No longer flying blind, employers address healthcare costs

September 25, 2020

For most employers healthcare is the second largest expense after payroll, yet many are flying blind on the prices being paid. In an effort toward transparency, the RAND Corporation released a study finding that employers pay hospitals 247% more than what Medicare would pay.

“If the private health plans participating in the study had paid hospitals using Medicare’s payment formulas, the total allowed amount over the 2016 to 2018 period would have been reduced by $19.7 billion, a potential savings of 58%,” said Christopher Whaley, PhD, policy researcher at RAND Corporation, and lead author of the report.

The results certainly support the argument that most employers are paying more than what is reasonable for healthcare in hospitals. Armed with this data employers are now working together to take a more active role to guide their employees and family members to hospitals that offer better value.

High hospital prices take a financial toll not only on employers, but everyday people. For employers, these unsustainable costs leave less money available for employee raises, robust health and wellness benefits, capital to grow their businesses, and funds to contribute to their communities. The RAND study findings allow businesses and consumers alike to be better informed shoppers of healthcare.

It is only by employers working together and participating in efforts such as the RAND study and focusing on identifying hospitals with the highest quality at a fair price, that much-needed market changes can be achieved.

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