Feb 25, 2022 - Health

Hospitals and doctors hold leverage over employers

Illustration: Aïda Amer/Axios

The failure of Haven — the joint venture among Amazon, Berkshire Hathaway and JPMorgan Chase — is the most recent example of how employers lack the clout to push back against the market power of increasingly consolidated systems of hospitals, doctors and other medical providers.

What they're saying: "Even big employers aren't big enough within a market to really be able to negotiate down prices, especially with the must-have providers," said Emily Gee, a health economist at the Center for American Progress and former federal official.

How it works: Most large employers and unions are "self-insured" and therefore cover the cost of medical claims. They hire insurers to handle back-end work, like processing claims and negotiating terms with providers.

  • They can save big by excluding the most expensive providers from their networks, but that could restrict workers from going to academic medical centers or force them to travel far to a lower-cost facility.
  • "No insurer in Boston can sell a plan that doesn't make it possible to go to Mass General or Brigham. Their brand names are so powerful," said David Blumenthal, president of the Commonwealth Fund who used to work at the Mass General Brigham system, which now faces state sanctions over its prices.
  • Most employers also aren't big enough to threaten to send their workers to competing hospitals, assuming there's competition in a local area.

Between the lines: If there's little to no risk of losing patients, hospital systems and medical groups maintain the upper hand over those paying the bill.

  • "And for the employer, insurers have proven themselves to be utterly rubbish on getting good deals," said Gary Claxton, a health benefits expert at the Kaiser Family Foundation.
  • One source who oversees health insurance for a large group of workers said they tried to ask their insurer for narrower provider networks, but insurance companies mostly ignored the request.
  • Insurers were "hearing from big law firms or whoever saying, 'We want the biggest network prestige hospital,'" said the source, who asked not to be named to speak candidly.
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