Elisabeth Rosenthal is a senior contributing editor at KFF Health News and the author of “An American Sickness: How Healthcare Became Big Business and How You Can Take It Back.”
Health insurance that comes with a job has long been the gold standard of coverage, a prime reason to seek employment. But with insurance costs per employee expected to rise by more than 8 percent next year, many employers say they can no longer afford it. If they absorb the increase, they will not be able to hire as readily or offer the raises that employees deserve. The other option? Pass more costs on to workers through higher premiums and deductibles.
A survey conducted earlier this year found that about two-thirds of large employers (those with 500 or more employees) expect to increase employees’ share of premium costs next year.
“Our members are talking about how we have three to five years to fix employer-sponsored insurance,” said Elizabeth Mitchell, president and chief executive of Purchaser Business Group on Health, which represents large employers in their quest to get better insurance products.
“We’re going under our third year of double-digit increases and that’s for jumbo employers,” she said. Her brothers run smaller companies that are facing increases of 37 and 40 percent because smaller businesses have less leverage in negotiations with insurers.
And patients who are lucky enough to have insurance through their employers find that with today’s premiums and high deductibles, they can’t afford to see a doctor anyway.
Sixty percent of Americans under age 65 are covered by employer-sponsored insurance. But that figure masks big disparities: Over 90 percent of companies with more than 50 employees offer health insurance, a number that drops to roughly 50 percent for companies with 10 to 24 workers. Moreover, smaller companies tend to offer plans with higher deductibles.
So should we head to Medicare-for-all and forsake the idea of employer insurance? Entrepreneur Mark Cuban, who is going “full Shark Tank” in this arena, says not so fast.
He excoriates companies for being “comatose” in their inability to negotiate better terms in insurance contracts. Instead of wrangling as hard as they would when purchasing widgets or soybeans, they go to their broker and choose from available options.
“You know you’re getting ripped off. Why is it you don’t deal with all these line items?” he asked. The answer: “A, there aren’t enough hours in the day. B, we have to trust somebody.”
One problem that he and others point to is that human resources departments are typically small; they are not staffed with the personnel who can handle the negotiations.
Cuban’s solution: Companies need a health care chief financial officer. And he pointed out that they can use artificial intelligence, which he now deploys in his X feed to scrutinize any policy he can get his hands on for waste, bad deals and fraud.
“I did it for the city of Denver. I did it for North Carolina,” he said. “If I could only get those self-insured employers to run their contracts through a large language model and just say, ‘Where am I getting ripped off, and what can I do about it?’ We will see the cost of health care, pharmacy and medical go down considerably.”
While the focus for much of the past decade has been price transparency so that people could “shop” for health care the way they shop for groceries, analysts point out this made little sense to begin with.
“Why is the expectation that individuals are going to shop when it’s the employer that’s getting their health care?” said Colleen Smith, a health policy analyst at the Center for Modern Health, a free-market think tank. “So the next best thing that we can do is get employers to shop more, and you are slowly seeing more of that.”
But employer-provided plans may look very different in the future.
Some employers or consortiums of employers have bypassed insurers and set up direct contracts with groups of primary care doctors, many of which have been put together by a new breed of start-ups. They have negotiated set rates with specialists and hospitals to carve out common expensive procedures, such as joint replacements, colonoscopies and cardiac catheterizations. An additional insurance product covers more unusual or catastrophic needs. On the prescription drug front, the employers are directing workers to purchase through start-ups that sell medications at deep discounts, like Cuban’s Cost-Plus drugs, which sells thousands of generic medicines for the acquisition price plus a markup of 15 percent.
Against the backdrop of rising insurance costs, there are also proposals to give patients cash and let them go it alone.
The first Trump administration finalized a rule that allowed employers to fund individual coverage health reimbursement arrangements. Instead of, or in addition to, offering insurance plans, companies can contribute to an account that employees can use to pay premiums for an insurance plan of their choice as well as other health benefits or services they want.
This year, the Trump administration further codified how this option, rebranded as “CHOICE arrangements,” should work. As an incentive to grow this part of the market, small companies can receive a tax credit of $100 per month per employee in the first year of availability. A small percentage of companies already offer this new benefit.
That leaves individuals to piece together their own health coverage. For example, an employee might choose a cheap plan with a limited network to cover potential hospitalizations and elect to pay cash for other services. Companies are springing up to cater to the market. A Colorado-based clinic offers emergency room treatments that do not require hospital admission for a $160 fee with prices listed for any additional services. Families could pay to be members of a firm that offers ambulance transport so they aren’t surprised by high out-of-network bills for each ride. That could eventually make care more affordable.
Employer-provided health insurance is flailing, and voters say lowering health care costs is their top priority. It’s unclear if any of these solutions are poised to replace it.
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