Hospital prices are ‘unreasonable’ and ‘indefensible’, say employers

A new survey from the National Alliance of Healthcare Purchaser (National Alliance) Coalitions underscores the ongoing tension between employers and the insurers and providers that partner with them for health and other benefits.

The “Pulse of the Purchaser” report looked at a wide range of benefit areas and the concerns that employers have as they sponsor plans and benefits. The report found that concerns about cost continue to increase, and at the same time employers have growing concerns about the integrity of services and fees charged by their partners in providing benefits.

“Employers are frustrated that the health care system is designed to enrich the middlemen and is not delivering improvements in affordability, access or quality for purchasers or employees and their families,” said Michael Thompson, National Alliance president and CEO. “Increasingly the fox is guarding the henhouse, and both are exploiting a dysfunctional system at the expense of making it better. Employers are starting to take actions, both on the market and policy fronts, to realign the system to reduce conflicts and improve value.”

National Alliance surveyed 172 private and public employers and purchasers from across the country, with a wide range of industries represented.

Affordability issues a barrier

The survey found that although attracting and retaining talent is a top priority for employers, the continuing problem with rising health care costs are a challenge to that aim. The responses showed that 91% of employers say that rising health care costs impact their organization’s competitiveness, 73% said health care costs crowd out salary and wage increases, and 91% said the rising costs will result in further cost-shifting to employees.

The highest cost burden came from drug prices (93%), high-cost claims (88%), and hospital prices (83%), according to respondents.

The data showed that employers use a range of tools to deal with high-cost claims, including managing complex cases (71%), and early intervention (69%). Purchasing stop-loss insurance is a top solution for high-cost claims, with 69% of respondents listing that as their preferred strategy.

Employers also support policy reforms to reshape the market—73% said they saw hospital rate regulation as helpful or very helpful; 81% listed hospital price transparency as very or somewhat helpful;  the same percentage said anti-trust enforcement would be somewhat or very helpful, and regulation was also supported to address surprise billing (83% saying it would be helpful or very helpful), and drug prices (79%).

Fiduciary questions are among the findings

The National Alliance report also looked at how employers see their fiduciary role in health benefits. It found a general lack of confidence in the practices of hospitals, pharmacy benefit managers (PBMs), and other partners when it comes to helping employers fulfill their duties in this area.

For example, 69% of respondents said they were somewhat concerned or concerned about the integrity of services and lack of conflicts in hospital billing practices. In addition, 71% were somewhat concerned or concerned about whether hospital charges were reasonable for the services provided. And 51 % were somewhat concerned or concerned about integrity and possible conflicts in PBM administration.

Related: The employer public option: The future of employer-sponsored health insurance?

The report concluded that most employers are not confident of their partners’ efforts on compliance. For example, only 33% said they were confident that plan administrators would be in compliance with mental health parity requirements. The report noted that about 40% of employers said they had confidence that their partners would help them to meet transparency requirements that will go into effect in 2024.

The report had a number of findings in employers’ attitudes about benefits in the area of obesity programs, mental health coverage, and health equity programs.

For example, the survey found a significant increase in support of various health equity strategies. In one of the findings, the report said that improving accountability in service provider contracts went from 16% support in 2022 to 54% in 2023, a 38% increase.