U.S. Health Insurance Premiums Surge Due to Hospital Pricing and Consolidation

Health insurance premiums in the U.S. have increased substantially from 1999 to 2024, outpacing worker earnings by three times. This escalation is primarily driven by rising medical service costs, notably hospital services, which have increased faster than physician services and prescription drugs. A significant factor behind these rises is health system consolidation, where mergers among hospitals and healthcare entities have enabled hospitals to raise prices beyond their costs. Hospital leadership incentives contribute to this trend. Research shows that nonprofit hospital CEOs who expanded profits and organization sizes received the most considerable pay increases from 2012 to 2019, while rewards for quality improvement declined. Most hospital boards comprise members with finance or business expertise, leading to a focus on financial success over affordability or quality. Transparency in executive compensation criteria may encourage prioritization of community health and affordability. Policy experts suggest regulatory measures to cap hospital prices, particularly targeting the highest-priced hospitals and controlling price growth. Such oversight would involve service-specific and flexible regulations to manage market dynamics and prevent disruptions. Employers, who bear much of the cost burden for employee health coverage, are projected to face a 9.5% premium increase in 2026. They can mitigate cost pressures by designing benefits that promote price sensitivity, such as tiered copay plans linked to hospital pricing levels. Approximately one-third of large employers are adopting innovative health plans with variable copayments to control spending. Limiting price growth at nonprofit hospitals could foster competition, likely pressuring for-profit providers to reduce costs. Many large nonprofit health systems profess commitments to community health, emphasizing the importance of aligning executive incentives and regulatory frameworks to balance financial objectives with the goal of affordable, quality care.