Provider competition is the first condition necessary for an employer-initiated health care solution. The second market condition is the right composition of employer partners who can aggregate enough volume to capture providers’ attention at scale. Employers need significant member volume in a local market, generally must be self-insured, and have leadership that is directly involved and committed to the initiative’s success. These conditions are rare: provider consolidation has eroded competition in 75 percent of hospital markets and the employees of the largest self-insured employer are scattered across the country.

Market conditions are structural and outside of employers’ control, but employer initiatives often stumble because of self-made hazards that arise from employers’ own failures of logic and tunnel vision. These include: “sui generis syndrome” (i.e., we’re unique, your employees’ needs are not our employees’ needs), “misaligned incentive syndrome” (i.e., CEO wants lower costs, but if we eliminate the expensive health care chain from the network, employees will flee the company!), and the “catch-22 of jumbo employers” (i.e., believing that the largest companies can get a better deal on their own than by partnering with other employers). These traps are just as likely as the lack of the right market conditions to doom employers’ aggregated purchasing attempts.

If employers want to affect change in health care, leadership must take charge of the benefits strategy and be willing to trade off unlimited choice and individualism. To be clear, there are a few examples in the market where employer-led purchasing coalitions have achieved and sustained success. CPR’s pending research findings will offer blueprints and roadmaps for employers who want to learn from these lessons and build high-value aggregation models. But it’s equally important for employers to recognize that vendors and health plans may offer accessible off-the-shelf health care products, avoiding the need to build something from scratch.  

If employers want affordable health care, they also may need to change the game from the outside by working with state and federal regulators to combat the anticompetitive forces that have made health care markets so untenable. While this is new territory for employers, it may arguably prove the best way to create more fertile soil.