Prying Open the Insurance Black Box

Rule changes give companies tools to control health spending-and a legal responsibility

US employers spend more than $1 trillion a year on health insurance for workers and their families. While they’ve long had a fiduciary duty to ensure that those funds are spent prudently, most have relied on insurers and other middlemen to define benefits, negotiate prices with physicians and hospitals, and pay claims. Now new federal policies are adding pressure to companies to make sure they’re not squandering employees’ health benefit money.

That won’t be easy in a healthcare system where a quarter of spending is wasted and the cost and quality of care vary wildly. The details of prices and fees have long been hidden from employers, kept secret in contracts worked out by insurers, hospitals and benefits consultants. New measures aim to force them into the open, making it easier for companies to understand where their money is going.

Rules introduced during the Trump administration ordered hospitals and insurers to disclose prices they negotiate. Congress later added the requirement that brokers and consultants that design health benefits programs tell employers whether they’re getting compensation from companies whose products and services they recommend. “It’s a double-edged sword,” says Elizabeth Mitchell, chief executive officer of the Purchaser Business Group on Health, which represents dozens of employers such as Apple, Boeing and Walmart. “They now have the information they couldn’t access before, but they also have to act on that.”