Private Health Insurance Providers Pay Over Twice What Medicare Pays


RAND Corporation recently released a report on medical spending in 2020 in which they found that private insurance companies paid, on average, 224% of what Medicare would have paid.

The discrepancy varied from 175% in Arkansas, Hawaii, and Washington to 310% in Florida, South Carolina, and West Virginia. And while this certainly doesn’t appear fair to insurance providers, who then pass those higher payments to customers in the form of increased premiums, there isn’t an easy solution.

Negotiating for Lower Agreed Payments

It may seem that the solution would be for health insurance providers to negotiate lower payments for services with healthcare providers and hospital systems. But it’s not that easy because providers and hospitals depend on the high payments they get from insurance companies.

Another seemingly potential solution is Medicare for all, but hospitals would close down or find it impossible to find staffing if they lost their revenue from private insurers.

The Kaiser Family Foundation calculated that “limiting private insurance reimbursement to Medicare rates would reduce health spending by about $350 billion in 2021.” And while that looks good for insurance companies, it doesn’t look for hospitals and care providers.

So, insurance providers can’t expect to find allies in medical providers if they try to lower their payments to Medicare levels.

Health Insurance Providers Partnering With Large Employers

According to, 56% of employers offer group health insurance, so perhaps insurance providers can work with lobbying groups from the large companies they insure to help negotiate lower accepted reimbursement from hospitals and health systems, enabling insurance providers to lower premiums.

Private companies would benefit from negotiating lower premiums because their benefits package would become more attractive to employees. In addition, if they supplement employee premiums, their contributions would decrease. And it would be a win for insurance providers because their claims payments to hospitals and medical providers would decrease.

It’s obvious that there’s no easy answer because politicians, consumer advocacy groups, and insurance providers have been arguing over healthcare solutions for decades. But this information should give insurance providers the statistics they need to negotiate lower reimbursement agreements.


Melanie Musson is a health insurance expert with

Follow us on social media for the latest updates in B2B!



air quality
Superior Air Quality and HVAC Systems are Crucial for Senior Care
May 29, 2024

The demographic shift towards an aging population, projected to reach 27 million Americans in nursing and assisted living facilities by 2050, raises significant concerns about indoor air quality in these environments. With respiratory health already being a critical issue among seniors, the stakes are high for ensuring that HVAC systems are up to par….

Read More
Trades industry
The Future of Data Centers: Cooling, Power, and ESG with Saqib Ashraf
May 28, 2024

In a rapidly evolving data center industry, cooling technologies are finally taking center stage, driven by the rise of AI and other high-density computing needs. In the latest episode of Straight Outta Crumpton, Saqib Ashraf, Director of Solutions Architecture at CPG, shares insights on the future of data centers as well as the challenges…

Read More
With Walmart Health Shuttering Its Doors, Retail Healthcare Has to Rethink Its Role & Strategy in Primary Care
May 28, 2024

Retail healthcare is an uncertain slice of the U.S. healthcare industry, being defined by both recent strategic retreats and bold expansions which have sparked crucial discussions about the future of primary care services within the retail sector. The most recent news that shocked the industry was the shuttering of Walmart Health, Walmart’s 51 health…

Read More
Edge Computing Smart Cities Experts Talk
Edge Computing is the Foundation for Scaled Smart Cities. How Can the Industry Accelerate Adoption?
May 28, 2024

As cities globally accelerate their transformation into “smart cities,” the integration of a capable computing ecosystem to complement smart city initiatives has become an important part of smart city success. How critical will edge computing be in that ecosystem, and in the facilitation of today’s and tomorrow’s smart city projects, especially with where smart…

Read More