Last week, Blue Cross Blue Shield (BCBS) of Texas — the state’s largest insurer — and an alliance representing Texas Health Resources and UT Southwestern Medical Center — the region’s largest healthcare provider — reached an agreement for a new contract.
Although the terms of the contract have not been publicly disclosed, it is reported that Texas Health and UT Southwestern had initially asked for a $900 million increase in reimbursement rates over a 32-month period. That amount was much higher than rates already accepted by other major healthcare providers in the region.
When it was all said and done, an agreement was reached that was “in the range” of those other contracts, according to Shara McClure, divisional senior vice president of health care delivery for BCBS of Texas.
“Both parties compromised,” said McClure. “I feel very comfortable with the outcome and the financial implications on the businesses and members we serve.”
Though McClure may feel comfortable with the deal, who really foots the bill for the increasing costs of medical care?
“Everyday people pay the bill — one way or another,” stated Cynthia Cox, vice president of the Kaiser Family Foundation (KFF). She commented that healthcare costs consume a larger share of the economy each year and take a bigger bite out of the family budget as well.
According to Petersen-KFF Health System Tracker, the fraction of the gross domestic product spent on health went up by 6.5% from 2000 to 2020.
The effect on BCBS premiums may not be seen this coming year for those who have already locked in health plans, but some may see an incremental increase in deductibles and copayments because of the increased reimbursement contract. And it is a pretty safe bet that premiums will rise in the future.
In 2021, Kaiser’s employer health benefits survey reported that it costs over $22,000 to cover a family’s healthcare costs in a year, compared to less than $6,500 in 2000. That translates to a 22% increase over the last five years and a 47% increase over the last ten years.
What exactly makes health so expensive? Several elements contribute to the higher costs of health. The aging population is one, and other significant determinants are technological investments and medications.
Cox said, “When we look at what’s really driving costs overall in the health care system, it’s the prices paid to hospitals, physicians, and drug companies.”
Healthcare providers argue that they must make a healthy profit in order to make essential investments to maintain a high level of patient care, while patients and employee advocates believe the fast-growing health costs should be reined in.
“MRIs will age out, facilities will deteriorate, and patient care will be compromised because hospitals are a very capital-intensive business,” stated Stephen Love, CEO of the Dallas-Fort Worth Hospital Council.
“It is important to stand up for affordable care and try to stem rising costs at a time when our customers and members are facing inflationary and recessionary pressures,” said Blue Cross Chief Marketing Officer Dr. Mark Chassay.
While both viewpoints have merit, the bottom line is that someone has to pay. Employers are often the ones picking up the increasing cost of healthcare.
Some six to ten years ago, employee contributions to premiums rose faster than employer contributions. However, employer contribution towards premiums has doubled over the past five years. According to KFF, employers covered an average of 83% of the premiums for single coverage last year and 72% for family coverage.
An analysis by the consulting firm, Aon, reflects that employers increased their contribution to employer-sponsored health plans in 2022 by 3.7%, while employees pitched in an additional 0.6% of their wages.
In 2023, employer contribution costs are projected to rise between 5.6 – 6.5%. Ultimately, however, the increased costs of health insurance are at the expense of the worker. “Even if employers pay a larger share of premiums, that’s also coming at a cost — of people’s salaries,” said Cox. “No matter how you slice it, this costs people money.”
Health insurance premiums are not the only factor that is increasing. Last year, employees paid 5% more for deductibles and copays, averaging $1,892 in out-of-pocket costs, according to Aon.
Another factor driving up costs is the number of uninsured residents in Texas and in Dallas, roughly twice the share for the nation, according to Love.
Over the years, Republican lawmakers have stood against expanding Medicaid for uninsured residents, even though most of the expenses come from federal taxes.
Local taxpayers pick up part of the burden by funding public hospitals, and some costs are shifted to commercial insurance, which has the highest reimbursements. This cost-shifting is “absolutely” one reason hospital prices are higher in the Dallas-Fort Worth area, according to Love.
