Why most health plans strive to make healthcare cost more

Health plan representatives are always saying that their plans are doing everything they can to control costs and deliver greater value. But then nothing ever seems to change.

The truth is that group health plans typically earn a percentage of total claims, and it is in their interest for healthcare to cost as much as possible. Employer or union group health plans are frequently associated with a variety of services — e.g., health IT, pharmacy benefit management, case management, reinsurance — each with its own revenue stream. By choosing and incentivizing vendors, plan administrators directly influence their systems’ capabilities to manage risk. Intentionally meek approaches to healthcare risk management result in excessive care and cost, in turn fueling higher expenditures, greater net revenues and elevated stock prices.

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