The primary objective of every health insurance plan is to keep its members healthy. Members and their employers pay monthly premiums, and in exchange, the health plan covers the cost of care when members need it. This is how health insurance has worked for decades, but patients are increasingly delaying medical care despite having health insurance. The reason? High out-of-pocket expenses.
The buck stops with employees
In 1958, the average hourly wage in the U.S was $1.98, and the cost of healthcare per capita was $134. By 2012, the average hourly wage had risen to $19.19, but the average healthcare expense per person raced to $8,953. In real terms, the average American was paying over 7 times more for her health than she would have paid 70 years ago.
This increase in healthcare costs has had a domino effect. Insurance companies have responded by increasing healthcare premiums, with the average premium for employer-sponsored family health coverage touching $17,545 in 2016.
To cope with this tremendous burden, employers have reacted by switching to health plans that have lower monthly premiums, but higher deductibles. As healthcare costs have risen, deductibles have increased in lockstep. Thus, rising healthcare costs which originated at the provider, have passed through insurance carriers, onto employers, and then to employees. Thus, rising healthcare costs which originated at the provider, have passed through insurance carriers, onto employers, and then to employees.
Wages, however, have not kept up with deductibles. From 2010 to 2015, wages grew by 15%, while deductibles increased by 67%. What’s worse, is this burden is unlikely to disappear anytime soon. As long as there is a differential between deductible increases and wage growth, the financial burden on employees will continue to increase year after year.
Many employers have offered tax advantaged savings accounts such as HSAs and FSAs to mitigate this burden, but contribution to these accounts has sometimes been insufficient in fully covering out-of-pocket expenses.
The hard trade-off: Physical Health or Financial Health?
Higher deductibles and out-of-pocket expenses also impact employee behavior. According to a survey by Commonwealth Fund, 4 in 10 working-age adults skipped some kind of medical care because of the cost. Of those that visited the doctor, many put off medical procedures, and didn’t fill prescriptions because of high costs. These behaviors worsen health outcomes. When the patient eventually visits the doctor, the cost of care is much higher than it would have been before, because the medical issue has worsened.
It is well known that out-of-pocket medical bills are the single biggest reason for bankruptcy in the U.S. What is less well known, is that nearly 3 out of 4 of these bankruptcies are filed by individuals who have health insurance. With sky rocketing out-of-pocket expenses, many middle-income employees are faced with a tough scenario: Improve physical health by destroying financial health.
When a large out-of-pocket expense is incurred, many employees use multiple sources of cash to pay medical bills. The first and most efficient capital source is an HSA or FSA. Once this is exhausted, employees dip into checking and savings accounts. Then come credit cards, personal loans, and other high interest bearing sources. Finally, long term savings such as retirement, college education funds are depleted. As each source is utilized, financial health deteriorates, and the the road to recovery grows longer.
How do we tackle out-of-pocket expenses?
Employers are using various methods to help employees with out-of-pocket expenses while controlling health plan costs. Some contribute to HSAs, and this is a tax-efficient way to help employees with a rainy-day fund for medical expenses. Some employers pay premiums for supplemental insurance benefits which cover certain specific out-of-pocket expenses for employees. Many employers are adopting health and wellness benefits that reward healthy behavior, and encourage employees to schedule regular preventive check-ups that reduce the likelihood of health issues.
MedPut is another employee benefit that helps with out-of-pocket expenses. MedPut steps in to pay whenever an employee has an out-of-pocket medical bill, and negotiates that bill to generate savings for the employee. It pays the healthcare provider in full, and collects repayments seamlessly from the employee’s payroll through small payroll deductions. MedPut never charges interest to the employee, there is no impact to an employee’s credit score.
As healthcare costs continue to rise, employers need to find ways to control costs, while providing health plans that employees can use. Through MedPut, employers can manage costs of health plan premiums, and increase employee utilization of health plans. This creates a healthier workforce that receives treatment without worrying about costs at the point of care, and remains debt-free.
