How Employer-Sponsored Insurance Drives Up Health Costs

Employer-sponsored healthcare usually drives up costs, but it doesn’t have to if set up properly. Since employer-sponsored healthcare for smaller companies usually covers contraception, wigs, alcohol counseling etc, and health plans usually pay out between 80 and 85 cents on the dollar, your money is not paying out as efficiently as it should. Also, health plans which lack transparency and pay any “provider” regardless of how much they charge is very wasteful. Properly empowered and educated patients have FAR more bargaining power than third party payers.

How Employer-Sponsored Insurance Drives Up Health Costs

A new study in Health Affairs is attracting attention for its depiction of how powerful hospitals are extracting “steep payment increases” from insurers. But what the study really tells us is how much the exceptional cost of American health insurance is caused by our system’s original sin: the fact that, due to a quirk in the federal tax code, most of us don’t buy insurance for ourselves, but instead have it bought on our behalf by our employers.

“In the constant attention paid to what drives health costs,” the authors begin, “only recently has scrutiny been applied to the power that some health care providers, particularly dominant hospital systems, wield to negotiate higher payment rates from insurers.” If you’re a regular reader of The Apothecary, you know from where some of that scrutiny has come. And hence, you won’t be surprised to learn that the Health Affairs study does indeed find that powerful hospital systems have the power to dictate prices to insurers.

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