Like a lot of businesses, we wince whenever we see annual enrollment information for next year’s health insurance. For our employees at Sesame, we offer a range of health plans, and many of our colleagues choose high deductible health insurance because of lower monthly premiums.

This year, I was genuinely surprised to see rates rise by nearly 10% compared to last year. That, after a year (2021) when national health spending only increased by 3.4%, and prices increased by about 2%. “Maybe it’s COVID,” you might ask? But that doesn’t explain it either -- because the Federal government spent so much on COVID care, private health insurance spending actually fell -- by 1.2% -- in 2020.

Why are insurance prices going up by so much when overall spending went up by so little?

Well, here’s a theory: if you are a health insurer or administrator, you make your money, essentially, as a percentage of what you take in as premiums. If you negotiate too aggressively with doctors and hospitals, well, then they make less money AND you make less money!

If you can only make a maximum of 15% of what you take in from premiums (and remember, the Federal government mandated this with a medical loss ratio requirement of 85% as part of the Affordable Care Act), then to make more money as an insurer, you need spending on health care to increase each year, so that you can charge higher premiums, and collect your share of the pie on an ever-growing pie each year.

So, after years of a pandemic where health care spending moved outside the realm of private insurance, insurers need premiums to increase, by whatever means necessary, to keep their growth numbers looking healthy for the markets.

That means more and more employees get stuck with rising premiums, rising copays, and rising deductibles. But, because insurers have no strong incentive to negotiate prices aggressively, there’s no reason to expect that the price you’ll pay if you accept your insurer’s negotiated rate will be a particularly good one. So, employees get hurt twice -- they pay higher premiums, and they pay higher prices for care than what they could get on their own if they negotiated directly with their doctors!

That’s why we made Sesame -- to give every individual, and every self-insured employer -- a place where they can find care at genuinely affordable, competitive prices.

Of course, we put our money where our mouth is. Every domestic Sesame employee has a Sesame Plus membership, to help them find affordable care. It’s great for our team, who can save money on services that are cheaper through Sesame than the negotiated rates from our insurer, and it’s great for self-insured employers, who will have fewer employees spend above their deductible thresholds.