1 big thing: States are going after pharmacy benefit managers

Shelves in a pharmacy are stocked with prescription drugs.

2. Veterans' private care program led to longer waits

3. The disparities in federal health care spending

4. Stock buybacks are flowing on Wall Street

5. Your monthly dose of medical billing rage

Thanks to the Vitals reader who read Monday's edition and passed along two other great satirical medical studies: one about swallowing Lego heads and another on the effectiveness of moms kissing kids' boo-boos.

Vitals

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Keep up with health care politics, policy and business

Axios Vitals

1 big thing: The ACA's new legal threat

Protester hold signs outside of the Supreme Court during an Affordable Care Act case.

2. What's at stake

3. The politics of the ACA ruling

4. Seniors' pre-existing conditions problem

Illustration of a broken orthopedic walker.

5. Molina vs. Molina

Good morning, all. Caitlin Owens and I are your Vitals co-hosts this week. And wouldn't you know it, the minute Sam Baker heads for vacation, everything hits the fan.

You made it to the end? Nice. It's still only Monday. Your reward is this essential clinical trial that studied parachute mortality. Feel free to email me other good satirical medical studies: bob@axios.com. 

1 big thing: The pricey, unstable backbone of health coverage

2. Employers lack leverage

3. Workers have to pay more

4. Why this system persists

5. No way out

Happy Friday, Vitals readers. It's Bob Herman. Today's newsletter is 827 words, a pithy 3-minute read.

🚨 Special report: Today is my last day at Axios, so the lovely health care team here is letting me depart by taking over this bad boy and publishing a series that examines the flaws of the health coverage that 155 million Americans get through their jobs. Some nice, light reading, right? 

Never waste an opportunity to thank those who make you better: A big thanks to David Nather, Caitlin Owens, Sam Baker, Tina Reed and Adriel Bettelheim for all of their edits, shared bylines and health care jokes over the years. Keep reading them — I still will! And thanks to you all for reading these stories and giving your candid thoughts.

Editor's note: The second story in yesterday's Vitals was updated to reflect the specific case rates of COVID and removed references to CDC categorization of their transmission levels. A previous version of this story said the majority of states were seeing "moderate" levels of transmission.

The problem with getting coverage through our jobs

Axios Vitals Deep Dive: Health care's broken backbone

1 big thing: Why there's no surprise bill backlash — yet

2. The dire threat of antibiotic resistance

An illustration of antibiotic resistance.

3. ACO yeah, new data

4. Looming pharma antitrust issues

5. That's not how HIPAA works

TIL: The same person who co-founded the Atari video game system, Nolan Bushnell, also founded Chuck E. Cheese. That has nothing to do with health policy, but hey, impress your family and friends with a fun fact at your Labor Day festivities.

Have a safe Labor Day weekend. We'll be back next week on Tuesday. Feel free at any time to drop us your own TIL (Today I Learned) fact, related to health care or not: bob@axios.com and caitlin@axios.com.

1 big thing: Pre-existing conditions as a political hammer

2. Senate nears opioids deal as prescriptions fall

3. The uninsured rate remains plateaued

4. Medtronic's CEO on tariffs

5. Calm down, it's OK to drink

Good morning, health care enthusiasts. Turns out hospitals and smartphone carriers can surprise people with five-figure bills!

What we're watching: Well, not a whole lot now. The Senate postponed today's FDA hearing. But check the health care stream throughout the day for news, including any updates on the California dialysis bill.

Got any tips? Or maybe some fun data? NBA predictions? Send me a note: bob@axios.com. 

National

As employers struggle to tame health care's market power, they have used the tools of less generous coverage — higher deductibles, copays and coinsurance — to offset some of the rising premiums.

Why it matters: Workers are increasingly finding their health insurance doesn't feel like insurance.

By the numbers: The average single worker's deductible has tripled since 2006, and 30% of all companies now have annual deductibles of $2,000 or more, according to the Kaiser Family Foundation.

The average deductible for individual workers was almost $1,700 in 2021, according to KFF.

More than half of working families in high-deductible plans had deductibles of at least $5,000.

Federal law now outlaws most types of surprise bills, but workers could still face huge and unexpected costs depending on their network of hospitals and doctors.

Worth noting: Employees who face the highest out-of-pocket medical costs are those who work in industries that often don't offer insurance like food service, retail and hospitality.

Those industries disproportionately employ Black and Hispanic workers, and those workers are most vulnerable to being exposed to COVID-19.

Workers have to pay more upfront for care

Workers' health insurance increasingly doesn't feel like insurance.

Illustration of a stack of cash repeated three times, over green shapes and a blue zigzag line.

Employer coverage

Health care costs

As employers struggle to tame health care&#x27;s market power, they have used the tools of less generous coverage — higher deductibles, copays and coinsurance — to offset some of the rising premiums.Why it matters: Workers are increasingly finding their health insurance doesn&#x27;t feel like insurance.

The U.S. faces a range of health care flashpoints — unaffordable drugs, opioids, vaping — as we debate whether to adopt universal care. For now, the Affordable Care Act is the law of the land, but Republicans want to issue it a final death blow.

Health

Data: Centers for Medicare & Medicaid Services' Office of the Actuary; Chart: Will Chase/Axios

The pandemic disrupted nearly every facet of health care. But it hasn't changed the way hospitals, doctors, drug companies and other health care firms continue to charge employer health plans — and workers — whatever they want.

What they're saying: "The big honking problem is the prices that are being paid in the commercial sector," said Mark Miller, the former head of the Medicare Payment Advisory Commission who is now at Arnold Ventures.

The big picture: Annual per-person spending growth for workplace health insurance has exceeded the spending growth among Medicare and Medicaid patients in nine of the past 13 years, according to federal data.

That rise is almost entirely due to higher prices because enrollment and demand for services among the commercially insured have barely budged, or fallen.

Zoom in: Federal regulations require hospitals to publish the prices they charge employer plans, exposing how companies pay different and significantly higher amounts for care.

One example: major hip and knee replacement surgery at NewYork-Presbyterian Hospital in New York City last year. 

Empire Blue Cross Blue Shield paid $98,000; Cigna paid almost $71,000; UnitedHealthcare paid $66,000.

"Medicare pays closer to internationally reasonable rates," said Ted Doolittle, a former deputy director within the Centers for Medicare & Medicaid Services who is now a top Connecticut health official. 

Between the lines: Health care providers contend the rates set by Medicare and Medicaid are too low, and they need to charge employers more to make up for that deficit.

But that argument is undercut by research showing hospitals and doctors charge prices based on their market power instead of what other insurance programs pay. 

Editor's note: This series — based on interviews with two dozen health policy and industry experts, independent data, industry webinars, and court filings — explores the longstanding pitfalls of employer health coverage that are threatening a public in the middle of a pandemic.

Check out the rest of the stories in the series:

Hospitals and doctors hold leverage over employers

Workers change health plans more than ever

The problem with getting health coverage through our jobs

Top Stories

The pandemic disrupted nearly every facet of health care. But it hasn&#x27;t changed the way hospitals, doctors, drug companies and other health care firms continue to <a class="gtmContentClick" data-vars-link-text="charge employer health plans" data-vars-click-url="https://www.axios.com/jp-morgan-2020-private-health-insurance-prices-costs-1e92f969-bffc-4584-a3c9-e8c4072b5144.html" data-vars-item="in_content_link" href="https://www.axios.com/jp-morgan-2020-private-health-insurance-prices-costs-1e92f969-bffc-4584-a3c9-e8c4072b5144.html" target="_self">charge employer health plans</a> — and workers — whatever they want.What they&#x27;re saying: &quot;The big honking problem is the prices that are being paid in the commercial sector,&quot; said Mark Miller, the former head of the Medicare Payment Advisory Commission who is now at Arnold Ventures.

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.

The failure of Haven shows how employers lack negotiating clout.

The <a class="gtmContentClick" data-vars-link-text="failure of Haven" data-vars-click-url="https://hbr.org/2021/01/why-haven-healthcare-failed" data-vars-content-id="8d2580a9-409e-4700-8eef-74f58f25f6c3" data-vars-headline="Hospitals and doctors hold leverage over employers" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://hbr.org/2021/01/why-haven-healthcare-failed" target="_blank">failure of Haven</a> — the joint venture among Amazon, Berkshire Hathaway and JPMorgan Chase — is the most recent example of how employers <a class="gtmContentClick" data-vars-link-text="lack the clout" data-vars-click-url="https://www.ajmc.com/view/large-self-insured-employers-lack-power-to-effectively-negotiate-hospital-prices" data-vars-content-id="8d2580a9-409e-4700-8eef-74f58f25f6c3" data-vars-headline="Hospitals and doctors hold leverage over employers" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.ajmc.com/view/large-self-insured-employers-lack-power-to-effectively-negotiate-hospital-prices" target="_blank">lack the clout</a> to push back against the market power of increasingly consolidated systems of hospitals, doctors and other medical providers.What they&#x27;re saying: &quot;Even big employers aren&#x27;t big enough within a market to really be able to negotiate down prices, especially with the must-have providers,&quot; said Emily Gee, a health economist at the Center for American Progress and former federal official.

Data: Congressional Budget Office; Chart: Thomas Oide/Axios

Employer coverage is the country's largest tax break, and the idea of taxing that benefit to help expand coverage is usually met with widespread outrage from both corporations and organized labor.

By the numbers: Employer-paid health insurance premiums, which are exempt from income and payroll taxes, cost the federal government $329 billion in lost tax revenue in 2021, according to the Treasury Department.

The benefits disproportionately accrue to higher-income households, according to the Congressional Budget Office.

For most other workers, companies have been funneling untaxed dollars toward health care premiums instead of toward wages and salaries.

And the longstanding division over the tax treatment of workplace health coverage usually results in the status quo staying put, experts say.

Job-based health care is still the biggest break in the tax code

The benefits disproportionately accrue to the wealthy.

Employer coverage is the country&#x27;s largest tax break, and the idea of taxing that benefit to help expand coverage is usually met with <a class="gtmContentClick" data-vars-link-text="widespread outrage" data-vars-click-url="https://www.nytimes.com/2015/01/06/us/health-care-fixes-backed-by-harvards-experts-now-roil-its-faculty.html" data-vars-item="in_content_link" href="https://www.nytimes.com/2015/01/06/us/health-care-fixes-backed-by-harvards-experts-now-roil-its-faculty.html" target="_blank">widespread outrage</a> from both corporations and organized labor.By the numbers: Employer-paid health insurance premiums, which are exempt from income and payroll taxes, cost the federal government $329 billion in lost tax revenue in 2021, according to the <a class="gtmContentClick" data-vars-link-text="Treasury Department" data-vars-click-url="https://home.treasury.gov/system/files/131/Tax-Expenditures-FY2022.pdf" data-vars-item="in_content_link" href="https://home.treasury.gov/system/files/131/Tax-Expenditures-FY2022.pdf" target="_blank">Treasury Department</a>.

Employers support reforming how workplace health care is paid for and covered, but various coalitions don't agree on the details or how significant changes would actually be.

What they're saying: "None of us are going to say that this is a perfect system. There's a lot of frustration," said Jim Klein, CEO of the American Benefits Council, a lobbying group that advocates for corporate health benefits. "But compared to any alternatives, this system has earned a lot of trust."

The big picture: For more than a decade, employers have rallied around "value-based care" — a vague term associated with tying payments to the quality and cost of the health services provided instead of the volume of their services.

This includes options like medical tourism, where companies pay for their workers to travel for certain procedures at specified hospitals that have lower prices and high-quality scores.

"To completely ignore outcomes and to pay amounts that are vastly different regardless of outcomes is clearly a system that isn't right," Klein said.

The intrigue: Corporate America also strongly backs a bipartisan bill in Congress that would crack down on anticompetitive contracts between hospitals and insurers. 

The Biden administration also has expressed concern over how anticompetitive behavior in health markets can drive up the cost of care.

A paradox: The Benefits Council and other employer groups have pushed lawmakers to include employers in any proposals that involve Medicare drug inflation rebates. 

So, why not lobby for employers to get federal inflation rebates from rising hospital and doctor prices?

"That's a really good one," Klein said before pausing. "That's where those Medicare rates are perhaps so low that providers are looking to the private sector for the revenue to sustain the system." (Again, that's not really a thing.)

The bottom line: If employers want to come out of the pandemic with an improved system of covering care for their workers, experts say they'll have to look beyond small-bore projects and buzzwords.

"Most value-based programs have had little to no meaningful association with changes in cost, quality or wasteful spending," health policy experts wrote in JAMA in 2019 and echoed in discussions this past summer.

Companies don't agree on health coverage reforms

Many employers believe their health coverage "has earned a lot of trust."

Illustration of three briefcases getting progressively larger

Employers support reforming how workplace health care is paid for and covered, but <a class="gtmContentClick" data-vars-link-text="various coalitions" data-vars-click-url="https://www.youtube.com/watch?v=rytnop1gpzU" data-vars-content-id="c7a06823-5510-4985-9735-da76d0aeb829" data-vars-headline="Companies don&#x27;t agree on health coverage reforms" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.youtube.com/watch?v=rytnop1gpzU" target="_blank">various coalitions</a> don&#x27;t agree on the details or how significant changes would actually be.What they&#x27;re saying: &quot;None of us are going to say that this is a perfect system. There&#x27;s a lot of frustration,&quot; said Jim Klein, CEO of the American Benefits Council, a lobbying group that advocates for corporate health benefits. &quot;But compared to any alternatives, this system has earned a lot of trust.&quot;

Bob Herman

Stories

The problem with getting health coverage through our jobs

Workers have to pay more upfront for care

Companies don't agree on health coverage reforms

Job-based health care is still the biggest break in the tax code

Hospitals and doctors hold leverage over employers

Newsletter editions

Axios Vitals Deep Dive: Health care's broken backbone

Axios Vitals: States gunning for PBMs — Per capita disparities — VA's problems

Axios Vitals: ACA's new legal threat — Medicare’s subtle problem — Molina vs. Molina

Axios Vitals: Surprise bill backlash — Killer antibiotic resistance — HIPAA misuse

Axios Vitals: Pre-existing conditions, mapped — New uninsured numbers — Don't worry, have a pint