Feb 25, 2022 - Health

Employers are flying blind when buying health coverage

Illustration collage of a hand hovering over three identical medical crosses and numerous geometric shapes
Illustration: Annelise Capossela/Axios

Even after decades of being health care purchasers, companies ranging from small shops to Fortune 500 companies may not fully understand the health coverage they're buying and often pay more as a result.

The big picture: "Employers have been forced to look around and assemble this hodgepodge of vendors," said François de Brantes, a senior vice president at Signify Health. "The vast majority don't have sophisticated benefit teams."

What they're saying: Employers trust the insurers, consultants, vendors and other companies that cobble together their health and drug benefits, but many contractual terms that fly under the radar leave employers vulnerable to higher costs.

  • One example: A health benefits consultant told Axios they recently audited a $1.8 million hospital bill for a company's employee and found $450,000 in overcharges.
  • The employer was self-insured, so the employer's insurer didn't intervene because it wasn't on the hook for the costs.

Many businesses started to wonder how bad their prescription drug deals were after Anthem, one of the largest health insurance companies in the country, alleged in 2016 that it got fleeced by its pharmacy benefit manager, Express Scripts.

  • But employers haven't been willing to ditch things like drug rebates or drug copay cards even though they can wind up increasing what employers pay.
  • "We understand that rebates … it's a shell game," Dwight Davis, a drug benefits consultant for Gemini Health, said during an employer webinar in June. "We're gonna play the game as long as it's being offered. We don't wanna shut it off."
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