Why Most Consumers Are Ill-Prepared for Health Care Responsibilities
Studies Show That Consumers Don't Save or Understand their Benefits
With deductibles growing by the year, out-of-pocket costs increasing, and the cost of most medical procedures rising, many healthcare consumers are finding that they're unable to manage the costs of routine health care. People are struggling between buying health insurance and putting money into savings plans or even toward other requisite expenses.
The Commonwealth Fund conducted a survey from June through November 2018, publishing its findings in early 2019, approximately eight years after provisions of the Affordable Care Act (ACA) began to go into effect in 2010. They found that roughly the same number of Americans ages 19 through 64 were underinsured in 2018 as were in 2010—about 45%, or nearly half.
The survey also found that more people who were covered under employer plans are now underinsured and that those who are underinsured or uninsured are hit with higher, more prohibitive medical bills than Americans with adequate insurance.
Although the tax penalty associated with the Affordable Care Act was repealed as of January 2019, the mandate—and the Affordable Care Act itself—is still alive and well.
The High Cost of Routine Medical Care
Debt.org reports the following customary prices for some relatively common health care procedures in the U.S. as of 2018:
- Gastric bypass: $25,000
- Angioplasty: $28,200
- Knee replacement: $35,000
- Hip replacement: $40,364
- Heart bypass: $123,000
- Heart valve replacement: $170,000
That's a lot of money to come out of pocket if you're uninsured, although you might admittedly take less of a hit if you're uninsured because healthcare providers often offer insurers rates that are less than those charged to uninsured patients. All the same, there's no guarantee that that discount will trickle down to you.
Average American Savings
The Federal Reserve reported that in 2019, the median transaction account value (including savings, checking, and money market accounts) of American households was only $5,300. Couples tend to save the most, while single parents save the least. A Bankrate study revealed that one in five Americans don't save anything at all.
Compare the numbers. A catastrophic injury or illness can easily wipe out a consumer's savings account and plunge them into considerable debt as well.
Some consumers use health savings accounts (HSAs), 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 their savings to pay for regular medical care and prescription drugs, and for employees who have company-matched dollars. But the Mayo Clinic advises that there can be some potential pitfalls with health savings arrangements, including:
- Not everyone has the discipline to set aside money in a savings account.
- Older people facing health problems already might be on tight, fixed incomes and can't save enough.
- The pressure to keep money in a health savings account can prevent people from seeking medical care.
Consumers aren't educated enough on how to best make use of health savings accounts. Funds can sit in an unused account for years, which is a waste of money. Some medical practices refuse to give patients discounts for paying upfront for medical costs, even if the patient asks and doesn’t want to file a claim with her insurance company. And consumers aged 65 or older can't qualify for health savings accounts.
Restrictions apply when both parents work and are eligible for a health savings plan—only one plan is allowed per family and both parents must be enrolled in a high deductible health plan (HDHP).
Out-of-Pocket Amounts for HDHPs and HSAs
Limits for HDHPs and HSAs are set forth by the Internal Revenue Service each year. Out-of-pocket maximum limits for the 2021 calendar year are:
- Maximum self coverage: $7,000
- Maximum family coverage: $14,000
Health savings account contribution limits for 2021 are:
- Self coverage: $3,600
- Family coverage: $7,200
Again, there's a wide gap between what consumers can save and what they can afford. Most are unsure of how they would pay for a single significant health claim.
How Employers Can Help
Ultimately, it’s up to employers to provide the education and information employees need to be smarter, cost-effective health care consumers. Sending out benefits enrollment information each year isn't enough. Companies can educate and support a healthier workforce in several other ways.
Hold Educational Sessions
Explain benefit costs, coverage amounts, and savings options before open enrollment, during employee onboarding, and during peak risk seasons for health. Center these sessions around themes for saving money on health care and medication, preventing health problems, increasing health savings, and how to select quality care.
Provide an Emergency Medical Fund
Every company should consider putting aside a medical fund to help employees who are facing catastrophic illness or a major injury. This can be a community fund to which all employees contribute a small amount of every paycheck, or even once a month or so. Reward contributors with company swagger and other perks to keep them active in the plan. Appoint a review committee and a point-of-contact person to allocate funds when they're needed.
Access to Financial Wellness Tools
Make saving money a positive goal by sharing financial wellness tools that help employees track their spending and budgets, rack up savings, and start putting more money into their personal and health savings accounts. Employees are much less distracted and a lot more productive when they feel secure about their financial futures.
Secure the Most Affordable Group Health Plan
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.
Have an Open Door Policy
It can be tempting to let employees self-enroll in benefits after handing them a brochure. Have an expert on hand in your HR department or on call, someone who's ready to answer any questions and define complex health care terminology.
Develop and Launch a Corporate Culture
Encouraging employees to participate in low-cost screenings versus dealing with expensive serious illnesses later should be an ongoing discussion. Employers can play a larger role in helping employees lead healthier lifestyles by offering onsite wellness support and education. Wearable fitness devices, support groups, and healthy meal options in the workplace can make a huge difference to employees who might be struggling to stay fit and reduce stress.
It's not expected that health care costs will ever go down. In fact, they'll 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. The Health Insurance Marketplace is still available for those who don't have affordable access to coverage through their employers.