Center for American Progress

Federal Solutions To Address Rising Costs of Employer-Sponsored Insurance

Federal Solutions To Address Rising Costs of Employer-Sponsored Insurance

Federal policymakers should act to lower health insurance costs and improve affordability for both employers and workers.

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Snow falls in Washington, January 19, 2024, on Capitol Hill. (Getty/ Andrew Thomas/NurPhoto)

Introduction and summary

In 2022, 92 percent of Americans had some form of health insurance, with nearly half of this coverage obtained through an employer.1 While a vital benefit for employers and employees, the cost of providing employer-sponsored insurance (ESI) has reached a nearly untenable state. ESI premiums are rising at a faster pace than inflation and wage growth.2 In 2022, the average annual ESI premium was $8,435 for individual coverage and $23,968 for family coverage, a 43 percent and 47 percent increase, respectively, over the previous 10-year period.3 Higher deductibles and cost sharing—along with the rapid proliferation of high-deductible health plans (HDHPs) that further shift costs to employees and now make up more than 1 in 4 ESI plans—have also made ESI increasingly unaffordable for employees.4 In fact, in 2023, 2 in 5 adults covered by ESI reported difficulty affording health care.5 This should come as no surprise, considering that, in 2021, the annual average health spending per American covered by ESI (the amount paid by employer and employee for medical and pharmacy claims) was $6,467.6

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Experts point to increasing prices of health care products and services as the primary driver of rising spending rather than an increase in health care utilization.7 Fueling this price growth are exploitations of the prescription drug patent system and consolidation of hospital systems.8 Drug manufacturers, pharmacy benefit managers (PBMs), and large health systems use their outsized market power to hold insurance carriers to increasingly aggressive contract terms and prices.9 Meanwhile, consolidation among insurance carriers is also on the rise. Despite the potential for using that counteracting market power to negotiate lower prices, with little competition, insurers that dominate local markets instead tend to raise premiums.10 Ultimately, buyers—the employers sponsoring the plans—bear the resulting costs, much of which are then passed along to their employees.11

Employers have explored several market-based solutions to lower the cost of providing coverage to their employees and their families. Among these solutions are employers grouping together to gain negotiation power against the main drivers of increased health plan costs, including health system provider fees.12 Unfortunately, these efforts have seen limited success. Even where an insurance carrier represents a high number of enrollees, large health systems are still confident that their facilities and providers are essential to the plan’s network and the plan will eventually capitulate, regardless of employer efforts.13 This has led many business leaders to worry about the long-term sustainability of ESI and to express interest in government intervention.14

This report outlines federal policy interventions that Congress should consider to address the high costs of ESI. These include:

  • Make coverage more affordable for employers to provide by increasing transparency and addressing consolidation, including by:
    • Creating a national all-payer claims database
    • Expanding the authority and capacity of antitrust enforcement agencies
  • Improve employee access to equitable and comprehensive plans, including by:
    • Curbing the rise of HDHPs and health savings accounts (HSAs)
    • Expanding the role of states to regulate insurance plans of all types
    • Enabling more small businesses to provide affordable coverage through improving the Small Business Health Options (SHOP) marketplace
    • Considering a public option available to employers
  • Reform the prescription drug market to bring down the prices employers and employees pay for medications, including by:
    • Expanding the Medicare drug negotiation and rebate provisions of the Inflation Reduction Act (IRA) to the commercial market
    • Regulating the pharmacy benefit manager industry to ensure pharmaceutical rebates reach patient
    • Reining in manufacturer delay tactics that prevent generics and biosimilars from coming to market

Employers can offer ESI through either fully insured or self-insured plans. Small employers tend to offer fully insured plans, in which an employer purchases a health plan from an insurer and the health insurer carries the risk of unexpected high costs.15 Meanwhile, 82 percent of large employers with 200 or more employees offer self-insured health plans, bearing the risk themselves.16 Because they can spread risk across many employees and their dependents, large employers typically opt to carry the risk and directly pay for the health care costs of their employees by self-funding the plan, which an insurance company then administers. The Employee Retirement Income Security Act (ERISA) of 1974 largely exempts self-insured plans provided by private employers from state health insurance regulations.17 Both fully insured and self-insured plans are costly for employers to provide and for employees to use—and both need federal policy intervention to make that coverage more affordable. Unless otherwise noted, this report’s policy recommendations apply to both fully and self-insured plans.

Bring down health care prices for employers by increasing transparency and addressing consolidation

The corporatization and consolidation of the health care provider market have contributed to the rising costs of health insurance.18 Health care consolidation transactions—both horizontal and vertical—have accelerated since 2010. Between 2018 and 2021, 310 consolidation transactions were announced between hospitals and health systems.19 Mergers also occur between entities from different entities within health care, such as hospital systems acquisitions of physician practice or provider systems and insurers.20

Despite hospital systems’ insistence that expansions and mergers allow them to reduce some costs, research shows that consolidation does not result in savings for health plans or patients.21 Hospital mergers can increase the price of a stay by as much as 54 percent, and one study found that hospital acquisition of physician practices led to a 14 percent price increase for physician-provided services.22 Consolidation harms workers through higher prices for health care: One study found that the increase in health care spending from hospital consolidation is associated with lower income and rates of employment locally.23

Rising health care prices have prompted state and federal policymakers to root out incentives for consolidation that fail to bring value to patients; one example is preventing health systems from charging hospital fees to patients using outpatient care from an offsite provider practice.24 To improve competition and address the harms of consolidation, federal policymakers must improve transparency in health care pricing, including by developing a national all-payer claims database (APCD) and using antitrust enforcement tools to bring greater scrutiny to health care consolidation and anti-competitive practices.

Create a national all-payer claims database to improve transparency for researchers, policymakers, and plan sponsors

Federal policymakers should build on state action to create a national APCD that applies to all ESI plans. As of 2022, 18 states have operational APCDs, with an additional eight states developing new APCDs.25 These databases are troves of information for researchers, policymakers, and industry stakeholders, providing access to medical, pharmacy, and dental claims as well as eligibility and provider files collected from private and public payers.26 While some critics argue APCDs could increase prices because providers may demand higher rates their peers are receiving from insurers, evidence suggests APCDs can help reduce prices.27 The strength of APCDs is that they provide access to a nearly complete picture of the commercial insurance landscape in a state.28 This allows for more accurate research and policymaking in response to trends and pricing disparities that may not be apparent from less complete data.

However, self-insured employer plans cannot be required to submit data to state APCDs. In fact, in 2016, the Supreme Court ruled in Gobeille v. Liberty Mutual Insurance Co. that self-insured plans subject to ERISA—and therefore broadly exempt from state regulation—could not be required by states to submit claims data.29 Though some self-insured plans still choose to contribute claims to state databases, it is difficult to determine how much of a gap this ruling caused in the data.30

The federal government should consider establishing a federal APCD or, alternatively, “de-preempting” the reporting of self-insured plans. Establishing a federal APCD would allow for a single clearinghouse for all claims data nationally, streamlining research, informing policy, and promoting competition. Congress could direct the departments of Health and Human Services (HHS), Labor, and Treasury secretaries to coordinate data collection from the various plan types under their respective jurisdictions. The secretaries would rely on the implication of Gobeille, in which the Supreme Court suggested that the authority to create a federal APCD-like reporting framework already exists in statute.31 Alternatively, Congress could direct the secretaries to contract with a nonprofit, nongovernmental entity to serve as the repository for the claims data.32 To require self-funded plans to contribute data to state APCDs, Congress could amend ERISA to require self-funded plans to comply with state data collection efforts or administratively amend federal regulations to do the same.

How a federal APCD helps employers

Greater insight into insurance claims across multiple payers would allow ESI plans and insurance carriers to compare the rates to others in their state or region. Claims and pricing transparency would help ESI plans construct networks that bring better value to their enrollees and negotiate fairer prices.

How a federal ACPD helps employees

If pricing transparency allows plans and employers to negotiate lower provider rates, employees and their dependents would benefit from lower premiums and cost sharing.

Expand the authority and capacity of antitrust-enforcing agencies

The federal government must curb anti-competitive practices to address the growing concentration throughout the health care system, including in the health care provider and insurance industries. Dominant provider systems can extract higher payment rates from insurers and other payers via outsized market power and demand that payers agree to contracting terms that prevent patients from accessing competitors.33 Insufficient competition in the insurance market allows insurers to charge higher health insurance premiums even when they suppress provider prices.34

Despite growing consolidation within the health care market, the Federal Trade Commission (FTC) lacks the information and resources to sufficiently challenge health care mergers that threaten competition. The Hart-Scott-Rodino Antitrust Improvement Act (HSR) of 1976 requires that entities submit premerger notification to federal antitrust authorities.35 HSR notification applies to large mergers—in 2024, the threshold is generally a valuation of least $119.5 million36—and smaller mergers do not face the same requirement. Therefore, large companies can acquire small hospitals or physician practices largely without antitrust oversight even though the cumulative impact may have large economic consequences. Serial acquisitions have contributed to a dramatic shift in physician employment, with 74 percent of physicians employed by a hospital or corporate entity rather than in private practice at the end of 2021—according to one study—compared with 62 percent in January 2019.37

The FTC and Department of Justice have recently taken steps to give greater consideration to the consequences of serial acquisitions on competitions, including revisions to HSR filing forms and updating merger guidelines.38 One example of this is the suit brought by the FTC in September 2023 against U.S. Anesthesia Partners (USAP) and Welsh, Carson, Anderson, and Stowe (Welsh), alleging that USAP and Welsh were “systematically buying up nearly every large anesthesia practice in Texas to create a single dominant provider with the power to demand higher prices.”39 Congress could go further by requiring premerger notice from transacting parties if the cumulative value of their transactions in relevant industries over the past several years in the exceeds a reporting threshold amount. While this method would unlikely lead to the unwinding of previous mergers and acquisitions, it would allow the FTC and other antitrust enforcers to review the market impact of new transactions that would otherwise go unnoticed by regulators but be potentially detrimental to competition.

While the FTC has authority to challenge mergers across the health care industry, it lacks statutory authority to monitor and bring enforcement actions over other potential forms of anti-competitive conduct by nonprofit entities.40 This is notable as nonprofit hospitals accounted for almost half of community hospitals in 2022,41 and some nonprofit hospitals wield tremendous market power.42 Congress could close this gap in oversight by amending the FTC Act. The bipartisan Stop Anticompetitive Healthcare Act of 2023 (H.R. 2890) is one bill that would extend the FTC’s authority over anti-competitive practices to nonprofit hospitals.43 In addition, Congress should ban anti-competitive provider-insurer contract terms—such as anti-steering or anti-tiering clauses—that drive up prices and can prevent patients from accessing higher quality and lower cost providers.44

How expanding federal antitrust authority helps employers

Empowering antitrust agencies with the authority and resources they need to slow consolidation and stop anti-competitive practices, including among nonprofit entities, could lower health care prices and premiums for plan sponsors.

How expanding federal antitrust authority helps employees

More robust competition can improve quality and reduce health care prices, allowing employees to save through lower premiums and cost sharing.

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Improve employee access to affordable, comprehensive coverage

Federal policymakers can take several administrative and legislative actions to improve competition and promote high-quality, comprehensive ESI plans for employees at companies of all sizes. Policymakers should consider both incremental changes and bolder, more innovative reforms. For example, the Center for American Progress has proposed introducing a public option health plan for employers.45

Curb the rise of high-deductible health plans and reliance on health savings accounts

Some employers turn to HDHPs to limit premium increases to themselves and their employees. HDHPs trade a lower premium for a considerably higher deductible—more than $1,500 for individual coverage and $3,000 for family coverage.46 However, these plans simply transfer much of the financial risk from employer to employee, leaving employees to pick up much of the tab when they seek care and creating serious financial burdens on lower-income employees. In 2022, 29 percent of covered employees were enrolled in HDHPs.47

To blunt the impact of the HDHPs’ high deductible on employees, employers may accompany them with a health savings account. HSAs have limited pretax contributions—up to $4,150 for an individual and $8,300 for families in 2024—that can be made by either the employer, employee, or both.48 (see Table 1) An employee can retain unused HSA funds in an account, rolling them over indefinitely until withdrawn. By contrast, unused funds in a flexible spending account (FSA)—or an arrangement offered through an employer to enable an employee to “pay for many out-of-pocket medical expenses with tax-free dollars”—typically do not roll over past the end of the year, except when employers offer limited flexibilities.49 Moreover, funds placed in HSAs can be invested and grown, creating a tax incentive for foregoing the use of those funds for care in any given year.50 Unlike funds placed in other employee benefit accounts such as a 401(k) or individual retirement account, HSA funds remain untaxed so long as they are withdrawn to pay for a qualifying medical expense. After reaching age 65 or becoming disabled, using these funds for other purposes is penalty-free but taxable.51 This allows the account holder to avoid not only income tax on employer contributions and to claim an income tax deduction for their contribution but also avoid capital gains taxes on earnings used for qualified medical expenses.52 Savvy investors take advantage of this while they are younger and healthier to plan for future medical expenses in retirement, though this calculus only works for those without serious health needs and people with enough disposable funds to cover medical expenses out-of-pocket while contributing to an HSA.53 Accordingly, low-income, Hispanic, and non-Hispanic Black HDHP enrollees are far less likely to participate in HSAs than their higher- income and non-Hispanic white counterparts.54

The net outcome of HDHPs is that enrollees only save money when they don’t use health care. For lower-income enrollees, this usually comes from simply not seeking care until an illness has progressed.55 Delayed and often more complicated care is not only more costly to employees but also may result in poorer health outcomes or health complications that can drive up costs for employers with longtime employees in the long run, as preventable and treatable conditions progress into more serious health problems.56

Even when HDHPs are paired with an HSA, enrollees are still likely to pay more out-of-pocket for care than if they were enrolled in a different plan type.57 Furthermore, when employers provide HDHPs as part of a menu of insurance options to employees, the increased enrollment in HDHPs pulls lower-risk enrollees out of the pool for other plans, raising premiums for employees enrolled in more traditional plans.58 At the same time, the rise of HSAs has a profound impact on federal tax revenues—with an estimated $180 billion of forgone revenue as a result of tax breaks over the next decade. These losses would be further compounded by legislative proposals to expand HSA use.59 As such, policymakers in Congress and the Biden administration should look for ways to rein in HDHPs and reject proposed expansions to HSA eligibility and qualified expenses to protect the future affordability of ESI.60

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How limiting HSA and HDHP use helps employers

Policy intervention that limits the uptake of low-quality ESI health plans would improve employers’ ability to recruit and retain employees. According to the Employee Benefit Research Institute, in 2022, approximately half of employees enrolled in HDHPs were satisfied with their plan compared to two-thirds of employees enrolled in traditional plans.61 Regarding out-of-pocket costs for prescription drugs and other health care, employees with HDHPs were 25 percent and 39 percent less satisfied with their coverage, respectively, than those enrolled in traditional plans.62 Over time, employees with poorer health outcomes due to unreceived care may be unable to work—completely or partially—with serious consequences for themselves and their employers.63

How limiting HSA and HDHP use helps employees

Restricting the growth of HDHPs and HSAs would discourage employers from offering them. Insurance products with less financial exposure for enrollees protect employees and their families by enabling them to afford the care they need when they need it. Limits on HDHPs and HSAs also help prevent the widening of the racial wealth gap, as lower-income employees and employees of color are less likely to contribute to or benefit from HSAs.64

Expand the role of states to regulate some insurance plans

ERISA significantly reformed employee benefits and enabled health plan oversight.65 ERISA gave broad authority to the federal government to regulate employer health plans, preempting many state regulations.66 Because the federal government sets the regulatory floor for all ESI plans, but state regulations apply only to fully insured plans, the two funding arrangements are subject to vastly different requirements. The state regulatory restriction prevents state governments from raising self-funded plan protections above the federal floor.67 As such, states lack the authority to regulate insurance standards for self-funded ESI, which covers nearly 2 in 3 covered employees.68

Due to the Supreme Court’s interpretation of ERISA’s preemption clause,69 addressing this regulatory gap would require congressional action. Fortunately, Congress has several options.70 First, Congress could replace the existing preemption clause with a narrower provision allowing states to regulate self-funded plans above the federal floor. This would enable states to set better consumer protection standards and have greater flexibility to experiment with cost-containment policies that apply to self-funded plans such as prescription drug-price caps; payment and cost-transparency initiatives; and value-based payment models.71 Second, to a similar end, Congress could pass clarifying legislation to override the Supreme Court’s interpretation of ERISA that carved out self-funded plan regulation, enabling states to regulate self-funded plans.72 Finally, Congress could grant federal agencies the authority to issue waivers to applicant states.73 For example, Congress could enable the secretary of HHS or the secretary of Labor to approve waiver applications allowing states to regulate plans subject to ERISA, similar to the secretary of HHS’ authority in approving State Innovation Waivers under Section 1332 of the Affordable Care Act (ACA).74 Any of these options would empower states to better protect their citizens and labor forces while also allowing them to experiment with price control policies.

How expanding states’ authority to regulate insurance helps employers

Expanding the role of state insurance regulation through ERISA reform would extend some ACA requirements to self-funded ESI plans that may improve the plan’s value. For example, the ACA medical loss ratio rule—which requires that 85 percent of premium dollars in the large group market must be used for medical claims and quality improvement—does not extend to self-funded plans. Applying this requirement to ERISA plans would help employers save by minimizing the administrative spending of the insurers with whom they contract.75 Additionally, employers offering self-funded plans could benefit from state protections from high costs. For example, some states have enacted PBM transparency laws; employers could save on related costs if these were applied to the self-funded ESI market.76

How expanding states authority to regulate insurance helps employees

State-level ERISA regulations can help protect consumers from high costs. For example, state policies that require plans to limit out-of-network service cost sharing and count surprise billing toward deductibles could apply to the 2 in 3 employees insured by self-funded plans.77

Introduce more competition among commercial plans for small businesses by fixing the SHOP marketplace

Through the ACA, Congress mandated that employers with 50 or more employees offer ESI.78 However, this provision does not apply to smaller employers. The ACA imagined a marketplace, known as SHOP, for these small businesses to find affordable ESI plans. Employers could use SHOP to offer fully insured plans to their employees and receive tax credits for their premium contributions for doing so.79 However, since SHOP opened in 2013, employer use and insurer participation have been low.80 In 2017, 27,000 employers, covering 233,000 employees, participated in SHOP, compared with more than 12 million individuals covered by the ACA’s marketplace for individual coverage in the same year.81

To qualify for SHOP, an employer must make coverage available to all its full-time (30 hours or more per week) employees and have between one and 50 employees, although some states have expanded SHOP eligibility to businesses with up to 100 employees.82 Once enrolled in SHOP, businesses with 25 or fewer employees and that cover at least half of premium costs can apply for the small business health care tax credit (SBTC).83 However, the value of that credit is relatively low and is smaller for businesses with more employees, and the credit is available only for the employer’s first two consecutive years in SHOP. Given these constraints, it is no surprise that, in 2016, fewer than 7,000 employers applied for the SBTC.84

Not all small businesses interested in purchasing health insurance through SHOP may be able to do so. Nearly half of all states had no insurer offering a SHOP plan for plan year 2023.85 This is in part because a 2018 HHS rule eliminated the requirement that an insurer covering more than 20 percent of a state’s small-group market must also offer a plan through the SHOP exchange.86 HHS could reverse this rule to encourage SHOP participation once again.

Another contributor to limited SHOP uptake stems from a 2018 Trump administration rule that removed the federally administered SHOP portal from the enrollment platform, instead requiring small businesses to purchase SHOP plans from a private company, agency, or broker.87 The Trump administration permitted states operating their own SHOP exchange to make this same change. This decision came under heavy scrutiny, with one health law expert, Timothy Jost, going so far as to say it would “effectively end the SHOP exchange.”88 To comply with the intent of ACA to establish a marketplace for small businesses, HHS should reverse this decision and resume facilitating enrollment in small-group health plans.

How fixing the SHOP marketplace helps employers

Incentivizing additional insurer participation in SHOP exchanges would make it easier and more affordable for small businesses to offer insurance to their employees. It would close a substantial gap in ESI provision among small businesses and bring down ESI costs through more competition in the SHOP market.

How fixing the SHOP marketplace helps employees

If more small businesses were able to purchase ESI through SHOP exchanges, many uninsured or underinsured employees would gain access to affordable ESI.

Consider a federal employer public option

To improve employees’ access to affordable, comprehensive coverage nationwide, Congress should consider taking bolder action and explore creating a federal public option for employers. As discussed in detail in a recent Center for American Progress report, an employer public option could improve competition, which would bring down premiums and cost sharing; allow the government to regulate and set reasonable reimbursement rates; and expand risk pools to balance the high costs associated with employees who need substantial care.89 There are important considerations for policymakers when designing an employer public option:

  1. Employer participation should be voluntary
  2. All employers should be eligible to participate
  3. Employers should retain the option to self-insure or fully insure
  4. The employer public option should be the employer’s exclusive source of health insurance
  5. The employer public option should include multiple tiers of plan generosity to preserve employer and employee choice
  6. The employer public option should offer comprehensive benefits on par with private coverage
  7. The employer public option should have government-set rates
  8. The employer public option should have an adequate provider network

A thoughtfully designed employer public option could be a strong alternative to traditional ESI that can improve affordability for both employers and employees.

How creating a federal public option for employers helps employers

If designed thoughtfully to spur cost and quality competition, creating a federal public option could improve affordability for employers regardless of whether they joined the new option or retained private coverage. Instead of being held to rates set by insurers and providers, employers participating in the public option could rely on government-regulated rates, and all would garner savings from a more competitive market.

How creating a federal public option for employers helps employees

The savings employers accrue from participating in a public option would reach employees through lower premiums and cost sharing. Federal quality and benefit regulations governing the public option plans would ensure employees have coverage for critical services in their current jobs, and these benefits would be consistent if they transitioned from one employer participating in the ESI public option to another.

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Federal prescription drug reform can help control rising ESI costs

Prescription drug prices are another major cost driver for ESI. In 2021, average prescription drug spending per ESI enrollee was nearly $1,400, accounting for about 22 percent of overall spending.90 Federal policy interventions to expand new Medicare prescription drug pricing reforms to the commercial market; rein in PBM behavior; and improve access to generic drugs and biosimilars can help control costs for employers and improve affordability for workers.

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Expand the Inflation Reduction Act’s historic Medicare drug negotiation and rebate provisions to the commercial market

The IRA includes several Medicare drug pricing provisions estimated to reduce the federal deficit by $237 billion by 2031.91 The law made the historic change of finally allowing Medicare to negotiate drug prices directly with manufacturers.92 Instead of being obligated to accept the prices set by pharmaceutical manufacturers, which are frequently set as high as the market will bear, HHS can negotiate fairer prices for select drugs in the Medicare program. The 10 Medicare Part D drugs selected for the first iteration of negotiation—with prices to take effect in 2026—are used by as many as 9 million Medicare beneficiaries and are associated with thousands of dollars in annual out-of-pocket costs for many.93

The IRA also took steps to guard against excessive drug-price increases by introducing rebate penalties for price increases above the overall rate of inflation for both Medicare Part B and Medicare Part D. It is likely that both these inflation rebates and Medicare’s drug-price negotiation authority will have pass-through effects on the private market, lowering drug prices and costs.94 However, policies that extend the IRA’s inflation rebates to the commercial market are critical. Price hikes in the commercial market are a pervasive problem, as drug companies raised the list prices of 112 drugs above the inflation rate in July 2023.95

The Elijah E. Cumming Lower Drug Costs Now Act (H.R. 3) was a 2019 proposal that would have applied Medicare’s drug-price negotiation authority and inflation rebates to both Medicare and the commercial market.96 Creatively, H.R. 3 would have not only enabled the secretary of HHS to negotiate drug prices with manufacturers, it would have also set a price floor at the lowest price of the same drug in Australia, Canada, France, Germany, Japan, and the United Kingdom and a price ceiling of 120 percent of the average international market price across these countries.97 A separate analysis by West Health in 2021 estimated that H.R. 3 would have generated significant savings in the commercial market as well, amounting to a “$195 billion reduction in employer costs and $98 billion in savings for workers” by 2030.98

At a minimum, policymakers should pass the Lowering Drug Costs for American Families Act of 2023 (H.R. 4895), introduced by Rep. Frank Pallone Jr. (D-NJ), which would expand the IRA’s drug-price negotiation and inflation rebate programs to the commercial markets.99 The Congressional Budget Office estimates that, by 2031, the IRA’s inflation rebates in Medicare will reduce the federal deficit by $8 billion. Of this, reductions in commercial health premiums will result in $2 billion in government savings.100 Extending these provisions to the commercial market would result in significant ESI savings on prescription drug spending.

Another critical element of the IRA—outside of Medicare drug-price negotiation and inflation rebates—is annual limits on Medicare Part D out-of-pocket prescription drug spending for beneficiaries. In the absence of federal legislation extending this beyond Medicare, some states have enacted policies requiring out-of-pocket drug spending limits in the commercial market.101 The federal ERISA reforms described earlier would be an essential step toward extending those state-level consumer cost-sharing protections extending to self-funded ESI plans.

How extending IRA prescription drug reform helps employers

Lowering excessive drug prices can bring substantial savings to employers. In 2021, the Center for American Progress estimated that the policies in H.R. 3 could reduce monthly drug prices for patients and payers by thousands of dollars.102 In addition to lowering drug prices, provisions to limit drug-price increases to the inflation rate would prevent unreasonable price hikes from further driving up costs. These lower prices would result in lower premiums, helping employers and employees alike in their premium contributions.103

How extending IRA prescription drug reform helps employees

Drug-price negotiation and inflation rebates in the commercial market would translate to lower out-of-pocket costs for employee beneficiaries. Lower drug prices would reduce employee cost sharing and, when reducing drug costs to the plan and employer, result in lower premiums.104 Additionally, other Medicare Part D redesign changes such as an out-of-pocket maximum on drug spending, an insulin price cap, and spreading out-of-pocket costs over a year could improve access and affordability for employees.105

Regulate the pharmacy benefit manager industry to ensure patients benefit from prescription drug rebates

In the complex web of arrangements that make up the prescription drug supply chain, health insurance plans often contract with PBMs that serve as middlemen between manufacturers, insurers, and pharmacies.106 As an arm of the insurer itself; a subsidiary of a retail pharmacy; or a third party contracted to negotiate on an insurer’s behalf, PBMs serve as an intermediary between plan sponsors and drug manufacturers; negotiating prices, processing prescription drug plans; and distributing rebates to customers.107 However, when negotiating these rebates, PBMs often profit by retaining the difference between what the plan pays and what the dispensing pharmacy receives for a drug, preventing the negotiated savings from reaching consumers. Under this model, known as spread pricing, the PBM is incentivized to negotiate the best deal with the drug manufacturer and the dispensing pharmacy, but plans and patients may never see these savings.108

Congress should consider prohibiting spread pricing to ensure the rebates negotiated by a PBM reach patients, following the example set by the Modernizing and Ensuring PBM Accountability (MEPA) Act of 2023—introduced by Sen. Ron Wyden (D-OR)—that would prohibit spread pricing in the Medicaid program.109

There is little transparency around PBM practices, making them challenging to regulate and monitor. A consolidated PBM market compounds these problems: In 2022, six PBMs controlled 96 percent of the market.110 Moreover, the three largest PBMs—controlling an estimated combined 79 percent of the market—are owned by two national insurance carriers and a national pharmacy chain.111 According to estimates by Adam J. Fein, the CEO of the Drug Channels Institute, these include Caremark, owned by CVS Health (33 percent of the PBM market), Evernorth/Express Scripts, owned by Cigna (24 percent of the PBM market), and OptumRx, owned by UnitedHealth (22 percent of the PBM market).112

In May 2023, regarding its inquiry into PBMs, the FTC noted that:

The largest PBMs are part of vertically integrated companies and act as middlemen and negotiate rebates and fees with drug manufacturers, create drug formularies (lists of medications that are covered by insurance) and policies, and reimburse pharmacies for patients’ prescriptions.113

As the agents negotiating payment amounts and rebates between insurer and retail pharmacy, PBMs that are part of the insurance or pharmacy companies involved can inflate prices and profit as both entities.114

The concentration and lack of transparency in the PBM market have drawn attention from both the FTC and Congress and—because nearly all employers contract with PBMs—it is a particularly important contributor to high ESI costs.115 Congress should strongly consider enacting reporting requirements for PBMs to be submitted to regulators and plan sponsors. For example, the Pharmacy Benefit Manager Reform Act of 2023 would require PBMs to report their activities to plan sponsors annually.116 As a first step, this transparency would allow plan sponsors, researchers, and policymakers to better understand the role of PBMs in rising drug costs and identify appropriate solutions.

How regulating the PBM industry helps employers

To lower prescription drug costs, federal policymakers should ensure that PBMs are not harming competition and require that negotiated rebates reach consumers and plan sponsors. Requiring more transparency around the drug prices transacted between insurers, PBMs, and pharmacies would help employers make informed decisions about insurance coverage and pharmacy benefit administration.

How regulating the PBM industry helps employees

Employees feel high drug prices through premiums, copayments, and other cost sharing. Unlike health care services for which cost-sharing obligations are billed after delivery, prescription drug out-of-pocket costs are due when patients pick up their medications at the pharmacy. All too often, high drug costs render patients unable to afford their medications or require substantial sacrifices to be able to do so.117 Lowering drug prices through PBM reforms and eliminating profit seeking in the pharmaceutical system could help employees and their dependents access the medications they need.

Rein in pharmaceutical manufacturer delay tactics that prevent lower-cost generics and biosimilars from coming to market

Drug manufacturers frequently manipulate the patent system to extend the exclusivity period for their brand-name drugs for as long as possible.118 Extending exclusivity periods keeps prices high and payers bear these costs: Despite making up 8 percent of total prescriptions, brand-name medications make up 84 percent of total drug spending in the United States.119 These and other patent abuse tactics are costly and common. (See textbox below) From 2006 to 2017, pay-for-delay tactics alone cost the U.S. taxpayers more than $6 billion annually.120 When pharmaceutical companies set high prices and keep them high, employers and employees bear the burden of these costs.121

Common patent abuse tactics

  • Product hopping: Shortly before a patent ends, the manufacturer shifts patients to a new, alternative product covered by a new patent and discontinues the original product, preventing the generic version of the original product from being a direct substitute.122
  • Patent “thicketing”: The drug manufacturer patents a series of minor modifications to a drug’s form, dosage, or delivery mechanism, creating a web of patents nearly impossible for a competitor to challenge.123
  • Pay-for-delay: When a patent expires, the manufacturer of a brand-name drug pays the first generic competitor to delay selling the generic version, essentially extending the exclusivity period for the brand-name drug.124
  • Sham citizen petitions: The drug company uses a petition pathway for concerned citizens to voice concerns to the FDA to make claims intended to prevent competition.125

There are several legislative and regulatory pathways for policymakers to prevent these anti-competitive practices and facilitate truer market competition that would bring down drug costs for employers and employees.126 Congress should consider legislation to revise the patent and FDA approval processes; expand FTC authority to monitor of these practices; and define these tactics as unfair trade practices. A recent Center for American Progress report explores these recommendations in greater detail.127

How curbing patent abuse helps employers

More than one-fifth of per-person spending in ESI plans is on prescription drugs.128 By addressing the exploitation of the patent system and regulating unfair trade practices, employers would face lower expenses and accordingly could reduce their insurance costs. Helping patients access the medications they need would also support more well and productive employees.129

How curbing patent abuse helps employees

Reforming the patent system and regulating manufacturer tactics that prevent more affordable drug options from coming to market would lower consumer costs through reduced premiums and cost sharing. Because these reforms would apply across the prescription drug market, these policies could help millions of ESI enrollees.130


ESI represents the largest source of health insurance coverage in the United States. Offering a high-quality, affordable ESI plan is a core benefit employers use to recruit and retain employees. However, the ever-increasing cost to employers of providing this coverage and the growing expense to employees in maintaining and using their coverage is untenable. Many business leaders are rightly worried about the long-term viability of ESI.131 The federal government has an important role to play in lowering the cost of offering ESI and making it more affordable for employees to use by bringing down the prices of health care services and prescription drugs as well as addressing consolidation in health care markets.


  1. Kaiser Family Foundation, “Health Insurance Coverage of the Total Population, Timeframe: 2022,” available at–uninsured&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D (last accessed June 2023).
  2. Gary Claxton and others, “Employer Health Benefits: 2023 Annual Survey” (San Francisco: KFF, 2022), available at; Health Care Cost Institute, “2021 Health Care Costs and Utilization Report,” (Washington, DC: 2023), available at
  3. Claxton, “Employer Health Benefits: 2023 Annual Survey;” Gary Claxton and others, “Employer Health Benefits: 2013 Annual Survey (San Francisco: KFF, 2013), available at
  4. Kendall Strong, Brady Newell, Marilyn Werber Serafini, and G. William Haagland, “Improving and Strengthening Employer-Sponsored Insurance” (Washington: Bipartisan Policy Center, 2022), available at; Claxton and others, “Employer Health Benefits 2022 Annual Survey;” Sam Hughes, Nicole Rapfogel, and Emily Gee, “Health Insurance Costs Are Squeezing Workers and Employers” (Washington: Center for American Progress, 2023), available at
  5. Sarah R. Collins, Shreya Roy, and Relebohile Masitha, “Paying for It: How Health Care Costs and Medical Debt Are Making Americans Sicker and Poorer,” Commonwealth Fund, October 26, 2023, available at
  6. Health Care Cost Institute, “2021 Health Care Costs and Utilization Report,” (Washington, DC: 2023), available at
  7. Ibid; Health Affairs, “The Role of Prices In Excess US Health Spending,” June 9, 2022, available at; Gerard F. Anderson, Peter Hussey, and Varduhi Petrosyan, “It’s Still The Prices, Stupid: Why The US Spends So Much on Health Care, And A Tribute to Uwe Reinhart,” Health Affairs 38 (1) (2019), available at
  8. Sam Hughes and Nicole Rapfogel, “Following the Money: Untangling U.S. Prescription Drug Financing” (Washington: Center for American Progress, 2023), available at; Emily Gee and Ethan Gurwitz, “Provider Consolidation Drives Up Health Care Costs” (Washington: Center for American Progress, 2018), available at
  9. Hughes, “Following the Money.”
  10. Leemore S. Dafny, “Evaluating the Impact of Health Insurance Industry Consolidation: Learning from Experience” (New York: The Commonwealth Fund, 2015), available at
  11. Laurel Lucia and Ken Jacobs, “Increases in health care costs are coming out of workers’ pockets one way or another: The tradeoff between employer premium contributions and wages,” University of California, Berkeley Labor Center, January 29, 2020, available at; Beth Umland, Sunit Patel, and Tracy Watts, “Health benefit cost expected to rise 5.4% in 2024,” Mercer, September 7, 2023, available at
  12. Nicole Rapfogel and Emily Gee, “Employer and Worker Led Efforts to Lower Health Insurance Costs,” (Washington, DC: Center for American Progress, 2022) available at
  13. Ibid.
  14. Claxton, Larry Levitt, Shawn Gremminger, Bill Kramer, and Matthew Rae, “How Corporate Executives View Rising Health Care Cost and the Role of Government” (San Francisco: KFF 2021),
  15. Claxton, “Employer Health Benefits: 2022 Annual Survey.”
  16. Ibid.
  17. Ibid; National Academy for State Health Policy, “ERISA Preemption Primer,” (Portland, ME: 2009), available at
  18. Emily Gee and Ethan Gurwitz, “Provider Consolidation Drives Up Health Care Costs” (Washington: Center for American Progress: 2018), available at; Amy Phillips, “The Consequences of U.S. Hospital Consolidation on Local Economies, Healthcare Providers, and Patients,” Washington Center for Equitable Growth, November 15, 2023, available at; Leemore S. Dafny, “Improving Care, Lowering Costs: Achieving Health Care Efficiency,” Testimony to U.S. Senate Committee on the Budget, October 18, 2023, available at; Jamie Godwin, Zachary Levinson, and Scott Hulver, “Understanding Mergers Between Hospitals and Health Systems in Different Markets,” KFF, August 23, 2023, available at
  19. Brent Fulton, “Health Care Market Concentration Trends in the United States: Evidence and Policy Responses” (Washington, D.C.: Health Affairs, 2017), available at; Anu Singh, “2021 M&A in Review: A New Phase in Healthcare Partnerships,” Kaufman Hall, January 10, 2022, available at
  20. RAND, “What Have We Learned About the Economic Effects of Vertical Integration?” available at (last accessed December 8, 2023); Elizabeth Warren, “ICYMI: At Hearing, Warren Warns Against Corporate Consolidation in Health Care,” Press release, June 9, 2023, available at; Sorough Saghafian, Lina D. Song, Joseph P. Newhouse, Mary Beth Landrum, and John Hsu, “The Impact of Vertical Integration on Physician Behavior and Healthcare Delivery: Evidence from Gastroenterology Practices,” National Bureau of Economic Research” (2023), available at
  21. American Hospital Association, “Fact Sheet: Hospital Mergers and Acquisitions Can Expand and Preserve Access to Care,” March 2023, available at; RAND, “What Have We Learned About the Economic Effects of Vertical Integration?;” Cory Capps, David Dranove, and Christopher Ody, “The Effect of Hospital Acquisition of Physician Practices on Price and Spending,” Journal of Health Economics 59 (2018), available at
  22. Reed Abelson, “When Hospitals Merge to Save Money, Patients Often Pay More” (New York, NY: New York Times, 2018), available at; Capps, “The Effect of Hospital Acquisition of Physician Practices on Price and Spending.”
  23. Zack Cooper, Zarek C. Brot-Goldberg, Stuart V. Craig, Lev Klarnet, and Ithai Lurie, “How Does Rising Health Care Spending in the US Impact Labor Markets and Mortality? Evidence from Hospital Mergers,” 12th Annual Conference of the American Society of Health Economists, June 12, 2023, available at
  24. Maggie Hassan, “Senator Hassan Highlights Her Bipartisan Bill to Lower Health Care Costs for Patients and Save Billions in Taxpayer Dollars,” Press release, October 3, 2023, available at; Kevin Davenport and Jack Pitsor, “State Actions to Control Commercial Health Care Costs,” National Conference of State Legislatures, updated July 21, 2023, available at (last accessed November 21, 2023).
  25. Kevin McAvey, “Realizing the Promise of All Payer Claims Databases: A Federal & State Action Plan,” (Washington, D.C.: Manatt, 2022), available at
  26. Agency for Healthcare Research and Quality, “All-Payer Claims Databases,” available at
  27. Matthew Fiedler and Christen Linke Young, “Federal Policy Options to Realize the Potential of APCDs,” (Washington, D.C.: Brookings Institute, 2020), available at; Katherine L. Gudiksen, Samuel M. Chang, and Jaime S. King, “The Secret of Health Care Prices: Why Transparency Is in the Public Interest” (Oakland, CA: California Health Care Foundation, 2019), available at
  28. Fiedler and Linke Young, “Federal Policy Options to Realize the Potential of APCDs.”
  29. Gobeille v. Liberty Mutual Insurance Company, 577 U.S. __ (March 1, 2016), available at
  30. Fiedler and Linke Young, “Federal Policy Options to Realize the Potential of APCDs.”
  31. Fiedler and Linke Young, “Federal Policy Options to Realize the Potential of APCDs.”
  32. Fiedler and Linke Young, “Federal Policy Options to Realize the Potential of APCDs.”
  33. Maximilian J. Pany, Michael E. Chernew, and Leemore S. Dafny, “Regulating Hospital Prices Based on Market Concentration Is Likely To Leave High-Price Hospitals Unaffected,” Health Affairs 40 (9) (2021), available at; Fulton, “Health Care Market Concentration Trends in the United States: Evidence and Policy Responses.”
  34. Martin Gaynor, “Diagnosing the Problem: Exploring the Effects of Consolidation and Anticompetitive Conduct in Health Care Markets: Statement Before the Committee on the Judiciary,” U.S. House of Representatives, March 7, 2019, available at
  35. Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a, Federal Trade Commission available at
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  37. Physicians Advocacy Institute, “Covid-19’s Impact On Acquisitions of Physician Practices and Physician Employment 2019-2021,” (Chicago, IL, 2022), available at
  38. Federal Trade Commission, “FTC and DOJ Propose Changes to HSR Form for More Effective, Efficient Merger Review,” Press release, June 27, 2023, available at; Lina M. Khan, “Statement Regarding FTC-DOJ Proposed Merger Guidelines,” Federal Trade Commission, July 19, 2023, available at
  39. Federal Trade Commission, “FTC Challenges Private Equity Firm’s Scheme to Suppress Competition in Anesthesiology Practices Across Texas,” Press release, September 21, 2023, available at
  40. Rebecca Slaughter, “Antitrust and Health Care Providers Policies to Promote Competition and Protect Patients: Remarks as Prepared for Delivery at the Center for American Progress,” May 14, 2019, available at
  41. American Hospital Association, “Fast Facts on U.S. Hospitals, 2023,” available at (last accessed June 2023).
  42. Slaughter, “Antitrust and Health Care Providers Policies to Promote Competition and Protect Patients;” Jennifer Silver-Greenberg and Katie Thomas, “They Were Entitled to Free Care. Hospitals Hounded Them to Pay,” New York Times, September 24, 2022, available at; Derek Jenkins and Vivian Ho, “Nonprofit Hospitals: Profits and Cash Reserves Grow, Charity Care Does Not,” Health Affairs 42(6) (2023), available at
  43. Stop Anticompetitive Healthcare Act of 2023, H.R. 2890, 118th Cong., 1st sess. (April 26, 2023), available at
  44. Katherine Gudiksen, Alexandra Montague, and Jaime King, “Mitigating the Price Impacts of Health Care Provider Consolidation,” (New York, NY: Millbank Memorial Fund, 2021), available at
  45. Natasha Murphy, Sam Hughes, and Nicole Rapfogel, “The Employer Public Option: A Tool for Improving Affordability via Alternative Health Coverage” (Washington: Center for American Progress, 2024), available at
  46. Internal Revenue Service, “26 CFR 601.602: Tax Forms and Instructions,” available at (last accessed June 2023).
  47. Claxton and others, “Employer Health Benefits 2022 Annual Survey.”
  48. Internal Revenue Service,” Publication 969 (2022), Health Savings Accounts and Other Tax-Favored Health Plans,” 2022, available at (accessed November 6, 2023).
  49., “Flexible Spending Account (FSA),” available at (last accessed November 14, 2023).
  50. Gideon Lukens, “Expanding Health Savings Accounts Would Boost Tax Shelters, Not Access to Care,” (Washington, DC: Center on Budget and Policy Priorities, 2023), available at
  51. Lukens, “Expanding Health Savings Accounts Would Boost Tax Shelters, Not Access to Care;”
  52. Ibid; Internal Revenue Service,” Publication 969 (2022), Health Savings Accounts and Other Tax-Favored Health Plans;” Rutgers University New Jersey Agricultural Experiment Station, “Health Savings Accounts (HSAs),” available at (last accessed November 14, 2023).
  53. Charles Schwab, “Is an HSA a Good Deal?”, available at (last accessed July 2023); Center on Budget and Policy Priorities, “What is a Health Savings Account,” available at (last accessed July 2023).
  54. Jacqueline Ellison, Paul Shafer, and Megan B. Cole, “Racial/Ethnic and Income-Based Disparities in Health Savings Account Participation Among Privately Insured Adults,” Health Affairs 39(11) (2020), available at
  55. Ukert and Esquivel-Pickett, “Disparities in Health Care Use Among Low-Salary and High-Salary Employees”; Anuradha Jetty and others, “Privately insured adults in HDHP with higher deductibles reduce rates of primary care and preventive services,” Translational Behavioral Medicine 8 (3) (2018): 375-385, available at; Rajender Agarwal, Olena Mazurenko, and Nir Menachemi, “High-Deductible Health Plans Reduce Health Care Cost And Utilization, Including Use of Needed Preventive Services, Health Affairs 36(10) (2017), available at
  56. David H. Jiang, Benjamin F. Mundell, Nilay D. Shah, and Rozalina G. McCoy, “Impact of High Deductible Health Plans on Diabetes Care Quality and Outcomes: A Systematic Review,” Endocrine Practice 27 (11) (2021), available at
  57. Xinke Zhang, Erin Trish, and Neeraj Sood, “Financial Burden of Healthcare Utilization in Consumer-Directed Health Plans,” American Journal of Managed Care 24(4) (2018): e115-e121, available at
  58. Linda J. Blumberg and John Holahan, “Don’t Let the Talking Points Fool You: It’s All About the Risk Pool,” Health Affairs Forefront, March 15, 2016, available at; RAND Corporation, “Analysis of High Deductible Health Plans,” available at (last accessed November 6, 2023).
  59. Lukens, “Expanding Health Savings Accounts Would Boost Tax Shelters, Not Access to Care.”
  60. Jean Ross and Andrea Ducas, “Recent Health Savings Account (HSA) Expansion Proposals Are Costly and Misguided,” Center for American Progress, December 13, 2023, available at
  61. Employee Benefit Research Institute, “What Leads to Greater Satisfaction With Health Plan Coverage?” April 6, 2023, available at
  62. Ibid.
  63. David H. Jiang, Benjamin F. Mundell, Nilay D. Shah, and Rozalina G. McCoy, “Impact of High Deductible Health Plans on Diabetes Care Quality and Outcomes: A Systematic Review,” Endocrine Practice 27(11) (2021), available at
  64. Ellison, “Racial/Ethnic and Income-Based Disparities in Health Savings Account Participation Among Privately Insured Adults;” Salam Abdus and Patricia S. Keenan, “Financial Burden of Employer-Sponsored High-Deductible Health Plans for Low-Income Adults With Chronic Health Conditions,” JAMA Internal Medicine 178(12) (2018):1706-1708, available at; Alex Montero, Audrey Kearney, Liz Hamel, and Mollyann Brodie, “Americans’ Challenges with Health Care Costs,” KFF, July 14, 2022, available at
  65. 29 U.S.C. § 1001 et seq.
  66. National Academy for State Health Policy, “ERISA Preemption Primer.”
  67. Elizabeth McCuskey, “State Cost-Control Reforms and ERISA Preemption,” New York, NY: Commonwealth Fund, 2022), available at
  68. Claxton and others, “Employer Health Benefits 2022 Annual Survey.”
  69. FMC Corp. v. Holliday, 498 U.S. 52, 54 (1990).
  70. Elizabeth McCuskey, “Reforming ERISA to Help States Control Health Care Costs,” (New York, NY: Commonwealth Fund, 2023), available at
  71. McCuskey, “State Cost-Control Reforms and ERISA Preemption;” Katherine L Gudiksen and Robert B. Murray, “Options for states to constrain pricing power of health care providers,” Frontiers in Health Services 2 (2022), available at
  72. Deborah A. Widiss, “Communication Breakdown: How Courts Do — and Don’t — Respond to Statutory Overrides,” Judicature 104, no. 1 (Spring 2020): 50–8, available at–courts–do–and–don’t–respond–to–statutory–overrides/.
  73. McCuskey, “Reforming ERISA to Help States Control Health Care Costs.”
  74. Centers for Medicare and Medicaid Services, “Section 1332: State Innovation Waivers,” available at (last accessed July 2023); Elizabeth Y. McCuskey, “Reforming ERISA to Help States Control Health Care Costs,” The Commonwealth Fund, February 9, 2023, available at
  75. Congressional Research Service, “Medical Loss Ratio Requirements Under the Patient Protection and Affordable Care Act (ACA): Issues for Congress” (Washington: 2015), available at
  76. Erin C. Fuse Brown and Ameet Sarpatwari, “Removing ERISA’s Impediment to State Health Reform,” New England Journal of Medicine 378(1) (2018), available at
  77. Ibid.
  78., “Employer Mandate,” available at (last accessed June 2023).
  79. Sean Lowry and Jane Gravelle, “The Affordable Care Act and Small Business: Economic Issues,” (Washington, DC: Congressional Research Service, 2015), available at
  80. Emily Curran, “Winding Down the Small Business Marketplaces: Feds Acknowledge the Failure to Launch,” CHIRblog, May 22, 2017, available at
  81. Vanessa Forsberg, “Overview of Health Insurance Exchanges,” (Washington, DC: Congressional Research Service, 2023), available at; KFF, “Marketplace Enrollment, 2014-2023,” available at,%22sort%22:%22asc%22%7D (last accessed December 12, 2023).
  82. Forsberg, “Overview of Health Insurance Exchanges.”
  83. Lowry and Gravelle, “The Affordable Care Act and Small Business: Economic Issues.”
  84. John Dicken, “Small Business Health Insurance Exchanges: Low Initial Enrollment Likely due to Multiple Evolving Factors,” (Washington, DC: Government Accountability Office, 2014), available at; Forsberg, “Overview of Health Insurance Exchanges.”
  85. Forsberg, “Overview of Health Insurance Exchanges.”
  86. Forsberg, “Overview of Health Insurance Exchanges.”
  87. Timothy Jost, “CMS Announces Plan to Effectively End the SHOP Exchange,” Health Affairs, May 15, 2017, available at
  88. Ibid.
  89. Murphy, Hughes, and Rapfogel, “The Employer Public Option.”
  90. Health Care Cost Institute, “2021 Health Care Costs and Utilization Report,” (Washington, DC: 2023), available at
  91. Congressional Budget Office, “How CBO Estimated the Budgetary Impact of Key Prescription Drug Provisions in the 2022 Reconciliation Act,” (Washington, DC: 2023) available at
  92. Emily Cochrane, “Senate Passes Climate, Health and Tax Bill, With All Republicans Opposed,” August 7, 2018, available at
  93. U.S. Department of Health and Human Services Assistant Secretary for Planning and Evaluation, “Medicare Enrollees’ Use and Out-of-Pocket Expenditures for Drugs Selected for Negotiation under the Medicare Drug Price Negotiation Program,” August 29, 2023, available at
  94. Congressional Budget Office, “How CBO Estimated the Budgetary Impact of Key Prescription Drug Provisions in the 2022 Reconciliation Act.”
  95. Nicole Rapfogel, “Drug Companies Continue to Hike Prices Above Inflation,” Center for American Progress, November 1, 2023, available at
  96. Elijah E. Cummings Lower Drug Costs Now Act of 2019, H.R. 3, 116th Cong., 1st sess. (September 19, 2019), available at; Congressional Budget Office, “H.R. 3, Elijah E. Cummings Lower Drug Costs Now,” (Washington: 2019), available at
  97. Elijah E. Cummings Lower Drug Costs Now Act of 2019, H.R. 3.
  98. West Health, “New Study Estimates Medicare Negotiation Could Save Businesses $195 Billion and Workers Another $98 Billion,” Press release, May 20, 2021, available at
  99. Lowering Drug Costs for American Families Act of 2023, H.R. 4895, 118th Cong., 1st sess. (July 26, 2023), available at
  100. Congressional Budget Office, “How CBO Estimated the Budgetary Impact of Key Prescription Drug Provisions in the 2022 Reconciliation Act.”
  101. Janet Kaminski Leduc, “State Laws Limited Prescription Drug Cost Sharing,” Connecticut General Assembly Office of Legislative Research, available at (last accessed November 13, 2023).
  102. Nicole Rapfogel, Emily Gee, and Maura Calsyn, “H.R. 3 Could Save Patients Thousands of Dollars on Prescription Drugs, Center for American Progress, July 20, 2021, available at
  103. Philip L. Swagel, “Budgetary Effects of H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act,” Congressional Budget Office, December 10, 2019, available at
  104. Hughes, “Following the Money.”
  105. Juliette Cubanski and Tricia Neuman, “Changes to Medicare Part D in 2024 and 2025 Under the Inflation Reduction Act and How Enrollees Will Benefit,” KFF, April 20, 2023, available at
  106. Hughes, “Following the Money.”
  107. Ibid.
  108. Alex Kacik, “PBMs’ spread pricing inflates healthcare spending, commission finds,” Modern Healthcare, June 5, 2019, available at; Hughes, “Following the Money.”
  109. The Modernizing and Ensuring PBM Accountability Act of 2023, S. 2973, 118th Cong., 1st sess., September 28, 2023, available at
  110. Adam J. Fein, “The Top Pharmacy Benefit Managers of 2022: Market Share and Trends for the Biggest Companies,” Drug Channels, May 23, 2023, available at
  111. Ibid.
  112. Ibid.
  113. Federal Trade Commission, “FTC Deepens Inquiry into Prescription Drug Middlemen,” Press release, May 17, 2023, available at; Hughes, “Following the Money.”
  114. Erin Trish, Karen Van Nuys, and Robert Popovian, “U.S. Consumers Overpay for Generic Drugs” (Los Angeles: Schaeffer Center White Paper Series, 2022), available at; Hughes, “Following the Money.”
  115. Sara Hansard, “Frustrated Employers Outline Ways to Work With PBMs (2),” Bloomberg Law, June 26, 2023, available at; Ge Bai, Mariana P. Socal, and Gerard F. Anderson, “Policy Options to Help Self-Insured Employers Improve PBM Contracting Efficiency,” Health Affairs Forefront, May 29, 2019, available at
  116. Pharmacy Benefit Manager Reform Act of 2023, S. 1339, 118th Cong., 1st sess., April 27, 2023, available at
  117. Hughes, “Following the Money;” Bob Segall, “The cost to survive: Do I pay rent or buy insulin?” WTHR, July 19, 2019, Updated July 22, 2019, available at; Adam Gaffney David U. Himmelstein, and Steffie Woolhander, “Prevalence and Correlates of Patient Rationing of Insulin in the United States: A National Survey,” Annals of Internal Medicine (2022), available at
  118. Hughes, “Following the Money.”
  119. Patricia Kelmar and Abe Scarr, “The Cost of Prescription Drug Patent Abuse” (Denver, CO: U.S. PIRG Education Fund, 2023), available at
  120. Robin Feldman, “The Price Tag of ‘Pay-for-Delay,’” Science and Technology Law Review 23 (1) (2022):1-49, available at
  121. Rhiannon Meyers Collette, “Congress: Pharma’s Price Gouging is Purposeful,” Arnold Ventures, December 10, 2021, available at
  122. Patricia Kelmar and Abe Scarr, “The Cost of Prescription Drug Patent Abuse.“
  123. Ibid.
  124. Ibid.
  125. Robin Feldman and Connie Wang, “A Citizen’s Pathway Gone Astray—Delaying Competition from Generic Drugs,” New England Journal of Medicine 1499 (2017), available at
  126. Hughes, “Following the Money.”
  127. Ibid.
  128. Health Care Cost Institute, “2021 Health Care Costs and Utilization Report.”
  129. M. Christopher Roebuck, Joshua N. Liberman, Marin Gemmill-Toyama, and Troyen A. Brennan, “Medication Adherence Leads To Lower Health Care Use and Costs Despite Increased Drug Spending,” Health Affairs 30(1) (2011), available at; Catherine W. Gillespie, Pamela E. Morin, Jamie M. Ticker, Leigh Purvis, “Medication Adherence, Health Care Utilization, and Spending Among Privately Insured Adults With Chronic Conditions in the United States, 2010-2016,” American Journal of Medicine 133(6) (2020), available at
  130. Hughes, “Following the Money.”
  131. Gary Claxton and others, “How Corporate Executives View Rising Health Care Cost and the Role of Government” (San Francisco: Kaiser Family Foundation, 2021), available at

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Sam Hughes

Former Policy Analyst

Nicole Rapfogel

Policy Analyst, Health

Emily Gee

Senior Vice President, Inclusive Growth


Health Policy

The Health Policy team advances health coverage, health care access and affordability, public health and equity, social determinants of health, and quality and efficiency in health care payment and delivery.

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Over the past several years, employer-sponsored health insurance premiums have risen faster than inflation and wages. Both employers and employees are feeling the strain on their budgets, which in turn can limit access to care. This series examines the causes of the rising cost of employer-sponsored insurance and ways to lower prices for health care and improve affordability for workers and employers. Reports in this series highlight employer- and worker-led coalitions working to reduce the price of coverage and improve access to high-quality care; analyze trends in the availability and affordability of job-based coverage over the past decade; and present policy proposals to tackle rising costs and ensure that workers have sustainable, comprehensive coverage.


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