In every facet of our purchasing lives we act as normal consumers. When we go to the grocery store, we will choose one brand over another because of a matter of cents. When we need car repairs we will search countless repair shops to get the best price and value. In almost every purchasing decision we are engaged consumers. However, when it comes to health care we are the furthest thing from an engaged consumer, we are anti-consumers.
Why is this?
Health insurance coverage has become something it is not and should not be. Health insurance has began covering predictable expenses. With too low of deductibles and office co-pays the consumer became disengaged. For just a $10 co-pay you can go to the doctor for a mere cough and the doctor will tell you to take cough medicine. Was this visit really needed? Now, the true costs of that office visit is not $10, it is whatever the doctor charges. Why would the consumer care what this doctor actually charges if all they have to pay is the $10 co-pay and then the insurance picks up the tab? The consumer usually has no idea what the real cost is, to them it is $10. This is a major disconnection.
Remember, the insurance has to cover the rest of the actual costs of this office visit. That cost has to be reflected somewhere. The misuse of office visits, emergency rooms and pointless medical tests are reflected in rising health insurance premiums. There is no incentive to be an actual consumer, so why would anyone?
Along with co-pays we have a lot of low deductible plans still in the market today. Where is the incentive in a deductible that is $250, $500? If I know that the insurance will begin to pay after I hit this cost to me, I understand that I do not have much risk here. I still have no incentive to shop around like I would with any other purchasing decision, especially one has major as health care.
Now, I can already hear objections to what I am saying. Many will tell me my solution is to dig into the consumers pocket even more with higher deductibles. Thus, hurting the consumer and their ability to pay the bills and feed their families. This would be true if I was simply saying to move to a high deductible plan, end of story. What I am saying is to engage the consumer. Make purchasing health care real again. Consumers need to see the real costs. This can be done without hurting the consumer or their checkbooks. High deductible plans are the answer, but they have to be coupled with a personal care accounts such as a Health Reimbursement Arrangements (HRA).
An HRA, is a promise from an employer to reimburse the employee for health care expenses. If the employer gives the employee $1,500 in an HRA , the employee can use this money for eligible health care expenses. Now, employers are not actually handing over this money to the employee, they are simply promising to pay for any future medical expenses incurred. The easiest way to administrate an HRA is on a debit card based system. The employee will receive a debit card with the amount of funds the employer is willing to give, loaded onto it. The employee can then use this debit card to pay for any eligible medical expenses.
For example, let's take Company A.
Company A buys a health plan with a deductible of $3,000. Now if Company A was to say to it's employees this is your plan, you have to pay the first $3,000 before the insurance kicks in, the employees might not be able to afford that. However, if Company A was to give them a $3,000 deductible along with an HRA in the amount of $1500 then this would certainly lessen the blow. Now the employee has what feels like first dollar coverage, the first $1,500 incurred they can use the HRA for. For 85% of people this will be enough money for the year. Imagine 85% of people will see $0 in out of pocket expenses.
We have now created an engaged consumer. Why? These employees have to live on a budget and their decisions are driven by this budget. They understand if they spend all $1,500 in their HRA, they will now have to pay out of pocket until the deductible is met. They also understand that if they are unfortunate and need serious medical procedures their out of pocket is not extreme.
When employees are driven by this budget, they see the real cost of health care because they are paying the actual bills. These plans do not have co-pays, the bill the consumer receives is the actual bill and they learn quick the true costs. It leads to better purchasing decisions. For example, let's say you hurt your ankle late at night and your doctor's office is closed. Is it hurt bad enough to warrant an emergency room trip? Can it wait until the morning? Should I elevate, ice it and then see how it is tomorrow before deciding what to do? These are questions many will not even think to consider if they are just simply paying a co-pay to go the the emergency room. These plans cut out waste because the consumer weighs the value of their own health care. If they truly need to go to the ER, they will. If not, then why not wait and take the less expensive option?
Far too many times, people misuse their health plans. This leads to waste, which leads to higher costs. Creating an engaged consumer is vital to controlling costs. Imagine going to the store and purchasing a product without knowing what it just cost. That makes little to no sense for almost everyone. Yet, for some reason this is how we purchase health care. This needs to change, it has to change.
