Recently, healthcare consumerism has emerged as a growing trend in the medical benefits industry. Individuals are becoming more involved in the health benefits process. But what exactly is healthcare consumerism, and how does it affect employee health benefits?
In this article, we’ll define healthcare consumerism and explore health benefit options that put decision-making power in the hands of employees:
- Defining healthcare consumerism
- Why is healthcare consumerism a good thing?
- What is driving healthcare consumerism?
- What can an employer do to promote consumerism in healthcare?
Defining healthcare consumerism
Healthcare consumerism is a movement where individuals take more control of their own health benefits and healthcare decisions. This growing patient empowerment allows people to be more conscientious of their benefits and the costs associated with them. Consumers can then decide which health benefit plans are best for them and their families.
For employers, this usually means employees have a hands-on role in paying for and managing their 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. Just like any other product they’re purchasing, they want quality, affordable options with their healthcare.
Why is healthcare consumerism a good thing?
Healthcare consumerism is pushing the entire health system to provide better information and transparency so that anyone can make educated decisions about their health and health benefits.
Some examples of these changes include introducing hospital reviews, telehealth, and a growing library of health information online from healthcare organizations and hospitals. This need for increased transparency has even resulted in the passage of new legislation in Congress: 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.
All of these changes result 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 recently. Some of the 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 article 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 relaxed rules on broadcast advertising for medications. Pharmaceutical companies began to advertise more directly to consumers about drugs and medical procedures, leading to more healthcare consumerism.
The Affordable Care Act (ACA) further encouraged healthcare consumerism, as it created the opportunity for individuals to easily compare and purchase their insurance policies on a public marketplace.
What’s more, the COVID-19 pandemic caused healthcare consumerism to accelerate as patients sought new ways to connect with their healthcare providers, such as through telehealth. Others switched healthcare providers to receive better, more personalized coverage and an improved patient experience.
According to a Ketchum 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?
As employees look to have more control over their health benefits, employers need to provide health benefit options that offer flexibility.
Employees won’t just be looking for low-cost benefits; they’ll be looking for health benefit experiences that are easy to use. To plan for healthcare consumerism, 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 a quality health benefit while giving them more control and flexibility over their healthcare costs.
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 HSAs are owned by your employees, they can take the funds with them when they leave your organization, with many using HSAs as more of an extra retirement fund than 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.
Health reimbursement arrangements (HRAs)
Another popular health benefit option that offers flexibility to employees 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. The expenses are approved, and you offer them a reimbursement up to their allowance amount. This is usually done through your employees’ paycheck.
This allows you to ensure that your employees use their allowance for healthcare expenses while giving them the freedom to choose their health insurance policy and which out-of-pocket expenses they want to be reimbursed for.
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 a health stipend reimbursement to your employees to help them cover their health and medical expenses. This can be provided as a monthly allowance that rolls over month-to-month for the duration of the employee’s tenure with your organization.
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.
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, health benefits also need to adapt to meet growing consumer demands. You’ll 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 need.