Empty American Savings Accounts Call for Shifts in Healthcare Coverage

shutterstock_92934382 - CopyA recent poll conducted by The Associated Press-NORC Center for Public Affairs Research indicates that approximately two-thirds of Americans would have difficulty covering the costs of an emergency requiring $1,000 in liquid capital. This along with other metrics from the study, strongly suggests that the state of finances for the average American remains painfully precarious.

Financial instability, however, isn’t solely the province of lower-income families. Approximately two-thirds of households earning between $50,000 and $100,000 would struggle with the $1,000 emergency, just 8 percentage points below households making less than $50,000. And the ratio remains above one in three when considering households grossing more than $100,000 a year — a staggeringly high percentage.

Despite the shockingly slim savings, the majority of poll participants indicated that they feel positively about their finances. While this suggests that everyday expenses are well in hand, the vast majority of Americans seem poised for financial crises. Among the most likely culprits of such events are healthcare-related bills. Few Americans carry coverage appropriate to their savings. The underutilization of GAP policies and consumer-driven health plans leave most Americans over-burdened and underprotected.

Regulatory compliance can cause significant challenges for employers attempting to strike a balance between affordability and suitable coverage options, but there are now a wealth of policy alternatives to suit the silent and suffering majority. Contact Chelten Consulting to learn more.

 

Employer and Employee Healthcare Challenges and Consumer Driven Health Plans

One out of three Americans now view healthcare and benefits costs as their single greatest financial burden. This from a recent survey by the personal finance site GoBanking indicates significant concern across various market segments. All age groups between 24 and 65 demonstrated similar concerns. Rising out-of-pocket costs and soaring health insurance premiums are the biggest factors behind the growing discomfort, contends John Park, chief strategy officer for Alegeus, a healthcare benefits administrator and provider of directed healthcare solutions.

“Historically a lot of employers subsidized a lot of those costs,” Park says. “What we are seeing now is more and more of that burden is being shifted to the employee.” Park blames the move to consumer-driven health plans for creating much of the distress. Those plans can take many different forms, such as an HRA or an HSA account, but they were all designed to increase deductibles and to promote financial responsibility at an individual level.

shutterstock_252811903 - Copy“The creation of CDHPs was intended to couple high deductibles with a consumer account,” Park explains. “But that liability, that exposure is new to the consumer,” he continues. “I think what happened was that the burden was thrust upon the employees without giving them the proper tools and the education to help them make better decisions about the costs associated with their healthcare.”

Park says Alegeus has recognized the concerns and has created set of tools and strategies to educate employees and help them understand how to properly navigate through the many healthcare options and decisions that confront them. “We are sitting on a lot data that allows us to help employers make better decisions about benefit designs, based on understanding how employees are actually spending their healthcare dollars,” he says. He maintains that these insights can be used to design consumer-driven solutions that will reduce costs for both employers and their employees, helping both parties get the best value for their healthcare dollar.

Changes in Consumer Driven Health Plans

Increasingly cost-effective consumer driven health plans are on the rise in 2016. Why? As with most goods and services, growing enrollment promotes economies of scale, and diminishes the efficacy of competing programs (such as high-contribution HSAs and subsidized standard PPOs). The decrease in HSA contributions has enabled employers to fund a number of targeted health products, including accident, critical illness, and hospital indemnity.

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While similar to elective coverages, there are some differences. A key component of streamlining administrative burden lies in moving the products from an individual platform to a group chassis. Further, the new indemnities offer reduced coverage to accompany the higher deductibles, continuing to promote reduced burden-sharing for the majority of Americans who need minimal healthcare services.

The lower policy values result in reduced costs for employers and employees alike, and emphasizes responsible use of resources by reducing or eliminating coverage for services like emergency room visits. In addition, the simplified plan designs and lower face amounts have eliminated the need for underwriting, so enrollment is much simpler and requires less administrative work on the part of the employer.

Greater price stability makes CDHPs more sustainable long-term than HSA contributions. As long as these plans continue to comply with ACA regulations, employer-funded indemnity products will likely continue to grow in popularity and efficiency. In light of this rapidly shifting benefits landscape, it’s crucial for HR directors and benefits advisors to work in concert to maintain compliance and optimize offerings for employees. To learn more, contact Chelten Consulting.