Over the past decade, employees have seen their healthcare plans deductibles and co-pays increase six times faster than wages. Many experts agree that this cost-shifting was not a direct result of the enactment of the Affordable Care Act (ACA).
However, with the onset of the ACA’s new reforms, these same experts suggest that the ACA did not stem this trend toward increased out-of-pocket spending. But, regardless of what happens to the ACA, one thing is clear: Individuals will be forced to take on more responsibility for their healthcare. Enter the dawn of the role of the individual.
In many ways, this started back in 1980, when the creative interpretation of a provision in the IRS Code gave birth to the first 401(k) savings plan. Employees could put away money each month, tax free, to save for retirement. And employers could match those contributions in lieu of or in addition to other employee benefits.
Now, we’re looking to the new leadership in Washington, D.C. to create the equivalent for healthcare — expanding and unbundling health savings accounts (HSAs) from high-deductible health plans (HDHPs).
HSAs are a powerful savings vehicle for healthcare. Like 401(k)s, consumers can put away money each month, tax free. But unlike 401(k)s, they can access that money at any point in their lives.
The theory is if consumers choose an HDHP bundled with an HSA, they are more responsible for upfront costs for their healthcare and will therefore be more judicious about how they spend these dollars — ultimately slowing rising healthcare costs.
The problem with this theory is that the majority of healthcare plans now have high deductibles, regardless of whether they’re legally considered an HDHP. This puts consumers without access to an HSA at more financial risk.
My company, Benefitfocus, recently put out our annual State of Employee Benefits Report that looks at actual enrollment data from more than 500 large employers during the fall of 2016 — data that shows it’s not just those with HDHPs that could benefit from an HSA. Almost everyone has seen their costs go up.
PPO subscribers saw substantial hikes in their deductibles and out-of-pocket maximums, 8 percent for individual and 9 percent for family coverage, putting PPOs only a couple hundred dollars below the IRS threshold for a plan to be considered an HDHP. This means we’re getting closer to a world where every plan can and should have an HSA.
Several proposals to “replace” the ACA call for expanding the scope of HSAs. For example, the House Republican’s Better Way plan proposes to increase HSA contribution limits by allowing the tax-free contributions to equal the insurance plan’s annual deductible and out-of-pocket maximums — meaning that families could put away more than $14,000 a year.
Other proposals would get rid of maximum contribution limits entirely and would allow HSAs to be coupled with any type of plan — including those PPOs that are just below the current threshold.
This would support the long-held conservative view that consumers should be responsible for their healthcare — a reality that’s already here.
But HSAs are only the beginning of what I expect to be a robust system of financial wellness measures — protecting individuals from the crippling effects of rising healthcare costs and less government protection.
Whether it’s through employer-sponsored care or some version of government protection for those most in need, consumers must have the resources to protect their health and financial well-being.
Voluntary income protection benefits, often referred to as gap products, should be offered alongside every type of insurance plan.
They often come in the form of accident, critical illness or hospital indemnity insurance, and can help cover the costs of unexpected healthcare needs — needs that can bankrupt the average American, who has less than $1,000 saved for emergencies.
These benefits are gaining traction, as our State of Employee Benefits report also found nearly half of large employers are offering at least one. But we still have a long way to go. Consumers need more education and support to ensure they understand the value of HSAs and voluntary benefits, and that they’re equipped to take on the full burden of healthcare.
Healthcare decisions are unlike any other consumer choice — deeply personal and with the potential for long-term financial and health implications. Employers, the government and individuals must share the responsibility of this burden, just like they do for retirement.
The government should expand the availability and reach of HSAs, and employers and any government protection for those most in need should ensure consumers have access to supplemental voluntary benefits to offset those rising deductibles. That’s the key to true success in the dawn of the role of the individual.
Shawn Jenkins is co-founder and CEO of Benefitfocus, is a platform that supports benefits enrollment/management for 825+ large enterprises, 55+ insurance carriers’ and numerous consumers. The company enables employers and carriers with a powerful SaaS technology platform that empowers people to make better health, wealth and wellness decisions.
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The role of the individual and taking control of their own healthcare