Big business wants to take on D.C.’s hospital lobby

Groups representing some of the largest employers in the U.S. are urging Congress to take on hospitals, arguing consolidation and unfair pricing is driving healthcare costs up at an unsustainable rate.

Corporations previously tended to stay out of controversial healthcare fights on Capitol Hill that would create more government intervention in private markets. But with the average cost of an employer-sponsored family healthcare plan increasing 55% over the past ten years, and most Americans getting insurance through their jobs, something has to change, lobbyists and experts say.

“In the past, I think they’ve been kind of skeptical of government solutions, but I think that the frustration has bubbled over to the point now that they’re saying ‘no, we actually need someone to help,” said Shawn Gremminger, director of health policy at Purchaser Business Group on Health, which represents dozens of large businesses who fund their own insurance plans and assume the financial risk of paying for their employees’ healthcare, including Boeing, eBay, The Walt Disney Company, Walmart and others.

Democrats have put more of a focus on “fair” pay and workers benefits as they control Congress and the White House. Employers say healthcare affordability needs to be part of that conversation.

About 83% of covered workers have an annual deductible for individual coverage — an increase of 25% from five years ago — with an average of $1,644 per year, according to the Kaiser Family Foundation. Research shows high-deductible plans can lead people to putting off necessary care, particularly for low-income populations and people of color.

PBGH and the Kaiser Family Foundation released a poll in April that found 87% of the 300 executive decisionmakers surveyed believe the cost of providing health benefits to employees will become unsustainable in the next five to 10 years.

A similar percentage said a greater government role in providing coverage and containing costs would be better for their businesses and their employees.

“Employers have been asserting themselves (in Washington) much more stringently than in the past,” said James Gelfand, senior vice president of health policy for the ERIC Industry Committee, a national association representing large employers’ that self-fund their insurance plans. “That’s in part because the situation has spiraled out of control.”

Commercial plans pay providers about two times what Medicare does for the same services. While hospitals point to this as proof Medicare rates are too low, some critics argue mergers, “anti-competitive” contracting, and other practices have given hospitals more leverage to request unfair rates from private payers.

Hospital spending makes up about one-third of national health expenditures, totaling $1.2 trillion in 2019, with private insurers covering about 40% of that. However, hospital leaders argue some facilities would cease to operate if commercial rates were reduced to Medicare levels.

The average annual premiums for employer-sponsored coverage was $21,343 per family in 2020, according to the Kaiser Family Foundation, with enrollees paying about one-third of those costs.

Lobbyists at PBGH, the ERISA Industry Committee and other groups are urging Congress to take on hospitals, starting by banning the secretive contracting tactics used by Sutter Health and others that critics argue help health systems keep and build on their market power and drive up rates and profits.

Lawmakers are working on legislation that would ban “all-or-nothing” clauses in contracts between providers and payers requiring they cover every service and product at all of a system’s hospital if they want any access.

The proposal is also expected to ban “anti-tiering” and “anti-steering” clauses that make it difficult for employers and plans to guide enrollees to other, lower-cost, high-quality providers.

“I think we’re going to get a reintroduction in the next couple of months, with the goal of teeing it up for (inclusion) in the end-of-the-year budget package,” Gremminger said.

Those provisions were introduced in a bipartisan bill from Sen. Patty Murray (D-Wash.) and former Senate health committee chairman Lamar Alexander (R-Tenn.) in 2019. That bill passed the health committee, and while parts of it became law, the contract-related provisions were stripped out due to hospital opposition.

But now, Washington has a different makeup and Murray is the Senate health committee chair. After years of focusing primarily on the Affordable Care Act and the individual markets, which cover 12 million people, Congress is beginning to look at what’s driving rising healthcare costs. That includes investigating the price of employer-sponsored insurance, which covers 153 million Americans.

“I think policymakers invested a lot of years not talking about costs and getting that issue but fighting back and forth about the future of the ACA,” said Erica Socker, vice president of healthcare and payer reform at Arnold Ventures, a philanthropy organization that has become heavily involved in the national and state-level healthcare reform debates and funds groups like PBGH and the National Alliance. “The other thing that could be putting more pressure on them to think about costs is we’ve seen costs really rise, with more people being in high deductible health plans and really having a lot of out-of-pocket exposure to high costs.”

In a Senate hearing last month focused on hospital consolidation, Martin Gaynor, a professor of economics and public policy at Carnegie Mellon University, said “all-or’nothing,” anti-tiering and anti-steering clauses can weaken competition, but he noted there is not much research and their impacts given the secretive nature of contracts between providers and payers.

“If dominant hospitals impose restrictions on insurers such as ‘you are not permitted to inform enrollees about lower cost options or better value, you are not permitted to take our hospitals and put in a less favored tier because they are more expensive or not as good,’ restrictions like these are intended to restrict choice by individuals, weaken competitors and can be very damaging,” he said.

These contracting practices have been the subject of lawsuits against health systems like Sutter Health and Atrium Health in recent years. Both health systems settled the litigation, agreeing not to seek those contract terms in the future. It’s not clear how many systems have similar practices, since contracts are secret, but Gremminger says some PBGH’s members have complained about them since the settlements.

“It’s become increasingly apparent that the hospital consolidation that’s occurred over the last decade has led to a system that is increasingly unresponsive to the needs to maintain an affordable and effective healthcare system,” said Michael Thompson, president & CEO of the National Alliance of Healthcare Purchaser Coalitions, which represents regional groups advocating for employers in the private sector — mainly Fortune 400 companies. “What became clear in the Sutter case is that health systems have been empowered by pure market share have been exercising monopoly-type activities that have stopped the market from functioning.”

Still, the groups are going up against powerful forces in Washington, including the American Hospital Association and the Chamber of Commerce. And many of the same corporations that are members of the Chamber are also members of PBGH or the ERIC Industry Committee.

The Chamber, which also represents providers and drug companies, is ardently opposed to government intervention in the private markets, including setting drug prices in Medicare, which PBGH, ERIC and the National Alliance are considering supporting for the first time.

And the AHA and other hospital groups told congressional leaders in a letter in 2019 it had “serious concerns” that banning those anti-steering or anti-tiering clauses could lead to more narrow insurance networks while negatively affecting access to care at rural and community hospitals.

As for the “all-or-nothing” clauses, AHA wrote, having insurance companies contract with entire systems create efficiencies like not duplicating services at every site of care. Banning the clauses could reduce care in rural areas and inner cities, the letter added.

The AHA, which spent about $24 million on lobbying in 2020, has a powerful tool in its arsenal: the group can call on hospital leaders to lobby their congressional representatives on specific policies.

The employer groups said they’re working on getting the business owners they represent to talk to their representatives in Congress about healthcare costs, but the executives tend to be cautious about using political clout on controversial issues and damaging a brand.

“For employers themselves to be visible in certain ways, they need to get approval at all levels, and often times healthcare disagrees with their other interests,” National Alliance of Healthcare Purchaser Coalitions’ Thompson said. “The ideal is we get CEOs of the biggest employers of every state to talk to their policy maker about healthcare but the reality is they expect we will speak on their behalf.”