Billionaire entrepreneur Mark Cuban has made substantial progress in the healthcare and pharmacy space in nearly four years, and he's learned a lot about its costs for employers and workers in that time, too.
Mr. Cuban co-founded Mark Cuban Cost Plus Drug Co. in May 2020 with Alex Oshmyansky, MD, PhD. The online pharmacy launched eight months later and today offers more than 2,000 of the most highly utilized and/or high-cost generic medications. The drugs are sold with a 15% markup for price, a $5 fee to pay the pharmacists it works with and a $5 fee for shipping. The prices are significantly less than what Americans typically pay through insurance.
The company and its growing list of partners brought Mr. Cuban closer to self-insured employers and their CEOs, most of whom "don't know and don't really want to know where their healthcare benefit dollars are going," he wrote on X, formerly known as Twitter, Jan. 3.
Mr. Cuban said CEOs are indifferent to healthcare outcomes because they are not viewed as a core business competency. "As a result they waste a sh-tload of money on less than quality care for their employees, and more often than not it's their sickest and lowest paid employees that subsidize the rebates and deductibles," he said.
Nearly half of Americans receive health insurance through an employer. Average costs for U.S. employers that pay for employees' healthcare will increase 8.5% in 2024 to more than $15,000 per employee, according to a projection from Aon. The increase is nearly double the 4.5% bump to healthcare budgets that employers experienced from 2022 to 2023.
This forecast builds on recent cost increases: The annual premium for family coverage in 2022 averaged $22,463, with the worker contributing $6,106 annually — an increase of 20% over the previous five years and 43% over the previous 10 years.
While employers' healthcare costs increase, scrutiny of them does not, Mr. Cuban posits. He likened companies' passive spending on healthcare insurance to halfhearted diversity, equity and inclusion programs.
"Like healthcare, DEI is not seen as a core competency in most companies. It's just a huge expense," Mr. Cuban said. "Intellectually, [CEOs] see the benefit of DEI. But they don't have time to focus on it. So it turns into a check box that they hope they don't have to deal with beyond having HR do a report to the board and legal tells them they are covered.
"When anything that impacts all of your employees is pretty much a check list item to the CEO, there is a good chance that it's not going [to] work well and you are going to have employees who are not comfortable for a lot of different reasons. Which in turn creates resentment towards DEI policies and training. Which in turn makes it harder on the managers trying to implement it."
Mr. Cuban's commentary arrives at a time when employers' passivity with healthcare costs is poised for change. Employers have a menu of cost containment strategies for healthcare costs that they have been slow to use due to fierce competition for talent, but that may change as the labor market settles down.
"The strong U.S. economy and a general labor shortage have collectively served as a great buffer for payers and providers, but in recent conversations with employers and their advisors, we hear that employers' ability to continue to invest in rising healthcare costs is fraying (one advisor described employers as approaching a 'benefits cliff') and they are willing to consider healthcare cost management options they had not seriously considered in the past," Joyjit Saha Choudhury, managing director with Kaufman Hall, wrote in an analysis last fall.
What does this mean for hospitals and health systems? Most directly, greater healthcare cost management could take shape as increased scrutiny or measurement of care quality and outcomes, which vary widely for covered employees.
If employers and payers lean more heavily on providers to demonstrate appropriate, high-quality care, it will be a long time coming. Few employers by name have publicly stepped forward to command greater control over healthcare costs and outcomes; some have tried but even backed away. In a time when employers are miscalculating union tactics and demands while seeking stabilized talent, it would make sense if large corporations turned up the heat as healthcare purchasers.