The latest health care news from a RAND Corporation study shows that employers paid hospitals “2.4 times the Medicare rates in 2017.” Another recent headline revealed that private health insurance deductibles increased 150% in ten years (2009 to present). Every day a new headline exposes the dark side of employer-sponsored health insurance. The question is: Will employers take the criticism to heart even if it means no longer offering traditional workplace health insurance?
Stuck In Secrecy
Typically, employers have no idea what hospitals charge for their services. When hospitals agree to join a private health insurer’s network, the two parties negotiate their rates in secret. Neither the hospital nor the insurer shares this information with the groups paying the bills—employers and employees—until the bill is due. For their part, most employers never asked for this pricing information to begin with, and if they did, they still would not receive it. The majority of employers sign group health insurance policies or administrative services only contracts, agreeing that the insurance company does not have to reveal its "negotiated" network rates.
Health care price secrecy is unfair in so many ways. Imagine hospitals charging a different rate for the same service for each plan's network they join. That’s a lot of combinations of health care price secrecy. It can happen. One employer offering three "different" health plans could pay three different rates for the same service, provided by the same hospital. Also, these prices can vary glaringly across the country and in the same geographical area.
Workers Think Employers Are Negotiating Health Care Prices
It would shock most employees to learn that the “negotiating” of health insurance rates between their employer and the health insurance company, does not include a conversation about health care prices. Most employers pay whatever premiums or claims expenses the insurance company tells them to pay, with the promise that what they are paying is a discount. Employers take it on faith that the “discounts” are saving them money, but there’s evidence that’s not the case. Last year Propublica reported on a case where Aetna paid a hospital "more than three times the Medicare rate for (a hip) surgery and more than double the estimate of what other insurance companies would pay for such a procedure" because that was the price it negotiated to pay (in secret) with the hospital. The patient (a former Aetna employee and actuary) protested the price and shared his research with his former employer. Aetna replied, "The payment was appropriate based on the details of the insurance plan." Continue Reading...

Five years ago, the late, famed health care economics scholar, Uwe Reinhardt, wrote the following about what he called "the illogic of employer sponsored health insurance,"

Imagine yourself in a bar where a pickpocket takes money out of your wallet and with it buys you a glass of chardonnay. Although you would have preferred a pinot noir, you decide not to look that gift horse in the mouth and thank the stranger profusely for the kindness, assuming he paid for it. You might feel differently, of course, if you knew that you actually had paid for it yourself.

A New Day Brings New Scrutiny To Workplace Health Plans

Last month, an article by Drew Altman, titled, For low-income people, employer health coverage is worse than ACA, explored workplace health insurance affordability issues for low wage workers and workers with chronic illnesses. Altman writes:

We tend to think of everyone with employer coverage as one big group, but it’s really lower wage workers — and, while it’s a different subject, also people with major illnesses — who take it on the chin in the current private health insurance system. They are also the group with employer coverage who would benefit the most from a Medicare-for-All style plan.

The bottom line: Employer-based coverage is by far the largest source of health insurance, and it now provides the least financial protection for lower income workers who need it most.

Altman gets to the heart of the matter when he writes, "We debate affordability in the ACA marketplaces a lot, but we don’t talk about this far larger problem much, if at all."

A week after Altman's article, a report from The Foundation for Research on Equal Opportunity (FREOPP)—a public policy think tank co-founded by Obamacare critic, Avik Roy, designated employer sponsored health insurance as the worst form of private health insurance in the country in terms of underlying cost, sustainability, freedom of choice, and consumer-driven incentives. Worse than individually purchased health insurance, federal employees health benefits, and Medicare Advantage—the country’s other private health insurance programs.

No More Hiding

Tags: Medicaid For All, universal health care, employer sponsored health insurance