David vs. Goliath on Soaring Health Costs

Self-insured employers have been fighting the good fight against runaway health costs for their companies and for their workers for decades, without much help from state and national politicians. But a ray of sunshine has emerged: the courts.

A cause-driven law firm, Fairmark Law, has filed a federal class-action law suit in Wisconsin on behalf of self-insured employers and their employees against one of the state’s biggest hospital conglomerates, Advocate Aurora Health. The firm is charging monopolization and price gouging. The David versus Goliath suit was filed in the name of a small company, Uriel Pharmacy based in East Troy, Wisconsin.

The Medical Industrial Complex (MIC) of big hospital corporations and giant health care insurers has increased its rates close to 8% per year over the last two decades. That gouging has had the cumulative effect of raising the cost of care for a family of four to $22,000 to $30,000, depending on which consultant is keeping score.

In contrast, the most astutely managed company health plans have limited inflation to 2% to 3% per year. Total costs for a family can run $12,000 to $14,000 per year. That’s still expensive, but not outrageously so. (Note: The pure medical side of American health can be exemplary.)

That massive cost discrepancy is at the heart of the Fairmark case against Advocate Aurora.

Fairmark looks at the courts as one way to overcome anti-competitive contracting and imbalance of power between smaller payers and the Medical Industrial Complex.

Its Wisconsin case will be buttressed by a recent Rand Corp. analysis that ranks the state 4th highest in the country in comparison to Medicare payments. Our hospitals charge private companies three times what they pay Medicare.

Advocate Aurora Health has a monster merger in the works with Atrium Health of North Carolina. It’s hard to see any operating synergies between those two distant operations. But the combination would gain leverage for higher prices with the nation’s largest health insurers.