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."

Not all employers put up with paying health insurers and hospitals whatever they demand. Aggressive employers push back on health insurance company medical care cost projections, fees, and other costs. Employers are also starting to establish the prices they are willing to pay for certain episodes of care via reference based pricing (RBP). However, these tactics don't always save employees money. How often do employees see a health insurance premium decrease? And reference-based pricing programs in particular may be difficult for employees to understand and use effectively.
It seems that employers have to go to extremes to gain even a small amount of control over their health care costs, which may or may not trickle down to employees that need the most financial assistance. Well-paid workers may benefit from these cumbersome health care cost containment efforts, just like they benefitted from health care savings accounts, but lower wage workers likely will not.
Employers May Be In Over Their Heads
Employers decided long ago that they wanted to offer health insurance to their workers. Many have taken this decision seriously and with the best of intentions. Quality, affordable health care is what they want for their workers, but they’ve never been in a position to guarantee either. Affordable health care hasn’t been a thing in a very long time. And with research increasingly linking social determinants as a factor in individual health status, employers may be even less up to the task of controlling health care costs for all but their most affluent workers.
As the chronicles of workplace health insurance failures pile up, employers may find their “good intentions” called into question. Are workers paying more than they otherwise would for health insurance and health care because employers don’t want to lose their ace in the hole for attracting and retaining employees? It’s time for employers to answer the question.