By: Abigail Knapp and Sabrina Corlette
Households, employers, and state budgets alike are straining underneath the burden of rising well being care prices. As the costs for well being care providers proceed to climb, these will increase are handed on to customers within the type of larger premiums, deductibles, and different types of value sharing. Greater well being care costs will not be solely squeezing family budgets, but additionally slowing wage progress and undermining the financial competitiveness of small companies. As states search for methods to curb well being care spending, cost-growth benchmarks have emerged as a helpful however incomplete method. These benchmarks are coverage instruments designed to measure and restrict the speed of well being care spending progress inside a state, sometimes tying spending progress targets to a fee aligned with state financial and earnings progress. In addition they allow states to gather and analyze spending knowledge, serving to policymakers establish and goal the drivers of well being care spending progress. Whereas benchmarks lay the groundwork for value oversight, states should pair them with extra direct regulation and pro-competition reforms to meaningfully enhance affordability.
Impression and Limitations of Value-Progress Benchmarks
Setting a cost-growth benchmark alone has confirmed largely inadequate to comprise spending progress. The well being care business in lots of states with cost-growth benchmarks ceaselessly exceeds its annual targets. Well being care entities in Connecticut have exceeded their benchmark every year for the reason that benchmark was carried out and entities in Delaware have exceeded the benchmark each 12 months besides 2020, a 12 months wherein COVID-19 social distancing mandates depressed using well being care providers. Oregon, Rhode Island, and Connecticut lately recorded their highest progress charges for the reason that implementation of their benchmarks, with will increase of 5.2 p.c, 7.8 p.c, and seven.9 p.c, respectively. Rampant supplier consolidation and the monetary pursuits of insurers, suppliers, and “intermediary” industries (similar to income cycle administration corporations, claims re-pricers, pharmacy profit managers, and others) additionally proceed to push spending upward, diminishing the constraining results of voluntary benchmarks. As such, a number of states have adopted enforcement mechanisms for his or her cost-growth benchmarks, exerting better stress on well being care entities to carry down spending. States can take two common approaches to enforcement:
- Direct enforcement: Efficiency enchancment plans (PIPs) and monetary penalties for entities exceeding the benchmark.
- Oblique enforcement: Integration of value progress targets into different oversight processes, similar to certificates of want approvals, transaction critiques, and hospital finances critiques.
Even in states with comparatively sturdy and established enforcement authority, the well being care business continues to exceed progress fee targets. In Massachusetts, if the Well being Coverage Fee (HPC) finds {that a} well being care entity’s spending was unreasonably excessive, the HPC can require the entity to develop a PIP. The HPC displays the entity’s progress and evaluates whether or not the entity has met its objectives. As a final resort, the HPC could assess a civil penalty of as much as $500,000. Regardless of these accountability mechanisms, the well being care business has exceeded the benchmark nearly yearly for the reason that targets have been set, with spending progress rising much more sharply within the years following the COVID-19 pandemic. An analysis of the state’s benchmark program discovered that whereas the benchmark initially motivated entities to manage value progress, the affect of the benchmark has diminished over time, partly as a consequence of minimal penalties for entities which have exceeded the benchmark. Extra basically, cost-growth benchmarks are inherently forward-looking, constraining how briskly spending grows over time, however they don’t straight tackle already excessive costs.
To be efficient, cost-growth benchmarks must be coupled with broader, extra systemic value containment initiatives. Some states are doing simply that: Oregon enforces PIPs for entities that exceed the benchmark and can start assessing monetary penalties in 2026, but additionally employs different value containment measures, together with transaction oversight and reference pricing for its state worker well being plan. Starting this 12 months, the California Workplace of Well being Care Affordability (OHCA) should take motion in opposition to entities that exceed the state’s benchmark, together with PIPs and escalating monetary penalties. Nonetheless, the California Hospital Affiliation filed swimsuit in opposition to OHCA in October 2025, asking the courtroom to declare the benchmarks illegal and prohibit the company from making use of the associated fee targets to hospitals.
Shifting Past Enforcement
To successfully constrain well being care value progress and ship extra inexpensive well being care to customers, states will possible have to pair cost-growth benchmarks with extra direct worth regulation and/or pro-competition reforms. Like Oregon, a number of different states have carried out reference pricing for his or her state worker well being plans (SEHPs). Analysis has estimated that implementing a SEHP cost cap at 200 p.c of Medicare charges may have saved the plans $7.1 billion nationwide in 2022. Vermont and Indiana will start implementing hospital worth caps throughout their business markets in 2027 and 2029, respectively, with Indiana’s reference pricing method centered on the state’s largest, high-cost non-profit hospitals. Rhode Island limits the quantity by which insurers can enhance their charges for hospital providers, which has led to a median 9.1 p.c discount in hospital costs within the business market relative to comparability states. Different states are prohibiting anti-competitive contract restrictions and strengthening hospital transaction oversight to rein in excessive costs. Connecticut bans a number of anti-competitive contracting techniques in payer–supplier contracts, and likewise has the authority to evaluate sure hospital mergers and acquisitions and conduct post-transaction monitoring.
It’s additionally essential to include fairness issues into value containment insurance policies. With out intentional planning, efforts to scale back well being care spending could end in an underinvestment in traditionally marginalized communities, similar to communities of coloration and rural areas, in addition to in sure care settings, providers and important suppliers, similar to main care, psychiatric care, and maternal well being. A price-growth benchmark alone, with out tailor-made regulatory approaches, is a blunt instrument and infrequently lacks significant fairness issues. Nonetheless, states can use focused worth regulation, transaction evaluate, and different extra direct, systemic reforms to gradual worth progress in rich, high-priced settings whereas preserving entry to care.
Conclusion
State implementation of cost-growth benchmarks can pave the way in which for holding well being care costs and bettering affordability in necessary methods: establishing oversight our bodies, gathering spending progress knowledge, conducting analyses to establish value drivers, and extra. Nonetheless, the proof reveals {that a} voluntary value containment goal for in the present day’s well being care business is inadequate to ship affordability to customers. As states try and carry prices down for customers, cost-growth benchmarks needs to be coupled with worth regulation approaches and/or constraints on anti-competitive practices to extra successfully impression well being care spending and affordability.