RAND and USC health researchers: Even big self-insured companies can’t rein in health costs

Even large self-insured employers struggle to control healthcare costs, according to research from RAND and USC. Family health insurance premiums have surged above $28,000 annually for many companies. Small businesses often spend more on insurance than they earn in profits. Despite federal efforts to increase price transparency, it hasn't led to significant savings for most employers.

This is because self-insured companies typically rely on third-party administrators (TPAs) to manage their provider networks and bill processing. However, TPAs often have incentives that don't fully align with the employer's interests. For example, a fee called "shared savings" can inflate costs instead of reducing them. Even if employers receive fee breakdowns, switching TPAs or providers can cause employee pushback.

Some experts suggest potential solutions like fee caps, data access requirements, and stronger enforcement. However, enforcement resources tend to focus on larger employers, and smaller companies may lack the resources to change the system. A few self-insured employers have opted for direct contracts with hospitals or fully insured coverage, but these options often require a specific workforce location or stable individual marketplace.

The new transparency rules for pharmaceutical benefit managers in the 2026 Consolidated Appropriations Act are a step in the right direction, but more needs to be done to truly control healthcare costs.