hospitals lose on Medicare (around -9% for inpatient care) and the amount more they charge employers compared to Medicare (200% or more).

Employer Efforts

A small but growing group of companies, public employers (like state governments and universities) and unions is using new data and tactics to tackle these high prices. (Learn more about who’s leading this work, how and why by listening to our full podcast episode in the player above.)

Note that the employers leading this charge tend to be large and self-funded, meaning they shoulder the risk for the insurance they provide employees, giving them extra flexibility and motivation to purchase health care differently. The approaches they are taking include:


Steering Employees

Some employers are implementing so-called tiered networks, where employees pay more if they want to continue seeing certain, more expensive providers. Others are trying to strongly steer employees to particular hospitals, sometimes know as centers of excellence, where employers have made special deals for particular services.

Purdue University, for example, covers travel and lodging and offers a $500 stipend to employees that get hip or knee replacements done at one Indiana hospital.

Negotiating New Deals

There is a movement among some employers to renegotiate hospital deals using Medicare rates as the baseline — since they are transparent and account for hospitals’ unique attributes like location and patient mix — as opposed to negotiating down from charges set by hospitals, which are seen by many as opaque and arbitrary. Other employers are pressuring their insurance carriers to renegotiate the contracts they have with hospitals.

In 2016, the Montana state employee health plan, led by Marilyn Bartlett, got all of the state’s hospitals to agree to a payment rate based on a multiple of Medicare. They saved more than $30 million in just three years. Bartlett is now advising other states trying to follow her playbook.

In 2020, several large Indiana employers urged insurance carrier Anthem to renegotiate their contract with Parkview Health, a hospital system RAND researchers identified as one of the most expensive in the country. After months of tense back-and-forth, the pair reached a five-year deal expected to save Anthem customers $700 million.

Legislating, Regulating, Litigating

Some employer coalitions are advocating for more intervention by policymakers to cap health care prices or at least make them more transparent. States like Colorado and Indiana have passed price transparency legislation, and new federal rules now require more hospital price transparency on a national level. Advocates expect strong industry opposition to stiffer measures, like price caps, which recently failed in the Montana legislature. 

Other advocates are calling for more scrutiny by state and federal officials of hospital mergers and other anticompetitive practices. Some employers and unions have even resorted to suing hospitals like Sutter Health in California.

Employer Challenges

Employers face a few key barriers to purchasing health care in different and more efficient ways:

Provider Power

Hospitals tend to have much more market power than individual employers, and that power has grown in recent years, enabling them to raise prices. Even very large employers have geographically dispersed workforces, making it hard to exert much leverage over any given hospital. Some employers have tried forming purchasing coalitions to pool their buying power, but they face tricky organizational dynamics and laws that prohibit collusion.

Sophistication

Employers can attempt to lower prices by renegotiating contracts with hospitals or tailoring provider networks, but the work is complicated and rife with tradeoffs. Few employers are sophisticated enough, for example, to assess a provider’s quality or to structure hospital payments in new ways. Employers looking for insurers to help them have limited options, as that industry has also become highly consolidated.

Employee Blowback

Employers say they primarily provide benefits to recruit and retain happy and healthy employees. Many are reluctant to risk upsetting employees by cutting out expensive providers or redesigning benefits in other ways. A recent KFF survey found just 4% of employers had dropped a hospital in order to cut costs.

The Tradeoffs

Employers play a unique role in the United States health care system, and in the lives of the 150 million Americans who get insurance through work. For years, critics have questioned the wisdom of an employer-based health care system, and massive job losses created by the pandemic have reinforced those doubts for many.

Assuming employers do continue to purchase insurance on behalf of millions of Americans, though, focusing on lowering the prices they pay is one promising path to lowering total costs. However, as noted above, hospitals have expressed concern over the financial pressures they may face under these new deals. Complex benefit design strategies, like narrow or tiered networks, also run the risk of harming employees, who may make suboptimal choices or experience cost surprises. Finally, these strategies do not necessarily address other drivers of high costs including drug prices and wasteful care.