• Benefits Strategy

Are Out-of-Pocket Health Care Costs Making Your Employees Sick?

The primary objective of every health insurance plan is to keep its members healthy. Members and their employers pay monthly premiums, and in exchange, the health plan covers the cost of care when members need it. This is how health insurance has worked for decades, but patients are increasingly delaying medical care despite having health insurance. The reason? High out-of-pocket expenses.

The buck stops with employees

In 1958, the average hourly wage in the U.S was $1.98, and the cost of health care per capita was $134. By 2018, the average hourly wage had risen to $27.16, but the average health care expense per person had raced to $11,121. In terms of percentage of earnings, the average American is paying over six times more for her health today than she would have paid 60 years ago.

This increase in health care costs has had a domino effect. Insurance companies have responded by increasing health care premiums, with the average annual premium for employer-sponsored family health coverage hitting $19,616 in 2018.

To cope with this tremendous burden, employers have reacted by switching to health plans that have lower monthly premiums, but higher deductibles for employees. As health care costs have risen, deductibles have increased in lockstep. Thus, increased health care costs, which originated at the provider, have passed through insurance carriers, on to employers and then to employees.

Wages, however, have not kept up with deductibles. From 2010 to 2015, wages grew by 15 percent, while deductibles increased by 67 percent. What’s worse, is this trend has continued, and is unlikely to reverse any time soon. As long as there is a gap between deductible increases and wage growth, the financial burden on employees will continue to increase year after year.

The hard trade-off: physical health or financial health?

When employees are burdened by higher deductibles and out-of-pocket costs, their behavior changes. According to a 2016 study by the Kaiser Family Foundation, people with problems paying their bill were nearly three times as likely to delay medical and dental care compared to those without problems paying their bill. Of those that visited the doctor, many didn’t fill prescriptions because of high costs. These behaviors worsen health outcomes. When a patient delays treatment or avoids medications, the cost of care ends up much higher than it would have been before, because the health issue has worsened.

It is well known that out-of-pocket medical bills are the single biggest reason for bankruptcy in the U.S. With out-of-pocket expenses sky rocketing, many middle-income employees are faced with a tough choice: improve physical health, or maintain financial health?

When a large out-of-pocket medical expense is incurred, many employees use multiple sources of cash to pay health care bills. The first capital source is an HSA or FSA. Once this is exhausted, employees dip into checking and savings accounts. Then come credit cards, personal loans and other high-interest bearing sources. Finally, long-term savings such as retirement or college education funds are depleted. As each source is used up, financial health deteriorates, and the road to recovery grows longer.

How do we tackle out-of-pocket expenses?

Employers are using various methods to help employees with out-of-pocket expenses while controlling health plan costs. Some employers contribute to HSAs and HRAs, and these are tax-efficient ways to help employees with health care expenses. Some employers pay premiums for supplemental insurance benefits, which cover certain out-of-pocket expenses for employees. Many employers are also adopting wellness benefits that reward healthy behavior and encourage employees to schedule regular preventive check-ups that reduce the likelihood of health issues.

MedPut is another employee benefit that helps with out-of-pocket expenses. It is an innovative program that steps in to pay whenever an employee has an out-of-pocket health care bill. An employee can simply submit a photo of any unpaid bill, and MedPut handles the rest. MedPut contacts the provider, tries to negotiate additional savings on the bill and pays the bill off for the employee. Since MedPut works to negotiate bills with providers, the employee may actually see a reduction on the bill balance.

Once the bill is paid, MedPut schedules repayments seamlessly from the employee’s paycheck through small payroll deductions. The repayments to MedPut are always interest-free, with no impact to credit score.

As health care costs continue to rise, employers are looking to find ways to control costs, while providing health plans that employees can actually use. MedPut makes every health, dental and vision plan more powerful by providing a safety net for every type of out-of-pocket expense. By using this program, employers can manage costs of health plan premiums and increase employee utilization of the plans. Employees can receive necessary treatment without worrying about costs at the point of care—creating a healthier workforce, both physically and financially.

To learn more about how MedPut can help your employees with their out-of-pocket healthcare costs, click here to connect with us!

Benefitfocus customers can also access MedPut now through Benefitfocus BenefitsPlace®.