Employment-based insurance is central to the US health care system. It is the most common source of insurance, providing coverage for over 150 million Americans. It is also becoming increasingly inaccessible to families and businesses.
The premiums for people who get coverage from their employer have grown rapidly over the past decade. Since 2010, the average premium for a family plan has been increased by 55 percent– almost three times faster than inflation and more than twice as fast as the growth of wages. The average family contribution exceeds $ 20,000. That’s roughly the cost of buying a new Honda every year. The number of people in high-deductible health plans and the average deductible have also grown significantly. More than every fourth employee with one-time coverage now has a deductible of at least $ 2,000, significantly more than one in 10 employees in 2010.
The high cost of health care creates affordability problems for families and employers. Employers are struggling to cope with rising costs, but the burden ultimately falls on workers. Research shows that employers cope with rising health care costs in a variety of ways, including by limiting wage growth and increasing workers’ wages. premium contributionsdecreasing generosity their advantages, and reduction in employment…
Workers often end up paying more for less generous insurance while their wages stay the same. Even for people with work-based insurance coverage, many find it difficult to afford health care. Four out of 10 adults registered through their employer reported difficulties paying for health care or health insurance. Half said a family member delayed getting needed help or prescription drugs because of the cost.
As policymakers consider reforms to our health care system, reducing the financial burden increasingly faced by people with employer insurance should be a priority. Truly increasing the availability of this coverage will require addressing the irrational and overpricing we pay for health care, including through direct price caps as a result of the most egregious market disruptions. Lower prices in the employer market will improve the position of families, reduce health care costs faced by employers and allow them to pass on some of the savings to workers in the form of higher wages, and reduce the federal deficit, mainly through increased tax revenues.
Lack of competition allows providers to raise prices
Privately insured people are paying more and more for health care due to the high and rising prices charged by service providers. Healthcare markets in the United States are often uncompetitive. Over the past few decades, large healthcare systems have quickly merged with other hospitals and physician practices, resulting in the emergence of dominant healthcare systems or hospitals that are needed in many markets.
IN certificate it is clear that the consolidation of providers leads to higher prices for people with private insurance that have little or no impact on the quality of service. Unlike Medicare and Medicaid, insurers in the private insurance market must negotiate payment rates with their providers. Leading healthcare systems can use their bargaining power in these negotiations to demand higher prices. The tools of private payers to lower these payment rates are relatively limited.
On average, hospitals charge privately insured patients almost 2.5 times that Medicare pays for the same service. Prices vary considerably – both within states and between states. In some states, average hospital prices are more than three times Medicare rates, and some providers charge even more.
Higher prices result in higher premiums and out-of-pocket payments for people with job-based coverage. The rise in prices amounted to almost three quarters increase in per person costs between 2014 and 2018. By comparison, the increase in use was just over 20 percent.
Efforts to lower prices have been limited
The Affordable Care Act has led to significant expansion of coverage and introduced important new protections, including protection for people with pre-existing medical conditions. However, this has left the employers’ insurance market relatively intact, where most non-senior Americans receive coverage.
Some employers, realizing that paid medical services are borne by their businesses and employees, tried to limit prices. There are several success stories, for example in Montana, where a government employee health insurance plan was the ability to cap prices based on Medicare payment rates saving money for the state and its employees. Overall, however, employers’ efforts to limit prices have not yet been crowned with success.
An important limiting factor is that most employers do not have the bargaining power needed to oppose service providers. Because large employers often have workers dispersed across several states, their leverage in negotiations in any given healthcare market is limited.
Exceptions are possible. For example, government employee health insurance plans may be able to gather enough participants in their local market to counter the market power of health care systems that will not accept lower rates. Co-procurement models that combine the bargaining power of employers also shown initial promise… Buyers should look into these types of models. However, the success of these approaches still depends on having a sufficient aggregate enrollment and sufficient market competition to say “no” to a high-priced health care system.
Policies that directly cap prices are needed to improve affordability for people with work-based insurance
Ultimately, policymakers need to intervene to achieve widespread and meaningful reductions in health care costs for privately insured persons. Policies that increase competition (for example, by prohibiting the ability of health systems to prevent insurers from referring patients to providers at lower prices) are good policies and will help limit some of the methods dominant health care systems use to raise prices. But they alone are not enough to solve the problem.
As Congress and the states consider ways to tackle affordability, they should consider policies that address the underlying cost problem — the high prices charged by suppliers — and extend them to the employers’ market. One possible approach is to cap prices based on a percentage of Medicare rates. The idea is that market negotiations should take place as usual where they work reasonably well. But in cases where a large healthcare system is able to extract rates in excess of, for example, 200 percent of Medicare, this is an indicator that the system is using excessive bargaining power. There may be some legitimate concerns about the adequacy of Medicare rates and differences in quality. However, the limitation that hospitals can charge twice what Medicare pays seems like one place to draw the line between fair reimbursement and the limitation of the price abuse we are seeing now. Price caps can also be based on a set of agreed private sector rates because some suggested…
For example, what would a system that limits hospital admissions to less than twice Medicare mean to the health care system? Analysis published by the Committee on Responsible Budgeting suggests that cap rates for hospitals in non-rural areas will result in employers and families collectively saving nearly $ 900 billion in premiums and patients saving nearly $ 100 billion in joint spending over the next decade. The federal government will save about $ 200 billion over ten years. A hospital rate cap would reduce federal premium subsidies for plans purchased in markets under the Affordable Care Act. Most of the federal savings, however, will come in the form of increased income, as lower health care costs and therefore insurance premiums allow employers to transfer more money from health benefits to wages.
Recent research City Institutethen RAND Corporation, but Henry J. Kaiser Family Foundation The results of the rate cap suggest similar savings levels and highlight the effects of the rate cap in various multiples of Medicare. Containing inflated prices means we will see higher wage and job growth, lower insurance premiums and cost sharing for families, and a reduced burden on taxpayers. Limiting payment rates should be discussed as Congress and states are considering ways to provide wider access to more affordable health care.