National Headlines

COST | To Control Health Care Costs, U.S. Employers Should Form Purchasing Alliances

November 02, 2018

When it comes to health care costs, America’s employers are at a crossroads. Competing for scarce labor in a tight market, they will have trouble continuing to shift medical bills onto employees as they have for several decades.

That means that to control costs going forward, employers may have to confront the true underlying causes of rising health care expenditures: high prices and health care inefficiencies. To address these challenges, they will have to band together in purchasing coalitions that give them the local market power to force health systems to reform.

Employers are the largest single provider and purchaser of health insurance in the United States, covering over 150 million workers and their dependents and purchasing 34% of all health care dispensed in the country. As a potential force for change, only the U.S. government can rival America’s business community.

And in recent years, employers have enjoyed some success in controlling rising health care costs. Their premiums have been increasing 3% to 5% annually, rather modest by historic standards. As a percent of workers’ compensation, employers’ health care spending has held steady at between 8% and 9% since 2010. Much of this success seems attributable to the spread of high-deductible health plans (HDHPs), which have shifted more of the costs of care onto employees. The proportion of workers with HDHPs (deductibles of more than $1,300/$2,600 for an individual/family) increased from 6% to 22% between 2006 and 2018. High deductibles have the dual effect of reducing workers’ use of services and employers’ liability for the services employees use.

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