Who Really Pays for Healthcare Inflation? Insights from Price Growth by Payer Type.

By: Margaret Gachau, The Quinnipiac University Global Economics Research Team

In today’s report on the healthcare economy:

• Privately Insured Patients Face Higher and Faster-Rising Healthcare Costs

• Trends in Health Insurance Premiums: Group vs Individual Markets.

Uneven Healthcare Inflation: Faster Price Growth for Privately Insured Patients

As illustrated in the figure and supported by analysis from L.E.K. Consulting , Healthcare inflation continues to evolve unevenly across the system, with growing evidence that cost pressures are not distributed equally across payer types. While overall healthcare prices have risen steadily, the burden of these increases is disproportionately concentrated among privately insured patients.

 Data on price trends by payer type show that prices paid by private insurers have increased at a faster rate than those for Medicare and Medicaid. Although all payer categories exhibit upward movement, the divergence between private and public reimbursement has widened over time. This pattern points to structurally higher and faster-rising costs within the privately insured segment.

These differences are largely driven by variation in pricing mechanisms. Public programs such as Medicare and Medicaid rely on administratively set reimbursement rates, which place constraints on price growth. In contrast, private insurers negotiate prices directly with providers, often in markets characterized by provider consolidation and limited price transparency. This dynamic allows for greater pricing flexibility and contributes to sustained upward pressure on privately negotiated rates.

Taken together, these trends suggest that healthcare inflation is not a uniform phenomenon, but instead reflects underlying institutional and market structures, with privately insured patients bearing a disproportionate share of rising costs. Importantly, these differences in pricing dynamics are not confined to the provider level but are also transmitted to consumers through rising insurance premiums, as discussed in the next section.

Source :  Insights from  L.E.K. Consulting (Used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

Upward Trends in Health Insurance Premiums: Group vs Individual Markets

Note: Premium averages across the group market include large- and small-group fully-insured plans only.

Source: Mark Farrah Associates via KFF  and own calculations.

Premiums in the group market remain consistently higher than those in the individual market, reflecting broader risk pooling and more comprehensive coverage typically associated with employer-sponsored plans. However, both segments exhibit steady growth, with premiums rising significantly over time. Notably, the individual market shows a period of more pronounced increases around the mid-to-late 2010s, likely reflecting adjustments following  Affordable Care Act (ACA) implementation, including market stabilization efforts and changes in insurer participation. In more recent years, premiums in both markets continue to rise at a steady pace, suggesting that underlying cost pressure, such as rising healthcare utilization, labor costs, and service prices, remain persistent across the system.

Overall, the parallel upward movement in both group and individual premiums reinforces the broader trend of sustained healthcare cost growth, indicating that inflationary pressures in the healthcare sector are not isolated to a single segment.

Additional Reading

Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely