Health Consumerism– Cost savings on hold until shopping made easy

Oct 15, 2008

For those of you who haven’t seen it, BusinessWeek just came out with a nice primer on Health Benefits as we go into both elections and the annual benefit selection process.

As we would expect, microbusiness is the leading edge of benefit shifts, as these owners of very small businesses bear both the full brunt of benefit costs and need to determine appropriate trade-offs relative to business survival. The statistic that floored me was how quickly employee benefits were being jettisoned by microbusiness due to cost.

More respondents—67%—reported having health insurance for themselves, as compared with 54.9% in 2005. However, there was a shocking drop in the percentage that said they’re providing coverage for their full-time employees. In 2005, 46.2% said they were offering employee coverage; in 2008 the number went down to 18.6%. That’s one of the most massive drops we saw in terms of all the questions we asked across both surveys, and the sole reason is cost, which was cited by 65% as the top barrier to providing coverage.

So it seems the cost-saving impulse is a strong one going into this year, and I’d expect, given the recent economic conditions that it will become even stronger. So how does this reflect on the cheaper, HSA option? The results appear to be mixed, largely because in many cases the savings don’t go to the worker, while they bear the burden of additional administrative confusion.

Plenty of folks simply don’t want to be their own health-care manager. After all, there’s little of the positive reinforcement that you get (or used to get) from managing your retirement account and a lot more paperwork and negotiation involved.

As the owner of a small business, the HSA-CDHP combination makes my life simpler and cheaper, as I can use the HSA account to pay for dental and eye care while pocketing the cost savings. As a relatively low-frequency user of the health complex, this tradeoff makes a lot of sense for me…I’d rather spend the extra “health” dollars on good food and healthy activities (like my in-office elliptical machine, massage therapy tune-ups, personal training).

Goel says his COBRA insurance, which would have extended coverage for 18 months after he left his job as a McKinsey consultant, cost $450 a month—and it covered only him, not his wife. Instead, he’s spending $200 per month for a plan with a $3,000 deductible that insures both of them. “We’ve gotten our premium way down, which allows us to be protected without wasting tons of money that would go straight to the insurance company,” he says. In addition, since HSA contributions can pay for dental and optometry services, the Goels have eliminated the need to pay for those two areas separately.

However, the lack of transparency around pricing becomes very apparent while trying to shop for care. Prices can be negotiated down significantly with a cash payment, but the process is laborious and frustrating, as many physicians don’t know what they charge for any given service, and their business department submits codes that pay a contract value that’s not clear to anyone.

The coming economic climate should accentuate the cost savings potential of consumerism in health…unfortunately we do not have a health shopping experience that is acceptable for mainstream users. At HealthShoppr, we’re building some of these initial retail shopping experiences for health services…let us know if you’d be interested in working with us to build a health system that consumers can actually understand and use.