Most Consumers Ill-Prepared for Health Care Responsibilities
New Study Reveals Consumers Don't Save Enough or Understand their Benefits
With deductibles growing by the year, out-of-pocket costs increasing, and the cost of most medical procedures rising, healthcare consumers are falling behind in terms of being able to manage the costs of routine health care coverage. Many are struggling between buying health insurance and putting away money into emergency savings plans. Still others are more apt to spend money on tangible consumer goods and worry about health concerns later.
What a Study Says About Health Care Consumers
The 2016 Healthcare Consumerism Index conducted by consumer funding platform Alegeus indicates that consumers are still feeling very unsure of their healthcare decisions and therefore are increasingly budget-minded when it comes to health care. For this report, Alegeus polled more than 1,000 health care consumers to uncover their values concerning health insurance. They revealed:
- 66 percent said they didn’t know how much they needed to save for healthcare costs this year
- 76 percent said that they are focused on getting the best value for their money
- 70 percent indicated that are not at all confident that they have maximized their tax benefits for health care savings plans
- Only 23 percent are aggressively saving for health care needs
There seems to be a breakdown between the health care industry and where consumers stand, where it relates to the costs of good health.
Doctors are clueless on consumer medical costs. In recent visits to two separate health care providers, both for preventative routine care, I personally had conversations with my physicians about the nature of high deductible health care plans and how they actually work in the real world. Neither physician actually realized the astounding out-of-pocket costs that these plans had nor the great burden this had on me.
Both doctors mentioned that it was almost better to not have health insurance and just pay the reduced self-pay billing amount offered by the health care centers. If it were not for the requirement to have minimum health insurance coverage or face fines under Obamacare, I had to agree!
How can consumers reasonably afford health care when they are already strapped for cash due to insurance premiums that are increasing beyond affordable rates, even for group health plans? How can consumers, many of whom are in sectors of the workforce earning just above the poverty level in minimum wage jobs, afford to put money away into medical emergency savings plans? It’s unreasonable to expect that the average consumer has extra money laying around for this purpose.
Consider what can happen when a consumer lacks adequate health insurance coverage and has to dip into personal savings to pay for an unexpected medical crisis? Just one emergency room visit can put someone into debt.
The High Cost of Routine Medical Care
The Healthcare Bluebook lists customary prices for common health care procedures in the USA. As of 2016, the following medical procedures are listed in order of cost, highest to lowest:
- Appendectomy $9,968
- Stomach Ulcer $6,568
- Seizure and Headache $6,332
- Heart Attack $6,025
- Hospitalization for Ear Infection $5,615
- Abdominal MRI $920
- Leg cast $253
- Individual Psychotherapy (45 Minutes) $160
- Flu treatment $135
A Google Consumer Survey of 5,000 adults showed that 62 percent of Americans have less than $1,000 in their savings accounts, and nearly 21 percent don’t even have a savings account. Less than 10 percent said they keep just enough money in their savings accounts to avoid banking maintenance fees – for most banks this is around $300. Think also about consumers who had decent savings before the 2008 recession – a US Federal Reserve survey of 4,000 adults revealed that 57 percent of Americans had used some or all of their savings at that time, leaving them with empty pockets.
This is scary, considering that a single visit to the doctor can easily wipe out a person’s savings account.
Some consumers opt to use health savings arrangements, health reimbursement accounts, and flexible savings accounts to put money away for health needs. This is especially attractive for those who are already maxing out savings to pay for regular medical care and prescription drugs, and for employees who have company matched dollars. Mayo Clinic advises that there can be some potential pitfalls with health savings arrangements, including:
- Illness and health can be highly unpredictable, so it can be difficult to budget for health care needs
- It can be hard to find accurate information about the costs and quality of medical care
- Not everyone has the discipline to set aside monies in a savings account
- Older people facing health problems already may be on tight incomes and cannot save enough
- The pressure to keep money in a health savings account may prevent members from seeking medical care
- Non-medical expenses will be taxed if a consumer accidentally uses their HSA
There are additional problems with health savings accounts that may come up. For one, consumers are not educated enough on how to best make use of them. Funds may sit in an unused account for years, which is a waste of money. Some medical practices may refuse to give patients discounts for paying up front for medical costs, even if the patient asks for this and doesn’t want to file a claim with the insurance company. Consumers aged 65 or above cannot qualify for health savings accounts. Lastly, there are restrictions on families when both parents work and are eligible for a health savings plan – only one is allowed per family and both parents must be enrolled in an HDHP.
Out of Pocket Amounts for HDHPs and HSAs
Currently, high deductible health care plans are ranging from $2,000 to $13,000 annual out-of-pocket maximums. The rates, set forth by the Internal Revenue Service each year, put limits at:
For the 2016 calendar year, OOP minimum and maximum limits are as follows:
- Self-coverage $1,300
- Family-coverage $2,600
- Self-coverage $6,550
- Family-coverage $13,100
Health savings account contribution limits for 2016 are:
- Self-coverage $3,350
- Family-coverage $6,750
With the above amounts in mind, and most families paying between $400 – 800 per month in HDHP plan premiums, there is a wide gap between what consumers can save and what they can afford. Most are unsure of how they could pay for a single catastrophic health claim. Just one week in the hospital, with a battery of tests and scans ordered by physicians, can easily result in a bill of $50,000 or more. That’s on the conservative side.
How Employers Can Educate Employees About Being Responsible Health Care Consumers
Ultimately, it’s up to employers to provide the education and information that employees need to be smarter, cost-effective health care consumers. Sending out benefits enrollment information each year is not enough. There are several ways that companies can educate and support a healthier workforce.
1. Hold Educational Sessions to Explain Benefit Costs, Coverage Amounts, and Savings Options
Before open enrollment, during employee onboarding, and during peak risk seasons for health – employers can schedule educational sessions. Center them around themes for saving money on health care and medication, preventing health problems, increasing health savings, and how to select quality care. Share some of the tools mentioned here so that consumers can shop around for the best rates on medical procedures, doctor visits, and more.
2. Provide an Emergency Medical Fund for All Employees that they Contribute To
Every company should put aside a medical fund to help an employee facing catastrophic illness or a major injury. This can be a community fund that all employees can contribute a small amount out of every paycheck. Reward contributors with company swagger and other perks to keep them active in the plan. Have a review committee and a point of contact person to allocate funds when needed.
3. Give Employees Access to Financial Wellness Tools
Many consumers have gotten into bad habits of overspending and undersaving. Make saving money a positive goal by sharing financial wellness tools that help them track their spending and budgets, rack up savings, and start putting more money into their personal and health savings accounts. When employees feel secure about their financial future, they are much less distracted and a lot more productive.
4. Every Year, Secure the Most Affordable Group Health Plans with the Best Value
Take responsibility for a portion of the burden of affordable health care. Work closely with medical and voluntary plan administrators to put together group insurance plans that are low cost but offer the best value. Don’t shortchange employees by offering plans that don’t have good coverage or participate with a wide network of medical facilities.
5. Have an Open Door Policy for Helping Employees with their Medical Financial Questions
It can be tempting to let employees self-enroll in benefits after handing them a brochure. Never assume that they will understand the health care plans at all. Researchers at Carnegie Mellon University found that only 14 percent of Americans aged 25 to 64 had any understanding of the most basic insurance terms. Have an expert on hand in your HR department ready to answer any questions and define complex health care terminology.
6. Develop and Launch a Corporate Culture of Health and Wellness
While there’s not much that employers can do to help individual consumers take better care of their health, encouraging employees to participate in low-cost screenings vs. dealing with expensive serious illnesses later on should be an ongoing discussion. Employers can play a large role in helping employees to lead healthier lifestyles by offering onsite wellness support and education. Wearable fitness devices, support groups, and healthy meal options on campus can make a huge difference to employees who may be struggling to stay fit and reduce stress.
It is not expected that health care costs will ever go down; in fact, they will likely continue to rise in the coming years. But, consumers can get smarter about where they spend their health care dollars and what plans they choose to comply with health care mandates.