





Could employers do more to reduce healthcare spending? Employers have dramatically increased deductibles in recent years, and this has had some effect (though no one is certain just how much.) Employers tried forcing employees into narrow network plans in the 1990s, mostly in the form of HMOs, but employees rebelled against the lack of choice. (Some of you may remember the “Patients’ Bill of Rights” that Congress nearly enacted.) I don’t expect too many employers to repeat that mistake. Employers might offer cheaper plans alongside expensive ones, but they probably won’t pass most of the savings on to employees. For one thing, employers want to keep most of the savings for themselves. Perhaps more problematically, there is a growing body of evidence that this could lead to an adverse selection death spiral that would disrupt employee choices.

It is hard to imagine that American businesses have been willfully negligent about healthcare spending. If only by accident, some employers would be worried about health spending. And if worrying about costs was enough to actually lower costs, then those that worried would outperform their competitors and gain market share. By now, every American would be working for a company that worried about health spending. The logic is pretty compelling: America’s firms are worried about health spending and are appropriately outsourcing these worries to insurers.

So why are medical costs and medical prices so high? I could give a list but this has been discussed ad nauseum so I will not repeat it here. Employer-sponsored insurance is on the list, but largely due to tax deductibility. If employers are otherwise on the list, they are towards the bottom.
