A community-led partnership in Colorado designed to negotiate health care prices lowered health care premiums in 2020 and 2021, we find in our new paper in the Journal of Risk and Insurance. The nonprofit organization is called the Peak Health Alliance.

As health care premiums continue to rise nationwide, many employers have formed so-called purchasing alliances in hopes of collectively reducing health care costs for their employees. Despite their popularity, to date there has been limited evidence to show these alliances work to control costs.

We are health economics professors who have extensively studied policies that affect the design and cost of health insurance. Our work includes an earlier study we published in the American Journal of Managed Care that found large individual employers generally lack the ability to negotiate lower prices for their employees.

In this most recent study, we evaluated Peak Health Alliance, which initially launched in Summit County, Colorado, in 2020 and then expanded to seven other rural Colorado counties in 2021.

Our findings provide the first clear evidence that purchasing alliances like Peak can successfully reduce health care costs.

Peak Health Alliance was started in response to a Kaiser Health News report that found Summit County, which includes the ski destinations of Breckenridge and Keystone, was one of the most expensive counties in the country for health care. In collaboration with an insurance partner, Peak aimed to negotiate lower prices with hospitals in their networks and offer insurance plans on the individual market.

One key advantage of Peak was its relatively small and clearly defined geographic area - a single county with a population of roughly 30,000 people. This simplified management and likely increased Peak's bargaining power, as it allowed Peak to capture a large share of the population using a local insurer. Larger-scale initiatives, in contrast, often face greater administrative complexity as they manage more partners and geographies, potentially lowering their ability to negotiate effectively.

Peak was also different because it worked with both individuals and employers.

We used data from the Colorado Division of Insurance on health plans to compare changes in premiums from 2017 to 2021 between counties where Peak expanded to and counties where it did not.

In 2024, the national average annual premiums for a private insurance health plan is close to $9,000 per year for single coverage. Peak's savings of 13% to 17% translate to over $1,000 of savings per year per person enrolled in Peak's plans.

Premiums also dropped in the seven counties added during Peak's 2021 expansion. Those counties were Dolores, Grand, Lake, La Plata, Montezuma, Park and San Juan.

Our research strongly suggests that these premium reductions resulted primarily from lower health care prices. In other words, the costs insurers paid to health care providers for their services went down. When total costs are lowered, premiums for people enrolled in the plan also dropped.

It remains uncertain whether Peak Health Alliance can maintain its initial success following significant challenges with its insurance partners.

Peak initially partnered with Bright Health, now NeueHealth, which initially offered individual and Medicare Advantage plans. But Bright Health stopped offering health plans across the U.S. in 2022 due to profitability struggles across its entire business. As a result, Peak was forced to stop offering insurance plans in Colorado for the years 2022 and 2023.

Peak has since secured a new insurance partner in Denver Health Medical Plan, but it is unclear whether this new partnership will enable Peak to continue reducing health care costs.

It's not clear if similar alliances can replicate Peak's success in different market conditions and geographic regions.

Additionally, researchers need to examine the long-term effects of purchasing alliances on health care quality and consumer satisfaction, ensuring that cost savings do not compromise patient outcomes.

The Research Brief is a short take on interesting academic work.