Conventional wisdom holds that big, self-insured companies do a better job controlling health care costs than firms that rely entirely on insurance companies to provide their workers’ coverage. But that’s not true.
Why it matters: Although a handful of big self-insured companies get a lot of attention for their cost-control efforts, the data tell a different story: Self-insured and fully insured companies are equally bad at controlling health care costs.
By the numbers: The average family premium for fully insured firms last year was a whopping $20,627.
- For larger self-insured firms, it was $20,739.
- There hasn't been a meaningful difference for the past 20 years.
Self-insured firms would seem to have an advantage because they cut out the middleman.
- Big self-insured firms can contract directly with providers and limit their networks to only cover lower-cost providers.
- They can implement the latest payment reforms and wellness programs, and even open up their own clinics.
- And a few very large companies, including Disney, Safeway and Comcast, have received a lot of attention for their efforts.
Yes, but: Most large insured firms have implemented similar strategies. And they buy insurance from the same companies that administer self-insured plans.
- Big companies also are often spread across the country and the world, which greatly diminishes their bargaining power. No firm or collection of firms has even close to the leverage Medicare and Medicaid have.
The fundamentals have not changed since I started studying corporate cost-control efforts at MIT decades ago.
- Most firms live by the same unspoken rule: Do what you can to control health costs without angering the workers you need too much.
- That’s especially true in strong economies with tighter labor markets.
Other dynamics may be at work, too.
- Benefits officers do everything they can, but CEOs often serve on the boards of the best and most expensive hospitals and socialize with the leading doctors where they live.
- Taking on the cost problem would mean reducing the incomes and revenues of people who have their ears.
The bottom line: Even large, self-insured companies with all the advantages still have a poor track record on cost control.