January 02, 2024
Rising health care costs and concerns about the overall affordability of health care remain crucial issues for both employers and employees. Health care spending now exceeds 18% of U.S. gross domestic product (CMS, 2023). Per capita spending in the employer health care market increased 21.2% between 2017 and 2021 (Health Cost Institute, 2023), and employers again face a 6.0% annual increase in the total cost of employer-provided health benefits, according to Business Group on Health’s 2024 Large Employer Health Care Strategy Survey (Executive Summary). One important factor contributing to rising costs is the trend of increased consolidation within key health care sectors. Studies show that financial benefits from market consolidation are not always passed to consumers in the form of lower premiums (HHS ASPE, 2022). Competitive markets, even those driven by large multifaceted stakeholders, are foundational for the development of innovative health care products and services. Employers rely on this marketplace innovation to help them identify benefits solutions that will be valuable to both employer and employee in managing health care costs.
It is also widely understood that employers design and offer their health and other benefits plans to compete for and retain the talented employees that are vital to the business’s success. Underpinning competition for talent among employers necessarily must be a variety of competitive, differentiated, and continually innovating partners, service providers, suppliers, manufacturers, PBMs, hospitals, insurance carriers, third-party administrators, health care providers, and others with whom employers can work to develop and deliver their unique benefit plans and offerings. Without the underlying, fundamental competition among the different stakeholders in the health care marketplace, employer plan innovation and offerings may be stifled and devoid of differentiated, affordable, targeted value that drives employee engagement, recruitment, and retention.
Additionally, employers are best equipped to design and deliver affordable, accessible, high-quality benefits programs that help their employees and their families live healthy and productive lives. To deliver these programs and achieve this goal, employers need a robust market of health care and benefits solutions, each fueled by market competition to continuously innovate and improve.
Business Group on Health, recognizing the building blocks of innovation, competition, and differentiation as essential to employer sponsored plans and the essential delivery of affordable coverage and services, generally promotes and advocates for policies that empower employers to design meaningful benefit plans and programs. By extension, the Business Group promotes policies that drive the foundational competition among all market stakeholders upon which employer offerings are based.
Further, there are many factors that contribute to the extraordinary rise in health care costs, and little dispute that the increasing costs are challenging for employees and families, as well as employers. We believe policies and business practices that enhance and encourage innovation and competition in health care will help mitigate the cost trend and deliver more value for employees and their families through employer health plans.
This perspective and theme is reflected throughout our positions on specific issues and policies that impact employer plans, including for example:
- Prescription Drug Pricing and Pharmaceutical Supply Chain Reform
- Transparency in the Health Care System
- Medicare Payment and Delivery Reform
In addition, the Business Group supports appropriate government review and enforcement for planned consolidation and other practices that may, under certain circumstances, otherwise have anti-competitive concerns.
Business Group on Health also recognizes there are specific aspects of the U.S. health care system from which employer plans and their members would benefit from an increased level of integration and interoperability that may, at times, be driven by consolidation, partnerships, or other collaborations. Fragmented elements of health care delivery, such as in the virtual health and point solution markets, can add to plan members/patients’ frustrations and potentially lead to poor health outcomes, as the Business Group highlighted in our publication on the integrated benefits experience. Business Group on Health supports market consolidation and other actions targeted to improve the coordination and integration of care, the value and experience of the patient, and the efficiency of plan design and administration.
WHY IT MATTERS
- Consolidation in the hospital and insurance markets is generally shown to increase costs and overall health care spending. For example, there is evidence that horizontal consolidation is associated in these industries. (HHS ASPE, 2022).
- Recent research shows that provider consolidation, in its varied forms, often leads to higher prices for both Medicare and private payers (MedPAC, 2023).
- Among drug manufacturers, mergers over the past 30 years have resulted in the market share of the top eight drug companies rising from 36% in the late-1980s to over 50% today. In 2017, four companies produced more than 50% of all generic drugs (The Washington Post, 2021).
- In 2018, more than half of US physicians and 72% of hospitals were affiliated with vertically integrated health systems (Furukawa, et al., Health Affairs, 2020).
- Market concentration has also occurred among pharmacy benefit managers (PBMs) with the three largest PBMs now controlling roughly 79% of the market (Commonwealth Fund, 2022).
- There has been exponential growth in the virtual health solution industry in the past few years, with over 13,000 digital health solutions now available in the market (CB Insights, 2022). The rapid expansion of virtual health has added to an already complex and fragmented health care system, but market consolidation is underway.
More TopicsPolicy & Advocacy Coverage Expansion
ERISA PreemptionPreserving ERISA Policy Position Statement
Tax ExclusionTaxing or Limiting Tax-Free Benefits Policy Position Statement
Promoting Competition and Innovation in Health CarePromoting Competition and Innovation in Health Care Policy Position Statement
Drug PricingPrescription Drug Pricing and Pharmaceutical Supply Chain Reform Policy Position Statement
TransparencyTransparency Policy Position Statement
Mental Health ParityMental Health Parity Policy Position Statement
TelehealthTelehealth and Virtual Care Policy Position Statement
Medicare ReformMedicare Payment and Delivery Reform Policy Position Statement
HSAsHealth Savings Accounts (HSAs) Policy Position Statement
Surprise BillingSurprise Billing Policy Position Statement
OpioidsOpioids Policy Position Statement
Paid LeavePaid Leave Policy Position Statement