Health care is the most basic need of every person. No wonder health care benefits consistently rank as the second most important factor for employment after wages for employees across all age groups. However, the cost of these benefits render them mostly useless. When half of Americans have less than $500 in their bank accounts, a deductible plan of $10,000 doesn't make any sense. This is why health care costs are the top reason for personal bankruptcies, despite two thirds of these people actually having "health insurance."
Employers are finding that a growing number of employees are opting out of these high cost benefits. Simply put, a benefit not taken is a benefit not provided. Without benefits, there isn't anything creating a sense of loyalty to the employer. And in this tight labor market, that poses a huge challenge with recruitment and retention. Clearly, we need to break the status quo and build something better!
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The problem is with the structure of health insurance which, by definition, is supposed to protect against rare but high expense events (think of your automobile or homeowners insurance). Can you imagine the cost of your oil change if it got billed to your car insurance? So why then with health insurance have we managed to lump everyday care with rare major medical events to the point where no one knows the true cost of any episode of care?
The office copay and post-visit coinsurance, coupled with an annual deductible to reduce utilization and offload risk onto the patient, serve as financial hurdles that have rendered health insurance coverage unaffordable for so many working Americans. Moreover, the total out-of-pocket cost is unknown at the point of service.
Our broken health care system is also bad for providers. For example, it could take a month or longer for providers to collect the full payment on a single $100 office visit once coinsurance has been applied to a deductible. Clawing back the difference between copay and coinsurance in a high deductible involves countless hours of paperwork and aggravation.
So we have to ask ourselves, why not just pay the full amount each time under a direct-pay arrangement between the payer and provider? It is the only and best way to bring transparency and control to the health plan member. This method also makes perfect sense for providers. It would not only eliminate needless administration and third-party involvement for medical practices, but also guarantee full payment at the time of service and actually increase revenue for providers who can instead focus on treating patients.
We need to replace this broken system with a new paradigm where the consumer pays for all routine and simple care directly to the service provider, and utilizes a much more affordable option for rare but high-cost events like hospitalizations and major medical.
Thankfully, there are service providers doing just that, building direct-pay communities across a complete continuum of health care from medical practices to dental offices to diagnostic centers, and "bundled" payment arrangements for procedures and surgeries. They serve as cohesive and intuitive interfaces for visionary partners so that laypeople can utilize all of these services with one account regardless of their needs. We can only grow this ecosystem if we allow a patient to have one login to get medications today and perhaps tomorrow connect with a therapist for a mental health session.
It has become imperative for employers to rethink their benefits and be the financial fiduciaries that executives are charged to be. Since employees are paying the same, or even more, out-of-pocket for routine care, it makes sense to provide direct-pay access for routine care starting at a minimal cost of $5 a month. If there is financial bandwidth and desire to include protection against large medical expenses like hospitalizations, maternity, ER visits, etc., then arrangements like self-funded plans for large employers, and Healthshares for smaller employers can fit the bill.
Ever-rising health care costs and opaqueness around actual cost and control of health care decisions pose a challenge. It is imperative for all of us, especially in the benefits advising and employer community, to be bold and adopt proven solutions that may seem different but are the answer to our health care delivery conundrum. This ties into the need for better employee recruitment and retention strategies in a challenging labor market. It is only when we are willing to act and bring positive disruption that we will see the change that we all desire.
Jawad Arshad, M.D., is CEO of WoW Health Solutions, LLC and Eric Silverman is founder and owner of Voluntary Disruption.
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