Ballooning prices leave employers increasingly open to regulation of rates
FRUSTRATED WITH rising provider prices, nearly three-quarters of self-insured employers favor hospital rate regulation, according to a new survey by the National Alliance of Healthcare Purchaser Coalitions.
The survey of 90 midsize and large employers also found that one-third view Democratic proposals for a Medicare public option plan as very helpful or somewhat helpful for their employee health benefit strategies; another 29% were neutral.
Public option models generally feature capped provider payment rates. Employers anticipate being able to piggyback on those lower rates for their own private plans. In addition, 84% of the companies surveyed supported hospital price transparency measures.
On the other hand, employers don’t favor Medicare for All. More than half the companies said a government single-payer model would be very or somewhat hurtful to their strategies. Many don’t want to lose their ability to offer workers private coverage.
The findings suggest growing openness among employers to regulatory approaches for controlling healthcare costs, even though the business community traditionally has favored market-based solutions and has been leery of government intervention in the healthcare market.
That shift may be because per capita health spending for the 160 million Americans in employer-sponsored plans grew 4.4% in 2018, the third consecutive year of increases above 4%, according to the latest annual spending report by the Health Care Cost Institute.
Higher medical prices accounted for nearly three-quarters of spending growth from 2014 to 2018.
“With consolidation in the healthcare industry, employers are realizing government intervention may be necessary,” said Michael Thompson, CEO of the National Alliance. “That may not be our first choice. But if health systems are acting as monopolies, we may need to treat them like utilities.”
The surveyed employers listed pharmaceutical and hospital prices, lack of price transparency, healthcare industry consolidation and surprise outof-network bills as some of the most significant threats to the affordability of employer-provided health coverage.
A growing number of self-insured employer groups already are planning to more aggressively steer employees to high-value providers and negotiate prices as a percentage of Medicare payment rates.
They’re moving toward these more aggressive measures to counter the burgeoning market power of consolidated hospitals and physician groups. In 2016, 90% of metropolitan areas had highly concentrated hospital markets, while 65% had highly concentrated specialist physician markets, according to the Commonwealth Fund.
Employers say they need to adopt tougher new tactics for holding down costs because the strategy of shifting costs to employees through higher deductibles and coinsurance has hit the limits of affordability.
Sensing the political sea change, 75% of CEOs responding to Modern Healthcare’s Power Panel survey in November said their organization could live with some form of price caps as long as their industry had the opportunity to negotiate reasonable levels.
“There has been a change in thinking about payment caps over the last five years,” Howard Kern, CEO of Sentara Healthcare, told Modern Healthcare in December. “The industry can’t be out there setting outrageous prices. We have to be prepared to set rates that are reasonable. But all the players, including pharma, have to be playing under the same rules.”
During the Clinton and Obama administrations, the employer community generally was either hostile or at best neutral to Democratic efforts to restructure the healthcare system through government intervention. But employers could be a “sleeping giant” in healthcare politics, according to Jonathan Oberlander, a health policy professor at the University of North Carolina.
“When it comes to health insurance, many employers are of two minds: ‘We can’t afford this rising cost but we don’t want to give health insurance to the federal government,’ ” he said. “But there is a better chance many employers could support or at least reconcile themselves with something like a public option.”
Thompson said while employers aren’t likely to lead the political charge for greater regulation of healthcare prices, they’re now increasingly likely to be open—or at least not opposed—to thoughtful reforms for reining in costs.
“I don’t think that was the case 10 or even five years ago,” he said. “This is a relatively recent phenomenon as employers have woken up to the fact that they’re facing a runaway health system.” ●