Health care costs have continued to rise since the implementation of the Affordable Care Act (ACA). There are several logical reasons for this: First, more people now have health insurance. More covered lives translates into more health care dollars spent. Second, as the economy slowly improves, more employees are feeling secure in their income and are spending more on health care.
You might suppose that people would not treat health care dollars as discretionary spending, but this is precisely what they do in good times: They get that mole checked out, or they have that elective surgery they’ve been putting off. But when they open bills from the dermatologist and the hospital, they receive an unwelcome surprise. The out-of-pocket health care costs of those procedures were way more than expected.
The Scope of the Problem
Employees are paying more for their health than ever before. Since 2009, average out-of-pocket expenditures have doubled. These increased costs come in many forms: Many employers are offering high-deductible plans; others’ plans have higher co-insurance, which requires their employees to foot more of the bill for covered expenses; most new plans require employees to pay higher co-payments for visits to specialists and emergency departments; and many plans involve smaller networks of less-expensive doctors and hospitals, often compelling employees to spend more money when they choose to stay with a familiar doctor or hospital that happens to be out of network. Despite having more skin in the game than ever, employees appear to be consuming more health care services than ever — with often unfortunate results.
In a Kaiser Family Foundation survey, data found that as many as 50 percent of employees report they don’t have enough money in the bank to cover their medical plan’s deductible. Today, a catastrophic medical event, such as a cancer diagnosis, is the No. 1 cause of bankruptcy in the U.S.
The Effect on Businesses
Employers are feeling these pressures, as well. Businesses have witnessed increases in annual premiums for group health plans, despite cost shifting in the form of high-deductible, high-co-insurance plans. And experts are predicting premiums to continue rising in coming years. Companies pay substantial compliance costs because of the ACA and other mandates that subtract from the bottom line. Competition for talented employees is becoming increasingly dependent on a business’s ability to afford health insurance.
The good news for businesses is that employees are beginning to understand that health insurance comprises a substantial portion of their reimbursement package. Employees are telling pollsters that they would accept somewhat lower salaries in exchange for more comprehensive benefits packages.
How Can Employers Help Their Workers?
Human resource administrators can help employees by sitting down and explaining the workings of high-deductible plans. Too many employees are seduced by lower premiums. It may be useful to ask employees to review their use of health care services in the previous two years in order to get an estimate of anticipated out-of-pocket expenses. Employees should be encouraged to check periodically whether their doctors are still in network. These shifts occur on a yearly, sometimes monthly, basis.
Finally, many businesses are offering voluntary supplemental insurance to help employees fill gaps in coverage. These plans improve the business’s attractiveness while costing the company nothing. Employees should be encouraged to look at supplemental insurance but also to keep costs in mind.
Employees need to become informed consumers of health services. Time devoted to educating employees about risks and benefits is time well spent — both for the individual and the business.
David E. Williams is president of Health Business Group, a strategy consulting firm serving clients in technology-enabled health care services, pharmaceuticals, biotech, medical devices and software. He is frequently quoted in the media on the business of health care and is the author of the Health Business Blog. David sits on the board of both private health care companies and nonprofits.