AHCJ – Association of Health Care Journalists

21/08/2024 | News release | Distributed by Public on 21/08/2024 19:47

How rising health care prices are harming employers and families

Photo by wayhomestudio via Freepik

Employers have struggled for many years to contain the prices that hospitals charge. In recent years, however, some employers have developed the data they need to bring hospital prices under control.

In an AHCJ webinar on Tuesday, Aug. 27 from 1 to 2 p.m. ET, we will hear from two experts about how they used data on hospital prices to negotiate more effectively with the hospitals in their network, bringing those prices down. The experts are Cora Opsahl, director of the 32BJ Health Fund, a self-insured health plan in New York for 200,000 union members and their families, and Gloria Sachdev, president and CEO of the Employers' Forum of Indiana.

This webinar is the first in a series sponsored by the Peterson-Milbank Program for Sustainable Health Care Costs. The series will focus on the forces driving up the prices hospitals and other health care providers charge employers, their workers and families and what states, municipalities, employers and organizations are trying to do to contain them.

Employers' costs continue to rise

On August 16, a report showed that employers' health care costs are expected to rise by 9% in 2025, more than three times higher than the rate of inflation nationwide.

The rising prices of hospital care and how those prices drive up the cost of health insurance is important because when health insurance premiums, out-of-pocket costs, and hospital prices rise, family budgets get squeezed tighter. Keep in mind that last year, employers provided health insurance for 60.4% of Americans under age 65, meaning 164.7 million men, women and children, as KFF researchers reported in May.

The effects of rising hospital prices ripple through local economies, forcing employers to cut wages or delay pay raises. In a recent report, researchers showed that just a 1% increase in the prices hospitals and other health care providers charge causes employers outside of health care to reduce employment, putting workers on the unemployment rolls and leading to a rise in deaths from suicides and overdoes.

Compounding employers' problems is that often they don't know exactly what they're paying for each health care service that hospitals and other providers deliver to workers, as Tina Reed reported for Axios in January. "Employers say secrecy around negotiated health care prices too often prevents them from accessing data that would help them figure out if they're getting a good deal," she wrote. In March, STAT News reported on a similar problem, as this post explained.

All of these factors show the pressing need for employers to understand how big hospitals' and other health care providers' efforts to increase their profits are driving up the cost of care.

Recent efforts to contain employers' costs

In their work, Opsahl and Sachdev have developed strategies to address rising hospital and other health care and health insurance prices. Using data on hospital prices, they have negotiated better deals for employers and families in Indiana, New York and nationwide.

During the webinar, Opsahl and Sachdev will share how that data helps employers negotiate with health insurers, hospitals and other providers. Also, they'll explain how hospitals and insurers have pushed back hard during the negotiations for lower prices.

Consider, for example, that the leading factor driving up all health care and health insurance costs is the prices hospitals charge, Opsahl explained. From 2009 through 2023, the price of hospital care rose 80% according to the Consumer Price Index while prices for housing and food each rose at about 40% in those same years, she added.

Over the past 10 years, what employers have paid for workers' wages has risen 54% while in that same period, health care prices have gone up 230%, Opsahl said. Ten years ago, what workers and their families spent on health care represented 17% of total compensation but today, they're spending 37% of total compensation on health care, she added. If wages had risen at the rate health care prices rose, workers would have earned $5,000 more in wages per year, she noted.

Using data on hospital prices, Opsahl drove down the health care prices so successfully that what the 32BJ Service Employees International Union (SEIU) pay for its 210,000 members in 11 states and Washington, D.C., this year is zero for their monthly health insurance premiums and zero for deductibles when using in-network providers, she said.

The RAND report on hospital prices

In the webinar, Sachdev will talk about what happened in 2017 when the Employers Forum became the first coalition of employers to ask consultants from the RAND Corporation to report on variation in hospital prices in Indiana. Two years later, Sachdev and other coalitions asked RAND to conduct a study of hospital prices in 25 states. That second study allowed employers to compare what they paid in their states against what employers paid in other states.

Then, in 2020 and again this year, RAND studied hospital prices in 49 states and the District of Columbia, excluding only Maryland hospitals because the state uses annual budgets to pay for hospital care, as explained here.

In May, RAND showed that hospital prices in Indiana were among the highest in the nation (eighth among 49 states and the District of Columbia), as Whitney Downard reported for the Indiana Capital Chronicle.

Despite federal rules requiring hospitals and health insurers to publish the prices they charge consumers, the lack of price transparency in health care limits employers' ability to develop or implement effective benefit plans to control costs, the RAND report showed.

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