(and if not, who’s to blame?)

As deductibles and out-of-pocket limits continue to rise, and more and more plans drop the up-front copayments our clients have grown to love, we’re once again hearing the word “consumerism” as a possible answer to America’s health care crisis. The idea behind consumerism is that people purchase health insurance for the big, unexpected medical expenses that may arise and budget for everything else. When people spend their own money, they make different and better decisions than when they’re spending the insurance company’s money. Since they’re not shielded from the cost of health care services, they make buying decisions based on cost and quality—the same way they do in other areas of the economy.

Whether people are ready to embrace consumerism or not, they’re sort of being pushed into it. These days, most of our clients have a “consumer-driven” plan design, even though they may not realize it.

So the obvious question is this: are your clients good health care consumers? Do they have the information and tools that they need to make educated decisions based on cost and quality? And if the answer is no, who’s to blame? Is it the fault of the government, the insurance companies, or healthcare providers, or does the buck stop with you, their trusted insurance advisor?

A Long Way to Go

We should start by admitting that most people do not, in fact, have all of the resources they need to be good consumers of health care, and there’s plenty of blame to go around. One reason people are lacking the necessary tools is because those tools, by and large, do not exist. That doesn’t mean that people are helpless. There are ways today to compare options and make better healthcare choices, but we have a long way to go before health care will operate like the rest of the economy.

The fact that things aren’t perfect, however, is no excuse for inaction on the part of agents and advisors; in fact, just the opposite is true. In the absence of a complete set of consumerism tools that we can point our clients to, brokers must work that much harder to make sure consumers know how to make an informed decision.

The Elements of Consumer Directed Health Care

If we want to build better health care consumers, we should probably start by asking what all goes into a consumer-directed strategy. In other words, what items would be on our checklist if we really wanted people to take ownership of their health care decisions? Here are the main components:

1. A consumer-driven plan design What we mean by this is that the health plan should encourage consumers to “shop around” for health care services. A traditional HMO or PPO plan offering copayments that shield people from the true cost of care does not accomplish this goal because people have no financial incentive to choose one provider over another. Instead, eliminating the up-front copayments is necessary to get people to change the way they utilize their health coverage. Interestingly, these are the plans most of us are selling in both the individual and group markets nowadays, and that’s true whether any of the other elements exist or not.
2. A tax-advantaged account On a group basis, employers can put money in a Health Reimbursement Arrangement (HRA) or allow employees to contribute to a Flexible Spending Account (FSA), but the most popular tax-advantaged account for both groups and individuals is a Health Savings Account (HSA). HSAs can only be paired with a qualified High Deductible Health Plan, but since more and more people these days have that type of plan design, a lot of people are eligible to set up a Health Savings Account. Sometimes the insurance company will partner with an HSA administrator, but usually it’s up to the consumer to decide who they want to use.  Brokers can certainly recommend a good administrator to take the burden of searching off of the client.
3. Additional coverage to offset the higher exposure The minimum deductible on an HSA-qualified plan is $1,300 for individuals and $2,600 for families, but most people have much higher deductibles than that. Yes, contributions to a Health Savings Account can help people pay these out-of-pocket costs with tax-free dollars, but ideally they’d like to preserve those funds and see the balance in their accounts grow. That’s where supplemental coverage like accident and critical illness plans can be a good fit. These types of policies do not disqualify people from contributing to an HSA, and together they can help protect consumers against big out-of-pocket expenses if something unexpected does happen. They help people keep more of their HSA funds in their HSA accounts.
4. Alternatives to traditional copayments If we’re going to ask people to make better healthcare decisions, it’s critical that they actually have options in health care coverage. People can’t make better choices unless there’s more than one option. Initially, the choices are simple: use an urgent care center rather than an emergency room if it’s not a true emergency, switch from a name brand to a generic drug whenever possible, etc. We can go further, though. Instead of using an urgent care center when they can’t get in to see their doctor, consumers might want to try a more cost-effective retail clinic, or they may want to pick up the phone and call a doctor if they have a telehealth benefit. In addition to switching to a generic drug, people may find that they can save even more money if they also switch pharmacies. Some generics, for instance, might be covered on a pharmacy’s $4 or $5 drug list.
5. Price and quality transparency tools The number one tool people need, however, is a way to compare the amount providers charge for different services and the quality of service they provide. Insurance carriers provide some of this information once people are members. Additionally, there are other free comparison tools available. We’re certainly not where we need to be in terms of transparency, but some resources are available.
6. A way to share information The real power of consumerism, though, is in the ability of consumers to share information with others so that they, too, can make an informed decision. If enough consumers are sharing information, they begin to have a voice and can actually impact the prices that providers charge for health care. This movement is just beginning, but as we learned with the EpiPen case a few months ago, when a lot of consumers voice their opinions at once, they can impact change. We’ll likely see other examples of this in the near future.

Who’s to Blame?

Again, we’ve got a long way to go as a country before health care will function like other areas of the economy. Right now, it’s way too complicated for most people to make truly educated decisions.

Yes, the government is partially to blame for creating such a complex system, and it seems like every “fix” at the federal level just makes it more confusing for consumers. Then again, most health care is delivered and financed by the private market, and it is the insurance companies that introduced copayments that shielded people from the cost of care, so maybe the carriers are to blame. Of course, health care providers have taken advantage of the third-party payment system by charging ever-increasing prices since they knew that their patients wouldn’t mind—someone else was paying the bill. This has pushed premiums up and forced employers and individuals to scale back their health coverage in an effort to keep prices under control. Last but not least, brokers share some of the blame: all too often we’re selling plan designs that require our clients to pay a larger share of their health care expenses without arming them with the information and tools they need to use their plans effectively.

What Can Brokers Do?

Regardless of who’s to blame, we can certainly acknowledge that there is a problem and do our part to fix it. Here’s what we would propose.

As you visit with your clients, let them know that we seem be returning to the “old days” when people purchased insurance for the big stuff like hospitalization and surgeries and budgeted for things like doctor visits and prescriptions. Increasingly, the only available plans that will fit in our clients’ budgets come with higher deductibles and no up-front copayments.

You should emphasize the fact that they will have health care expenses, even if they’re healthy and can’t predict at this time what those expenses will be. Tell them that the health plan is not enough and that they should set some money aside for future medical costs. If they have an HSA-qualified plan, they can save this money on a tax-free basis.

You should also tell them that they can stretch their HSA dollars by purchasing supplemental coverage to help offset the costs of big claims resulting from accidents and critical illness. The cost of these policies is less than the additional cost of purchasing a more comprehensive health plan.

To help your clients adjust to the fact that they can’t run to the doctor for $25 like they could in the past, you should educate them about the alternatives. Tell them what tools are available for free or for a low monthly fee. Let them know that different pharmacies charge different prices for the same medication and that alternative prescription networks may give them a bigger discount than their health plan. These tools can certainly shine a spotlight on the price discrepancies.

Finally, encourage them to share their experiences with others on social media. As they do, they’ll also get better at finding information on their own, and that’s essential to them becoming better consumers.

Consumerism is the Future

As lawmakers continue to debate the health care law and work to find a better solution, it’s increasingly clear that consumers will be asked to take on a bigger role. By taking steps now to help your clients adjust to this new reality, you can make sure they have the resources they need to use their plans effectively. And because part of the solution requires them to purchase supplemental coverage, you’ll increase your income in the process.