Systemic issues: Where health insurance went wrong (2025)

Three-quarters of New Jersey residents say they are either “somewhat” or “very” worried about the cost of health care services and unexpected medical bills, while more than 6-in-10 are “somewhat” or “very” worried about their monthly health insurance premium and prescription drug costs, according to a poll released in May by the New Jersey Health Care Quality Institute in partnership with the Rutgers-Eagleton Poll. NJBIZ spoke with experts about some of the causes and possible solutions.

“The sentiments of Garden State residents are similar to national results reflected in a Kaiser Family Foundation study,” noted Quality Institute President Linda Schwimmer. Released in March 2024, the KFF study indicated that about half of insured adults – even ones with employer-sponsored insurance – rated their insurance as “fair” or “poor” when it comes to their monthly premium and to out-of-pocket costs to see a doctor.

“Individuals and businesses are worried because of a ‘double whammy,’ Schwimmer added. “Premiums keep rising, especially for small businesses, which have seen double-digit increases for the past four years, while employees get slammed as companies shift more costs to employees though higher premium sharing and out-of-pocket costs, including higher co-payments. Everyone is paying more and getting less, which leads to more stress all around.”

What can businesses do to try to reduce their premiums — and by extension, the costs they pass on to employees?

“The answer depends on the employer,” responds Schwimmer. “Some of the largest employers have more flexibility because they self-insure and can design their benefit package to take advantage of proven strategies to lower hospital and drug costs, in particular. Large employers can also require that the insurers they contract with will provide the network and manage their spending to implement certain strategies to lower overall spending. Some examples are, before getting a recommended surgical procedure, employees may be required to get a second opinion and go to certain centers of excellence that agree to negotiated rates. Or the procedures or tests must be done at outpatient settings, unless medically necessary to be done in the hospital. Larger companies are also able to design formularies to better control prices for drugs.”

But smaller companies generally don’t have that flexibility and leverage, she noted. “Smaller employers have to buy ‘off the shelf’ insurance plans. Sometimes they may work with a health insurance broker to seek out options outside of the fully insured regulated market, such as level funded plans. These products can be less expensive because they are not taxed the same way, and they can decline to offer coverage to employer groups with a higher medical risk profile.”

Schwimmer, however, sees alternative markets as stop-gap measures that do not address what is wrong with the U.S. health care system. “More fundamentally, the best thing we could do to improve the health care system and ultimately to lower what we spend on health care overall, is to invest more in keeping society healthy,” she said. “That includes many things outside of health care, but within health care, that means comprehensive primary care and preventative care.”

When people are “connected to a primary care doctor or nurse that they trust and who knows them and receive holistic care – which includes mental health and an array of preventive health services – over time we will spend less money because we are keeping people healthy and addressing issues before they become more complex and expensive,” explained Schwimmer. “Unfortunately, today we underpay for those services, and we are paying the price that that short-sighted approach. The United States is an outlier in this regard. Only committed, focused leadership can change things for the better.”

A growing challenge

As president at Executive Benefits Group LLC, an independent employee benefits broker, Tom Siino deals with many employers and employees who struggle with health care insurance premium costs. “The problem is getting worse,” said Siino, who’s also a past president of the New Jersey chapter of the National Association of Benefits Insurance Professionals (NABIP-NJ). “Inflation has jumped over the past few years and medical inflation is up even more. Employers are struggling with expenses, and they’re passing more costs on to employees.”

Part of the challenge, he noted, “is that New Jersey has a lot of state-mandated benefits, which sounds great, but comes at a cost, so we have some of highest health care insurance rates in the nation.”

A September 2024 report issued by the state Health Care Affordability, Responsibility and Transparency Program noted that “spending per person in New Jersey is growing faster than the national average rate,” with the gap widening from 12% higher in in 2026 to 15% in 2021.

Siino said the issue is compounded because “there is not as much competition in the conventional insurance market as there used to be.”

His advice: “Employers, both large and small, should work with professional insurance brokers preferably members of NABIP-NJ, to explore alternative options like ‘level-funded’ plans [a type of self-funded plan where the employer contributes a steady monthly payment to cover costs for administration, and other expenses], an HRA [Health Reimbursement Arrangement, a type of health plan that allows employers to reimburse employees for qualified medical expenses] and other alternatives that may offer more flexibility and options, compared to a standard commercial plan.” [See related story, “Pros and cons: Can an alternative health plan cut your costs?”]

Even though traditional insurers are coming out with new products, “the underlying challenge is the high cost of health care, including GLP-1 drugs, or glucagon-like peptide-1 receptor agonists, that treat type 2 diabetes and obesity,” Siino added. “There’s a huge demand for drugs like Ozempic and Mounjaro, for example, but they come with huge costs.”

Back in 2003, the late Princeton University health economist Uwe Reinhardt – along with Gerard Anderson, Peter Hussey and Varduhi Petrosyan – wrote an article on the return of health care investment titled, “It’s The Prices, Stupid: Why The United States Is So Different From Other Countries.” Using data from the Organization for Economic Cooperation and Development they found that the United States spends more on health care than any other country but gets less of a return.

Some 21 years later, nothing much has changed, according to Ward Sanders, president of the New Jersey Association of Health Plans, a state trade association that represents the major health plans in New Jersey.

“Individuals and businesses have a sense that they’re paying a lot for health care insurance because they are paying a lot,” he declared. “The high premiums are based on the underlying high cost of health care. It’s all about the prices. We have lots of great hospitals and lots of great prescription drugs, but the pricing of these services is often very expensive.”

Health plan providers are doing their best to rein in costs, according to Sanders. “If you look at the listed prices for hospital services, for example, you’ll see that insurers have negotiated significant breaks. As a bulk purchaser, health plan insurers are always fighting for affordability for their members while ensuring comprehensive coverage and broad provider networks. But negotiating with hospitals and with physician practices is increasingly challenging, especially with provider consolidation and as so many physician practice groups are getting bought up by hospitals and private equity.”

And just as insurers try to negotiate prices with health care providers, large businesses may be able to negotiate with health care insurers. But smaller organizations usually don’t have that ability.

Some employers may look to professional employer organizations, which allow employers to share responsibilities including benefits. “But most PEOs want a minimum of five employees,” he added. “So, a very small employer may be locked out of that option.

Sanders said that any small employer should “use a licensed broker to shop for coverage, as they can be invaluable. A broker can shop among carriers for the best mix of coverage and pricing and can evaluate issues like cost-sharing and network fits. Getting affordable health care insurance is a challenging issue.”