Bloomberg Law
Feb. 28, 2020, 10:46 AMUpdated: Feb. 28, 2020, 7:48 PM

Employers Pushed to Demand More of Insurers as Health Costs Jump (1)

Sara Hansard
Sara Hansard

Health policy groups are urging employers to get tough with the insurers that administer their health plans.

They say employers should insist on information about prices charged by medical providers and demand the elimination of agreements between insurers and hospitals that force coverage of inefficient facilities in health plan networks.

The push comes as companies are increasingly frustrated in their attempts to rein in inflationary health-care costs. Total health-care spending by employers and their employees grew 4.4% in 2018 to an all-time high of $5,892 per person, an increase of 18.4% since 2014, according to a recent report from the Health Care Cost Institute. That increase was largely driven by price increases, according to the institute, which compiles claims for 40 million employer members.

Employers cover about 160 million people, the largest share of health coverage in the United States.

“We’re throwing down the gauntlet and drawing a line in the sand to say that it is unacceptable for health plan provider contracts to mask prices and quality outcomes or contain anti-competitive clauses,” Julianne McGarry, director of projects and research at the Berkeley, Calif.-based Catalyst for Payment Reform, said in a recent webinar.

Tackling those issues could help employers save on health costs by identifying less expensive doctors and hospitals and by bringing to light those clauses in contracts between insurers and hospitals that ultimately drive up prices.

Policymakers are also looking to push the health-care market toward more price transparency and away from restrictive hospital contracts.

In 2019, the Department of Health and Human Services issued a rule requiring hospitals to disclose their negotiated prices for treatments, which is being challenged in court, and HHS also has proposed insurers provide such information.

Also last year, Sutter Health Systems, the largest health-care provider in northern California, agreed to pay $575 million in a class action settlement with the state and the United Food & Commercial Workers & Employers Benefit Trust and other health plans. The class action alleged Sutter used its market dominance to get higher prices through anti-competitive practices.

Getting on the Same Page

Catalyst for Payment Reform says employers should push for hospital and doctor prices that are benchmarked to Medicare rates, which are lower than what employers typically pay.

The nonprofit develops policies aimed at helping employers design plans that encourage enrollees to use the most efficient medical providers. Its members are 37 employers, health-care purchasers, and benefit consultants throughout the U.S. They include major companies such as General Motors, Google Inc., and Walmart Inc.

The only way to change insurers’ business practices is if a wide swath of employers ask for the same things when they negotiate with insurers, Suzanne Delbanco, the group’s executive director, said in an interview.

“If employers can all ask for the same thing at the same time, the health-care system is much more likely to be responsive to their needs,” she said.

The Pacific Business Group on Health, a San Francisco-based purchaser coalition that represents 41 organizations throughout the U.S. that spend about $100 billion on health care for more than 15 million Americans, is doing the same thing. It’s monitoring health plans on behalf of a handful of companies to steer employees away from low-value care.

Common requests employers will make of health plans going forward are about primary care spending and how to avoid low-value care, Elizabeth Mitchell, the group’s president, said in an interview.

Insights From Claims, Price Data

New York-based 32BJ Health Fund has seen tangible advantages from reviewing costs. The fund spends nearly $1.5 billion a year on benefits to 200,000 workers in 11 states and the District of Columbia who are members of the 32BJ SEIU local union, a branch of the Service Employees International Union. It’s also a member of the the Catalyst group.

The fund is launching a high-value maternity network April 1 in the New York area as part of an initiative to reduce costs and improve quality, Director Sara Rothstein said in an interview.

By examining claims data, the fund found that having a baby was the most common reason for a planned hospital admission, Rothstein said. “We saw wide variation in prices. So a vaginal delivery could cost less than $10,000 or more than $30,000 at hospitals that are not very apart from each other,” she said.

After requesting quality information from local hospitals, the fund selected high-quality hospitals to participate in a narrower maternity network, Rothstein said. Admissions to those hospitals will be free for patients after a copay rebate.

The fund negotiated the narrower network on its own because it believed its plan administrator, Empire BlueCross BlueShield, which is owned by Anthem Inc., was constrained from doing so.

“My sense is that there are contract clauses in some other provider contracts that either would have prohibited them from doing this, or would have required them to include certain facilities,” she said.

Anthem didn’t respond to a request for comment.

Obamacare Exchange Joins In

California’s Affordable Care Act exchange, Covered California, is overhauling contract expectations for health plans for 2022, Executive Director Peter Lee said in an interview. The 12 health plans sold through Covered California and the state’s individual market cover about 2.2 million people.

Lee said Covered California is pushing its plans to become part of accountable care organizations, which tie provider reimbursements to quality goals and reductions in the cost of care. One-fourth of Covered California enrollees were enrolled in an ACO in 2018, a 4-point increase from 2015, which “far exceeds state and national benchmarks,” according to a December 19 report.

Employers need to be willing to take bold action to create narrow networks based on high quality and efficiency, which reduces claims costs, Lee said.

“What employers have done generally for the last 15 years in the face of staggering increases in health-care costs is shift the cost to their employees, not hold health plans accountable and change the underlying delivery system,” Lee said.

(In 14th paragraph, updates description of Pacific Business Group on Health with latest numbers. )

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editors responsible for this story: Fawn Johnson at; Brent Bierman at