Special thanks to our friends at Imagine360, who have made this post free to all users as part of sponsoring Second Opinion.
Imagine360 is an alternative health plan for self-funded employers, helping save an average of 15–30%. These savings are driven by a combination of direct contracts with high-quality health systems and providers, reference-based pricing, a transparent pharmacy solution, third-party administrative services, and stop-loss insurance for added protection.
At HLTH, Imagine360 CEO Jeff Bak will discuss today’s unprecedented healthcare inflation and explore innovative solutions for employers during the GoFund Health: The New Ways to Pay panel, happening Monday at 3:30 PM PT.
We are living in a unique moment, driven by a confluence of macroeconomic factors. Specialty drug prices and hospital prices are increasing at the same time, creating unprecedented cost increases. According to the National Business Group on Health, an organization that represents employers, healthcare costs are projected to rise a median of 9% in 2026, this will be the second year in a row where costs will drastically outpace projections. The organization’s CEO Ellen Kelsay told the media recently that trends are more “daunting and sobering than they have ever been.”
What’s driving these price surges? Health policy experts and economists tell me that health systems have more negotiating leverage coming out of the pandemic, and contracts tend to be in three to five year cycles (many are now coming up). There’s also increasing consolidation amongst these systems, which tends to drive prices up. Meanwhile, specialty drug prices are also going up significantly, general inflation is continuing to rise, and we’re feeling the impact of needed care that was delayed or avoided altogether during the pandemic.
Employers subsidize healthcare coverage for 70% of Americans, and experts say they are both feeling the strain and actively trying to do something about it. “That level of cost just can’t be absorbed,” said Christopher Whaley, an associate professor in the Department of Health Services, Policy and Practice at Brown University’s School of Public Health. “And it’s leading to drastic changes.”
Whaley’s academic research has explored how “perfect storm” moments, like the one we’re in today, have led to practical, creative solutions. And he thinks we’ll see more of them. One example is reference-based pricing, which got its start in Europe but was brought to the U.S. when CalPERS had its own financial crisis. It was later implemented in the employer market, and we’ll discuss that more throughout the piece.
There will inevitably be some winners and some losers as employers evolve their strategies. Here are some of the key predictions I heard across vendors, employers, brokers and other experts: