Incentives are there, they are just not going in the right direction. First, the buyer does not care that much since it is all tax-deductible. And there are ot

Incentives are there, they are just not going in the right direction. First, the buyer does not care that much since it is all tax-deductible. And there are other dynamics in play. Here is a nasty example: Employers care that premiums only increase by X% per year. Fine. As such, insurance will try to protect its contract with employer by going to the hospital provider, and demanding a low premium increase. Hospital says fine but "OK - but you agree to our increase of list price by 50%.... don't worry, we give you a discount on that amount. Insurance won't pay that increase" Insurer says "Great! In fact, let's push it to 100%? OK?" How did we come to this? Insurer and Hospital agreeing to increase price by 100% and discount that 100% back down? Its because of the incentives. Insurance will use this to go back to employer and say. "We got you that x% cap on increase in premiums. Employer, by the way, you still owe us money from the 100% discount we got you from the hospital bills " Employer says OK and pays a ~3% premium on the 100% 'discount' ("claims repricing" in industry parlance). Meanwhile, Hospital goes back to the government. "We had losses from discounts given to govt patients totaling X in discounts". Now hospitals recoup some of that money. (in industry parlance Disproportionate Share Hospital (DSH)) Meanwhile, people with no insurance have to pay these inflated list prices...with no insurance discount whatsoever. HR staff gets promoted or leaves the job, because they did a great job securing that X% cap. The new person does not know what "claims repricing" is. It remains in the contract. Premiums go higher next year.