Employers are struggling to figure out if they're overpaying for health care
Employers are facing stronger legal requirements to ensure they aren't wasting their workers' money on overpriced health insurance, at the growing risk of financial consequences.
- But 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.
Why it matters: Federal rules push employers to serve as responsible stewards — or "fiduciaries" — of their workers' premium dollars.
- The price tag of the average employer-sponsored family health plan hit nearly $24,000 last year, with employees on the hook for about a quarter of the cost, per KFF. And a new study this week illustrated how premiums, which have been rising faster than wages, are eating into workers' potential earnings.
The big picture: Employers — even the really large ones with sophisticated HR teams — don't always have a good sense of the inner workings of their benefits despite the massive amounts of money they shell out for them.
- "The core challenge for employers is that they don't have visibility into this information and the vendors that they have relied on to procure health care on their behalf, they don't share it," Elizabeth Mitchell, CEO of the Purchaser Business Group on Health, told Axios.
Driving the news: The fiduciary requirements have been in effect for a few years. But as of Dec. 31, employers had to attest that their agreements with their third-party administrators, pharmacy benefit managers and other benefit providers contained no "gag clauses" at risk of fines.
- That meant employers had to make sure their contracts contained no agreements that would block them from data they needed to ensure they were paying fair prices for care.
- Employer groups tell Axios that requirement has been difficult, if not impossible, to meet in many cases because the administrators of their plans often aren't forthcoming or cooperative.
- In some cases, employers have identified gag clauses but struggled to get their third-party administrator to remove them, said Chris Deacon, founder of VerSan Consulting, who focuses on policy related to employer health benefits.
- "It's just a really tough place to put employers," said Cora Opsahl, director of the 32BJ Health Fund, one of New York's largest unions. "I might not have a gag clause in my contract with my carrier, but the carrier may have gag clauses in their contracts with their providers. I don't know that."
Opsahl joined a handful of employer groups last week in lobbying members of Congress to support transparency legislation they say would provide the tools employers need to access this data from their plans.
- The House version would require hospitals, labs, imaging centers and ambulatory surgical centers to annually post the prices they've negotiated with insurers as well as discounted cash prices. PBMs would have to report to employer health plans information on their spending, rebates, and fees related to covered drugs.
- The Senate version would go further, guaranteeing employers have access to daily feeds of their insurance claims and services provided. It would also require providers and insurers to make negotiated prices publicly available and require insurers to attest all prices are accurate.
- "There's a lot of good that's come about in the House bill. However, if you don't have actual prices, you don't have true transparency," PatientRightsAdvocate.org founder Cynthia Fisher told Axios.
The other side: Insurer lobby AHIP didn't immediately provide comment, and it's previously declined to weigh in on employer complaints that they're struggling to get essential data.
- In a letter to Congressional leaders last week, AHIP CEO Michael Tuffin called for the preservation of insurers' ability to leverage competition and negotiate lower drug prices.
- He also warned against potentially "duplicative" consumer transparency provisions.
What we're watching: Following a playbook used to challenge companies' management of their 401(k) plans, law firms are reportedly lining up potential class action suits against companies over their handling of their health plans, Politico reported recently.
- On the flip side, there have been lawsuits filed by employers against insurers alleging breach of fiduciary duty.
- "We know now that we are getting access to more and more claims data is something is wrong with the system," Deacon said.
- "Somebody has been asleep at the driver's wheel, and I firmly believe that somebody will be on the hook for a significant amount of fiduciary liability. The question is going to be who is left holding that bag?"