Make employer sponsored insurance more affordable
Employment-based coverage is at the heart of America’s healthcare system. It is the most common source of coverage, providing insurance to more than 150 million Americans. It is also increasingly less affordable for families and businesses.
Premiums for people covered by their employer have increased rapidly over the past decade. Since 2010, the average premium for a family plan has been increased by 55 percent– almost three times the inflation rate and more than twice as fast as wage growth. Average family premiums exceed $ 20,000. That’s roughly the cost of buying a new Honda every year. The number of people benefiting from high deductible health plans and the average deductible have also increased significantly. More … than one in four workers with single coverage now has a deductible of at least $ 2,000, a substantial increase from one in 10 workers in 2010.
The high cost of health care creates affordability problems for families and employers. As employers seek to cope with rising costs, workers ultimately bear the burden. Research suggests that employers are dealing with rising health care costs in multiple ways, including limiting wage growth and increasing the number of workers. premium contributions, by reducing the generosity their advantages, and reduce employment.
Workers often end up paying more for less generous coverage while their wages stagnate. Even for people with employment-based coverage, many find it difficult to afford care. Four in 10 adults purchasing coverage through their employer reported having difficulty paying for health care or health insurance costs. Half said a family member delayed needed care or prescription drugs because of the cost.
As policymakers consider reforming our healthcare system, reducing the financial burden increasingly faced by people with employer insurance should be a priority. To truly improve the accessibility of this coverage, it will be necessary to tackle the irrational and excessive prices we pay for care, including by directly limiting the prices resulting from the most glaring failures of the market. Lowering prices in the employers’ market would improve the situation of families, reduce the health care costs that employers face and allow them to pass some of the savings on to workers in the form of higher wages, and reduce the deficit. federal government, in large part by increasing tax revenues.
Lack of competition allows suppliers to raise prices
Private policyholders are increasingly paying for health care due to high and rising prices from service providers. Healthcare markets in the United States often lack competition. Over the past decades, large healthcare systems have combined with other hospitals and physicians’ offices at a rapid pace, leading to many markets with dominant healthcare systems or âgo-toâ hospitals.
the proof is clear that the consolidation of suppliers leads to higher prices for people with private insurance with little or no effect on the quality of care. Unlike Medicare and Medicaid, insurers in the private insurance market must negotiate payment rates with providers. Dominant health systems can exercise their market 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 almost 2.5 times what Medicare pays for the same service. Prices vary widely, both within and between states. In some states, average hospital prices exceed Medicare rates more than three times, with individual providers charging even more.
Higher prices translate into higher premiums and reimbursable costs for people with professional coverage. Price growth represented almost three quarters increase in spending per person between 2014 and 2018. By comparison, increases in usage were just over 20%.
Efforts to reduce prices have been limited
The Affordable Care Act led to major extensions of coverage and put in place important new protections, including protections for people with pre-existing conditions. However, it has left the employer insurance market – where most non-elderly Americans receive coverage – relatively intact.
Some employers, aware of the costs of paid health care to their business and workers, have tried to limit prices. There are success stories, like in Montana where the state employee health plan was able to limit prices based on Medicare payment rates save money for the government and its employees. But overall, employer-led efforts to limit prices have so far met with limited success.
A major limiting factor is that most employers do not have the necessary market power to counter suppliers. Because large employers often have workers dispersed across multiple states, their bargaining power in any given healthcare market is limited.
There may be exceptions. For example, government employee health plans may be able to muster enough registrants in their local market to counter the market power of health systems that will not agree to cut rates. Collaborative purchasing models that combine market power between employers have also shown initial promise. Buyers should explore these types of models. However, the success of these approaches still depends on a sufficient combined enrollment rate and sufficient competition in the market to be able to credibly say a high cost health system ânoâ.
Policy action that directly restricts prices is needed to improve affordability for people with employment insurance
Decision-makers will ultimately have to intervene to achieve widespread and significant reductions in the price of health care for the privately insured. Policies to improve competition (for example, by prohibiting the ability of health systems to prevent insurers from referring patients to low-cost providers) are good policy and would help curb some of the practices that health systems Dominants use to raise prices. But they alone will not solve the problem.
As Congress and states consider ways to address affordability, they should consider policies that address the underlying cost problem – the high prices charged by suppliers – and extend them to the employer market. One possible approach is to cap prices based on a percentage of Medicare rates. The idea is that market-based negotiations should work as usual when they are working reasonably well. But in cases where a large healthcare system is able to extract rates that exceed, say, 200% Medicare, this indicates that the system is exploiting excessive market power. There may be legitimate concerns about the adequacy of Medicare rates and differences in quality. However, limiting what hospitals can charge to twice what Medicare pays appears to be a way to draw the line between equitable reimbursement and reducing the abusive pricing practices we are seeing today. Price limits could also be based on a multiple of tariffs negotiated by the private sector, because some have proposed.
For example, what would a system that limited hospital rates to no more than twice Medicare for the health care system mean? Analysis published by the Committee for a Responsible Budget suggests that rate caps for non-rural hospitals would collectively save employers and families nearly $ 900 billion in premiums and patients save nearly $ 100 billion in premiums. cost sharing over the next decade. The 10-year savings to the federal government would be about $ 200 billion. The hospital rate cap would reduce federal premium subsidies for plans purchased in Affordable Care Act markets. However, most of the federal savings would take the form of increased income, as lower health care costs and hence bonuses would allow employers to shift more money from health benefits to wages.
Recent analyzes of Urban Institute, the RAND Corporation, and the Henry J. Kaiser Family Foundation effects of the payment rate cap suggest similar savings levels and highlight the effects of the Medicare multiple multiple payment cap. Reducing excessive prices means that we would see higher growth in wages and employment, lower bonuses and cost-sharing for families, and a reduction in the burden on taxpayers. Payment rate caps should be on the table as Congress and states consider ways to ensure broad access to more affordable health care.