A report published last week by the Kaiser Family Foundation confirms what employers and employees already know: Health coverage costs continue to skyrocket.
The study finds that average annual employer-sponsored family healthcare premiums in 2021 are $22,221. That’s nearly $1,000 more than last year. Since 2010, premiums have risen by 61%, versus 27% for inflation as a whole.
Out-of-control healthcare costs demonstrate the urgent need for systemwide price transparency so we can identify the best quality care at the lowest possible prices. The implementation of two new federal price transparency rules in the coming months will empower healthcare consumers to reduce their costs, enjoy financial certainty, and make hospitals and insurance companies compete for their customers.
Kaiser’s report reveals that even though health insurance companies enjoyed record profits and stock prices during the COVID-19 pandemic, these savings did not get passed along in the form of lower premiums. Premiums now equal about one-third of median household income. The Kaiser study finds that employees directly pay for about 28% of total annual premiums through paycheck deductions. Yet in reality, workers pay for the entire $22,221 premium cost. They fund the rest in forgone wages indirectly taken from their payout of the pool of funds employers budget for total employee compensation.
This health insurance burden disproportionately hurts low-income employees because price increases account for a bigger portion of their compensation. A $1,000 annual increase in premiums affects a worker making $40,000 far more than one earning $400,000. As a result, rising health insurance costs contribute to income inequality.
The National Federation of Independent Businesses reveals that small business owners have listed the “cost of health insurance” as their No. 1 burden for over 30 years in a row. The Employee Benefit Research Institute finds that the share of small businesses offering health insurance has significantly declined in recent years due to these increased costs. Warren Buffett is correct when he calls healthcare costs “a tapeworm in the American economy.”
The Biden administration has the opportunity to arm employers with the information they need to significantly lower their health coverage costs. It should implement the Transparency in Coverage rule next July. This rule will grant employers access to real prices, including all negotiated rates and historical claims data, so they can eliminate price-gouging providers and insurers and steer their employees to less expensive care.
This month, the Biden administration finalized a separate rule that will help employers identify the best care at the best prices. The regulation strengthens hospital price transparency law, which requires hospitals to publish their discounted cash prices and all negotiated rates by payer and plan. A recent study by my Patient Rights Advocate organization finds that only 5.6% of hospitals fully comply with the law. The Biden administration rule, which takes effect in January, significantly raises financial penalties on noncompliant hospitals to over $2 million a year.
Upfront prices put us in the driver’s seat to take control of our healthcare finances. They will unleash a competitive healthcare market that puts downward pressure on prices, just like in every other sector of the economy.
Cynthia A. Fisher is a life sciences entrepreneur, the founder and chairwoman of PatientRightsAdvocate.org, and the founder and former CEO of ViaCord.
