If Employers Pay the Bills, Then Employers Should Set the Price
By: Eric Bricker, MD
Employer-Sponsored health insurance pays for the healthcare of 155 million Americans.1
The total annual cost for family coverage is about $22,000, of which the employer pays $16,000 and the employee pays $6,000.
Given that employers foot most of the bill, in some sense, they are the customers of healthcare.
How Prices are Set
In economics, price is determined by supply and demand… and demand is determined by the customer. Given that employers pay for the majority of healthcare for their employees, then it is the employers that determine demand.
Historically, employers have not explicitly stated what price they are willing to pay for healthcare services. Rather, prices have been a jumbled combination of 1) insurance network discounts from healthcare providers and 2) health insurance plan design (i.e. deductible, co-insurance, etc.).
A market without clear prices will function terribly… which is why the VAST MAJORITY of markets have clear prices.
Since employers foot the majority of the healthcare bill, they have a responsibility to set the prices.
In doing so, they create clarity for their health plan members. Setting prices manages expectations. Setting prices prevents a ‘bait-and-switch.’
When an employer does NOT set prices, they are saying to their employees, ‘here is a benefit for you, but we don’t know how much it will benefit you and you don’t know how much it will benefit you.’
In result, only HALF of employees are satisfied with their health benefits.2 It’s the flip of a coin.
Is your #1 sales person satisfied? Flip a coin.
Is your lead software developer satisfied? Flip a coin.
Is your chief operating officer satisfied? Flip a coin.
Paying $16,000 per employee per year for the flip of a coin seems like a poor business decision.
However, Employers CAN take control of their health plan. Employers CAN create clarity in their benefits. Employers CAN demand excellence.
Set the Price. Take a Stand.