Healthcare consumerism has emerged as a growing trend in the healthcare industry. Thanks in part to rising healthcare costs, individuals are becoming more involved in their health affairs to ensure that they’re getting the maximum value out of dollars spent on health and wellness services.
In the past, healthcare consumerism grew slowly. Now, it's become the norm across many facets of the healthcare industry. But what is healthcare consumerism, and how does it affect employee health benefits?
In this article, we'll explain the rise of healthcare consumerism and explore health benefit options that put decision-making power in the hands of employees.
Defining healthcare consumerism
Healthcare consumerism is a movement where individuals take more control of their healthcare decisions. This growing patient empowerment allows healthcare consumers to be more conscientious of their health benefits and associated costs. Now, consumers demand more control and responsibility for selecting the health plans that are best for them and their families.
For employers, this usually means employees have a hands-on role in paying for and managing their medical benefits. Generally, this results in better healthcare services for the consumer while reducing overall costs, as people are willing to switch providers for a better patient experience.
In essence, patients act more like consumers who are shopping for a hotel or product to buy online. Like any other product or service, they want affordable options for their healthcare.
Why is healthcare consumerism a good thing?
Healthcare consumerism pushes the entire healthcare industry to provide better information and transparency. This ensures everyone can make educated decisions about their health and health benefits.
Some examples of these changes that address consumer behavior include introducing hospital reviews, telehealth, and other remote healthcare choices. There's also an online library of health information from healthcare organizations and hospitals. This need for increased transparency has even resulted in Congress passing new legislation: the No Surprises Act.
The No Surprises Act, which took effect on January 1, 2022, helps to protect Americans from surprise medical bills at out-of-network hospitals or other providers. This helps to reduce out-of-pocket costs and medical debt in the U.S.
All these medical services changes resulted from healthcare consumerism. But why is the trend growing in the first place?
What is driving healthcare consumerism?
While healthcare consumerism isn't a new concept, it has been growing in popularity. Some early drivers behind healthcare consumerism include value-based care, the popularity of high-deductible health plans (HDHPs), and the direct-to-consumer marketing of medications.
According to a MediMedia article1 in the U.S. National Library of Medicine, patients began to participate in medical decision-making with healthcare providers in the 1980s. Then, in 1997, the FDA changed the healthcare landscape with relaxed rules on broadcast advertising for medications. Pharmaceutical companies began to advertise directly to consumers about drugs and medical procedures.
The Affordable Care Act (ACA) further encouraged healthcare consumerism. It allowed individuals to compare and buy individual health insurance policies on a public marketplace.
Moreover, the COVID-19 pandemic caused healthcare consumerism to accelerate as individual patients sought new ways to connect with their healthcare providers, such as through telehealth or concierge medicine. Others switched healthcare providers to receive more personalized coverage for their unique needs, such as chronic conditions. This resulted in improved patient experiences.
According to a Ketchum2 survey, 45% of healthcare consumers switched their healthcare providers during the pandemic.
With more healthcare options available than ever before, many consumers are abandoning traditional health insurance companies in favor of newer plans and insurance alternatives.
What can an employer do to promote consumerism in healthcare?
Employees want more control over their benefits. This means employers need to provide flexible benefits options.
According to our 2022 Employee Benefits Survey Report, 65% of employee survey respondents said they value being able to choose their own benefits. Additionally, only 36% of employees felt they had a say in the benefits their employers offer.
Employees won't only be looking for low-cost benefits. They'll also be looking for personal health benefit experiences that are easy to use. To plan for consumerism in healthcare, organizations need to offer employee health benefits that are accessible and transparent.
Traditional group health insurance plans don't offer an individualized experience for each employee. Your employees have different needs, and offering a single insurance plan gives them no say in their health benefits.
Thankfully, there are other options for providing your employees with quality health benefits while giving them more control and flexibility over their healthcare costs. In the following sections, we'll cover alternative medical care benefits that provide an individualized consumer experience.
Account-based health plans
Flexible spending accounts (FSAs) and health savings accounts (HSAs) are popular options that give employees more control over their health benefits. Both FSAs and HSAs are tax-advantaged spending accounts where employees can set aside funds from their paychecks to cover out-of-pocket expenses.
HSAs are owned by the employee, giving them complete control over their account and health expenses. You can also contribute to an employee's HSA.
However, not every group health insurance plan supports an HSA. And, because your employees own their HSAs, they can take the funds with them when they leave your organization. Many employees use their HSAs as an extra retirement fund instead of a health benefit.
Like an HSA, an FSA is a spending account that both employers and employees can contribute to. Unlike an HSA, though, the funds in an FSA aren't maintained if your employees leave the organization. This gives employees more financial incentives to use their funds for healthcare.
Health reimbursement arrangements (HRAs)
Another flexible health benefit option is a health reimbursement arrangement (HRA). An HRA is an employer-provided arrangement for reimbursing employees for their healthcare expenses.
The allowances offered by an HRA are tax-free and can be used for qualified medical expenses such as insurance premiums or out-of-pocket expenses. These allowances are offered monthly, and any funds not used at the end of the benefit year stay with the employer.
It works like this: your employees submit expenses for reimbursement. This can include individual insurance coverage premiums. The expenses are approved, and you offer them a reimbursement up to their available allowance amount. This is usually done through your employees' paychecks.
This ensures that your employees use their allowances for healthcare expenses. It also grants them the freedom to choose their health insurance policy and which out-of-pocket expenses they want to be reimbursed for. This gives your employees complete control over choosing a primary care provider based on their needs and budget.
With an HRA, your employees have the flexibility to create a health benefit that works best for them.
Three of the most popular types of HRAs available include:
- Qualified small employer HRA (QSEHRA)
- Individual coverage HRA (ICHRA)
- Integrated HRA, also known as a group coverage HRA (GCHRA)
The final type of health benefit we'll cover is a health stipend. Like an HRA, you can offer your employees a health employee stipend reimbursement to help them cover their health and medical expenses.
Health stipends don't come with as many regulations as HRAs, HSAs, or FSAs, leaving eligible categories to the employer. You can choose to allow your employees to reimburse individual insurance premiums or out-of-pocket expenses.
With no limit to the expenses that can be considered eligible, you can provide a health stipend for any number of categories. This includes mental health benefits, supplemental insurance products like dental and vision, personal hygiene products, and specialized care for certain health conditions.
Because health stipends aren't tax-advantaged, you must add them to your employees' W-2s as taxable income. This makes stipends an excellent option for organizations with employees who receive premium tax credits. Your employees won't need to waive their credits to take advantage of the health stipend benefit.
With healthcare consumerism changing the medical landscape and increasing patient satisfaction, health benefits must also adapt to meet growing consumer demands. Understanding and following healthcare consumerism trends will increase employee satisfaction and reduce turnover. You'll also create a more meaningful benefit that works for your employees' individual needs by offering your employees flexible health benefits.
HRAs and health stipends are great options for providing flexibility to your employees while still ensuring that they use their benefits for health expenses. With PeopleKeep's personalized benefits solutions, you can provide your employees with the benefits they want.
This blog article was originally published on March 16, 2022. It was last updated on November 15, 2022.