NOTE: For the next three weeks, my blogs will share three assumptions that many employers mistakenly accept as facts:
1. ‘Skin in the Game’ will keep costs down.
2. Workplace wellness programs save money.
3. Repeal, replace or repair Obamacare measures will fix our ailing healthcare system.
This ‘ThinkPiece’ article was originally published last month in the Des Moines Business Record. Today’s blog addresses whether having ‘skin in the game’ will make healthcare users better ‘consumers.’
For at least the last eight years, healthcare and health insurance have been caught in the political crosshairs of conflicting ideologies. Nearly one-fifth of the economy has become the perennial punching bag for both political parties. A demarcation line exists between enhanced-federal control versus private-market forces at local levels.
In the meantime, employers and their employees must navigate through uncertain waters on how to pay escalating healthcare costs. To date, employers continue to rely on ‘cost-cutting’ assumptions that appear to be both intuitive and rational: forcing employees to have more ‘skin in the game;’ initiating wellness programs to curtail health costs; and waiting for policy makers to “repeal, replace or repair” Obamacare. This last implied assumption suggests that by fixing the individual insurance markets, the entire healthcare system in the U.S. will be miraculously resuscitated.
On the surface, all three assumptions appear to have merit. But, when assessing the facts, employers should be cautious about these ‘solutions.’ At the bare minimum, these assumptions – or possible myths – deserve more scrutiny.
“SKIN IN THE GAME”
Employer-sponsored health plan deductibles in the U.S. have been dramatically increasing for a number of years. Since 2004, in Iowa alone, employer deductibles have increased by 185 percent. Iowa workers now pay single and family averages of $1,627 and $3,400, respectively. Nearly a quarter of Iowa employers offer high-deductible health plans (HDHP) which usually include qualified spending accounts, such as health savings accounts or health reimbursement arrangements. A general belief of offering high-deductible plans is that employee cost-sharing obligations (e.g. having “skin in the game”) will encourage employees and family members to scrutinize the cost and quality of care from various health providers.
It is true that high-deductible, consumer-driven health enrollment is associated with lower healthcare spending, particularly in outpatient care and prescription drugs. But, data from health insurance claims indicate that this lower spending is primarily derived from decreased use of care, not because enrollees are switching to lower-cost alternatives. In some cases, this decreased care might be for unnecessary services – which is a good thing. However, if necessary care is being skipped because patients are paying more out-of-pocket, there is a great risk that delaying care may actually cause health costs to rise sometime later, when the medical condition has become more acute.
A few years back, when researchers surveyed 2,000 18-to-64-year-olds covered by insurance, they compared those with HDHPs to those with more traditional (lower deductible) plans to determine healthcare shopping frequency rates. The findings revealed that HDHP enrollees, although having more out-of-pocket exposure, showed little evidence of making higher-value purchase decisions compared to those with less financial risk. Additionally, given the scarcity of information on specific health costs and provider outcomes, patients obtaining care are not truly informed decision makers.
Even when plan participants have access to healthcare prices, this information does not assure that patients will spend less, especially in monopolized markets. A 2016 study published in The Journal of the American Medical Association investigated the Truven Treatment Cost Calculator, a website that provides users with costs on over 300 services. It found that the cost calculator was not popular with participants and that price transparency did not reduce outpatient spending – even for those patients with HDHPs.
As Austin Frakt reported in 2016, some health plans now provide price transparency tools to their enrollees. Unfortunately, as with the Truven study, a very small percentage of enrollees actually utilize them. Aetna, for example, offers a price transparency tool to 94 percent of its commercial market customers, but only 3.5 percent use it. Part of the reason could be that health care choices are driven by physician referrals, and options provided throughout the care process may be deemed too complex and overwhelming. According to at least one analysis, only 40 percent of healthcare spending is amenable to shopping. If out-of-pocket costs are the same at both a high-cost and low-cost provider, there is little incentive to pay the cheaper cost if insurance will pay the difference.
The Skinny: Merely providing employees with HDHPs to have more “skin in the game” will not make them more informed consumers. It may actually make them more frustrated. Transitioning healthcare ‘users’ to ‘consumers’ will continue to evolve over time, whether by educating them on how insurance works, or by targeting them to find higher-quality providers and services. One promising approach is reference-based benefits, which are preset dollar limits an insurer places on certain medical services or procedures. Under this approach, employees will pay the difference if they select a service or procedure above the reference price. The key to this approach is full transparency of the reference prices.
Next week’s blog will review the second myth, the effectiveness of wellness programs.
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