Employees Ready for Action to Address High Health Care Costs
For years, employees have faced increasing premiums and cost-sharing. But how well do they understand the sources of those increases, and how ready are they for employers or policymakers to take action?
Recent focus group research conducted by Public Agenda, a nonpartisan research-to-action organization, with people covered by employer-sponsored insurance, found that participants were unaware of the extent to which provider prices are driving the affordability crisis. But when focus group participants were presented with straightforward information about the drivers of high medical costs, they favored government price-regulation and backed preventing anti-competitive mergers among hospital systems. By contrast, they were concerned about how changes to benefit design, such as tiered or narrow networks, would impact access and quality.
This research, supported by Arnold Ventures, convened 40 adults covered by employer-sponsored health insurance in Texas, Washington State, Wisconsin, North Carolina and Pennsylvania.
“We gave employees in these focus groups the opportunity to deliberate over various approaches to addressing high provider prices,” said David Schleifer, PhD, Vice President and Director of Research at Public Agenda. “Even participants who said they were wary of government regulation felt that price regulation has become necessary because prices have gotten out of hand.”
Confusion About Key Cost Drivers
Focus group participants initially assigned blame for rising costs to insurers, pharmaceutical companies and the effects of inflation. They were surprised when presented with data showing that hospital, physician and clinical services accounted for 51% of $4.1 trillion in total U.S. health care spending in 2020.
When they were shown data that indicated health care providers’ prices rose by almost 16% between 2016 and 2020, they cited widespread corporate greed as the underlying cause for sharply rising hospital and physician price increases.
Support for Price Regulation and Limitations on Hospital Mergers
Employees in these focus groups were strongly supportive of either state or federal government playing a role in setting health care provider prices and limiting hospital mergers. Broadly speaking, participants saw government regulation as a way to make pricing more reasonable and predictable. And they believed that anti-trust enforcement could break up monopolies and shield patients from what they framed as price gouging. This mirrors the views that employers expressed in a survey of more than 300 executive decision makers conducted by PBGH and the Kaiser Family Foundation (KFF).
The lack of functional and effective markets in the private health care system is driving the out-of-control health care costs too many Americans face. Effective markets require healthy competition among providers, health plans, drug manufacturers and suppliers. Also essential is transparent information on quality, patient experience, health equity and meaningful choices for consumers. Unfortunately, these conditions are not met in all markets.
Employers Pay Lion’s Share of Premiums
According to KFF, employers paid 73% of family premiums in 2022. But employees in these focus groups didn’t realize that employers typically pay the bulk of health insurance premiums, including those for family coverage. When presented with the data, however, participants could easily see how these high premiums must affect employers’ competitiveness and employees’ compensation.
The employers footing the bill for rising premiums also express significant concerns regarding health care costs. The PBGH and KFF survey of executive decision makers found 83% agreed that the cost of health benefits is excessive. Additionally, 87% believed that the cost of providing health benefits to employees will become unsustainable in the next five to 10 years.
Perspectives on Benefit Design
When presented with three benefit designs that employers could use to mitigate high provider prices – reference pricing in which prices are set based on a percentage of what Medicare pays for medical services; tiered networks based on cost and quality; and narrow networks that do not cover low value providers – these employees consistently preferred reference pricing over tiered or narrow networks.
They believed reference pricing could preserve access to more hospitals and networks than tiered or narrow networks. Among their concerns, however, was the possibility that hospitals and doctors could refuse patients whose insurers used reference pricing. They also worried that if hospitals and physicians earned less money, they would have less incentive to provide high-quality care and that talent could abandon hospitals being paid via reference-pricing in favor of wealthier facilities.
Employees were skeptical of how both tiered and narrow networks would affect access to care and quality. They noted that these models could make care more expensive for people unable to travel to preferred providers, a reality that would exacerbate already-limited access in low-income communities, communities of color and rural areas. Employees also expressed distrust about insurers’ ability to fairly determine which hospitals or doctors provide high-quality care. They believed insurers would use tiered and narrow networks to drive people toward inexpensive, but not necessarily high-quality, care and would not prioritize patient needs.
Open, ongoing dialogue with employees about the drivers of high health care costs and different ways of addressing them can help employers, policymakers and advocates better understand the views, priorities and concerns of people with employer-based insurance.