Employers are Struggling to Figure Out if They're Overpaying for Health Care

Employers are facing stronger legal requirements to ensure they aren't wasting their workers' money on overpriced health insurance, at the growing risk of financial consequences.

But employers say secrecy around negotiated health care prices too often prevents them from accessing data that would help them figure out if they're getting a good deal.

Why it matters: Federal rules push employers to serve as responsible stewards — or "fiduciaries" — of their workers' premium dollars.

The price tag of the average employer-sponsored family health plan hit nearly $24,000 last year, with employees on the hook for about a quarter of the cost, per KFF. And a new study this week illustrated how premiums, which have been rising faster than wages, are eating into workers' potential earnings.

The big picture: Employers — even the really large ones with sophisticated HR teams — don't always have a good sense of the inner workings of their benefits despite the massive amounts of money they shell out for them.

"The core challenge for employers is that they don't have visibility into this information and the vendors that they have relied on to procure health care on their behalf, they don't share it," Elizabeth Mitchell, CEO of the Purchaser Business Group on Health, told Axios.

Driving the news: The fiduciary requirements have been in effect for a few years. But as of Dec. 31, employers had to attest that their agreements with their third-party administrators, pharmacy benefit managers and other benefit providers contained no "gag clauses" at risk of fines.

That meant employers had to make sure their contracts contained no agreements that would block them from data they needed to ensure they were paying fair prices for care.

Employer groups tell Axios that requirement has been difficult, if not impossible, to meet in many cases because the administrators of their plans often aren't forthcoming or cooperative.

In some cases, employers have identified gag clauses but struggled to get their third-party administrator to remove them, said Chris Deacon, founder of VerSan Consulting, who focuses on policy related to employer health benefits.

"It's just a really tough place to put employers," said Cora Opsahl, director of the 32BJ Health Fund, one of New York's largest unions. "I might not have a gag clause in my contract with my carrier, but the carrier may have gag clauses in their contracts with their providers. I don't know that."

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