Is there a better health insurance system for employers and workers than our current heavy reliance on employer-sponsored systems?
I have been thinking about this question for some time as the relationship between workers and organizations has undergone fundamental change. However, the question resurfaced in my mind as a result of my having an appendectomy last month. I experienced firsthand how challenging it is to navigate the US healthcare system and make choices as a consumer. While my experience was overwhelmingly positive as far as my medical treatment and care were concerned, I found the costs and how they broke down to be perplexing and confusing to a consumer.
I arrived at the emergency room at 3pm on a Friday and was discharged from the hospital roughly 25 hours later on Saturday afternoon. My treatment included a CT scan as an outpatient prior to going to the hospital, a brief visit with my primary care physician who told me to go to the ER, an hour’s stay in the ER, laparoscopic surgery, and 18 hours of post-surgery care. The total amount charged by the hospital, doctor, surgeon, anesthesiologist, and radiologist amounted to $36,368. However, Independence Blue Cross had negotiated lower rates and the total payment accepted was reduced to $7,238, or just under 20% of what was billed. Because I have met my deductible under my high deductible plan, my insurance will pay $5,790, while I will pay $1,448.
Policy makers have grappled with so many ways to improve the effectiveness and efficiency of healthcare in the US. One popular idea that has taken hold in the last 10-20 years was to increase the role of the consumer in making choices. The notion was to let the invisible hand of the market create efficiencies in healthcare as it has done in so many other industries.
There are two major problems with this idea in healthcare.
1. When you aren’t feeling well, that is not the time when you are ready to go shopping for the best healthcare at a competitive price.
This was the case with my appendicitis and is also illustrated by 27-year old Evan Acuna’s experience with food poisoning. Evan was still feeling ill two days after eating his Thanksgiving meal. He was becoming delirious from dehydration and went to a hospital emergency room in Trenton, NJ near where he lives. The hospital gave him two IVs of fluids and released him after he was feeling better just a couple of hours later.
Evan received a $9,200 bill for this emergency room visit which was lowered because his insurance company had negotiated a discounted rate. However, because Evan had a high deductible plan and had not yet met the $5,000 deductible, Evan’s insurance paid $3,117, leaving him with a $4,752 bill. Fortunately, Evan eventually got the hospital to lower his portion to $779.
2. The pricing system is so opaque that it is near impossible to get a clear answer as to what services cost.
As an example, after my doctor told me that I needed to have a CT scan and that I could do it in the ER or as an outpatient, my wife researched the relative cost of this choice. She learned that having it done in the hospital would be approximately $4,000. However, an outpatient CT scan would cost less than $1,000. Being a good consumer, I chose to have it done as an outpatient.
How did this work out for me? The outpatient radiology department billed $6,761. However, insurance negotiations knocked the cost down to $716, just over 10% of what was originally charged. How does one effectively shop for services when there are such enormous
Imagine buying an automobile or another expensive product where the seller won’t tell you the price because they won’t know until after you have made the purchase. And further, the amount you are quoted may end up being ten times the amount you ultimately pay, or it might not be.
What does this rant about medical costs, pricing and consumer-driven healthcare have to with HR’s role in healthcare?
It illustrates to me that our past attempts to create a rational healthcare system is falling well short of the mark. However, the good news is that, at a policy level, we may have an opportunity to redesign the US healthcare system as we debate the relative merits of various approaches. In doing so, HR professionals should examine the different proposed models and contribute our voices to the general understanding of how these will impact workers and organizations.
Many of the announced presidential candidates are supporting a “Medicare for all” approach. A recent NY Times article examined the opinions of experts regarding five questions related to healthcare coverage under this approach:
1. Should we provide automatic universal coverage?
2. Should employer-based private coverage end?
3. Should we replace individually purchased private coverage, like Affordable Care Act plans or Medicare Advantage?
4. Should we eliminate premiums and have the system financed exclusively by taxes?
5. Should we eliminate cost sharing — meaning co-payments, coinsurance, deductibles — for everyone?
How would you answer those questions, particularly the one about ending employer-sponsored private coverage? The answers that we choose as a country will have a profound impact on workers and organizations.
The reliance on employers to provide healthcare is an accident of history when during WW2 employers that were prohibited from competing for workers by increasing wages turned to providing generous healthcare plans. Currently, according to the Congressional Budget Office and the US Census, over half of Americans under the age of 65 obtain their health insurance coverage through an employer plan. However, is this the best system for workers and organizations, especially as work becomes more project-based and ties to organizations over long time periods become ever looser?
If we were to start all over with a blank slate, there would be many strong reasons to design a system that does not place such a heavy burden on employers and restrict the mobility of workers. There would be winners and losers in any such decoupling depending on what system is put in place to replace it. And, keep in mind that how it would be paid for can be independent from plan sponsorship.
What I am asking is that you consider how a different system that is non-employer-based would impact your
organization, your employees, and perhaps even yourself. Many people stay in jobs working for organizations solely because in leaving they would lose their health insurance coverage. And, future policy changes need to deal with medical inflation creating, as Warren Buffett put it, the "tapeworm of costs" for employers.
Suppose our healthcare system
provided universal access and allowed workers to have the flexibility and mobility to move among organizations and projects without concern that they will lose coverage, or how they will pay for it. How do you think this would impact your organization? How would you attract and retain talent in such a world? Would you see some of your less engaged employees leave? Would a non-employer-based system be a net plus or net minus for your organization?
I’d love to hear what you think.
Gerry Brandon, PhD, SPHR, SHRM-SCP is the Director of the Graduate Programs in Human Resource Development at Villanova and an Associate Professor. Connect with him on LinkedIn and learn more about him here!