It’s no secret that the price of health care in the United States has increased over the past several decades. While there is no single reason for the explosion in health care prices, there are a few surprising contributing factors—none more so than consumers themselves.
For many years the health care and health insurance system has been set up to separate consumers from the purchasing decisions. As a result, the majority of health care costs are not paid out of consumers’ own pockets.
The health care system has paid the price for this way of doing things. When people have insurance that pays for the majority of health care costs, they don’t think twice about using medical services. This can lead them to consume more care than needed, which in turn drives up prices. When the prices of services go up, so do the health insurance rates for both employers and employees.
Ultimately, rising costs have forced employers to confront two painful options: reduce benefits or increase employee contributions.
However, a new option may provide an alternative. Consumer driven health care (CDHC) may result in reduced medical service costs and improved quality of health care by requiring employees to take charge of their health care decisions.
CDHC is a trend that has grown in popularity over the past several years and is designed to combat the pitfalls of the health care system. When employees are responsible for more out-of-pocket costs, they become more aware of health care pricing and are likely to spend more time examining costs, benefits and quality.
This system is not about shifting costs to employees, but rather about putting more dollars spent on health care into the hands of employees, particularly those who seldom need to see a doctor for more than preventive care. CDHC encourages consumers to use health savings accounts (HSAs), health reimbursement accounts (HRAs) or similar medical payment products to pay for routine health care expenses directly, while a high deductible health plan (HDHP) protects them from catastrophic medical expenses.
Patients using a CDHC plan are more likely to ask questions, discuss treatment options with their doctors, research the cost of treatments and procedures and seek the best care in terms of quality and value. In addition, people in CDHC plans are more likely to take advantage of cost-effective care, such as no-cost preventive care that is beneficial to overall health. CDHC plans are also appealing to the youngest and healthiest workers because they are among the least expensive plans that still fulfill the individual mandate requirement of the Affordable Care Act.
CDHC plans benefit the patient by providing more visible costs and more control over health care decisions. They also benefit health plans and employers, as employees are likely to be more conscious of their spending and make healthier decisions, which drives down costs for the employer. Finally, these plans are beneficial to the health care system by reducing unnecessary care and freeing up resources.
NY Small Health can help you navigate your small business health insurance plans. Do you have questions about small group plans or employee benefits? Contact us today.