Smaller clinical laboratories and pathology groups should benefit from shift toward consumer-driven healthcare
High-deductible health plans (HDHP) are increasing in popularity as more consumers opt for lower annual premium costs in exchange for larger out-of-pocket expenses. This shift in health insurance could result in direct benefits for smaller clinical laboratories and pathology groups as more patients have a choice in where they purchase medical laboratory testing services.
From a policy perspective, employers and healthcare strategists hope that using HDHPs to engage consumers will help put market forces back into medicine. Because clinical laboratories and pathology groups increasingly find themselves excluded from provider networks, and fighting to keep access to patients, they should welcome the trend to consumer-driven healthcare.
A logical response to the HDHP trend would be for labs to begin posting their lab test prices on their websites. It would be equally useful to also post quality-performance and customer-satisfaction survey results to allow consumers to make informed choices about the labs they want performing their tests.
Cost of Health Insurance Premiums Drives Health Plan Consumerism
According to Douglas Ghertner, President of Change Healthcare, a company focused on helping consumers shop for healthcare services, lower cost is the main appeal for high-deductible consumer-directed health plans. “When you talk to consumers, they tend to gravitate to the plan with the lowest premium,” he stated in a USA Today article.
Today, patients directly pay only 11% of the $3 trillion spent annually on healthcare. That is an amount equal to $330 billion, which is more than Americans spend annually on anything other than shelter, food or transportation, reported the Wall Street Journal (WSJ).
Because consumers with high-deductible plans typically pay most, if not all, of their healthcare costs out-of-pocket until their annual deductibles are met, the assumption is that they are more likely to “shop around” comparing prices for office visits, procedures, lab testing and other healthcare services.
High-deductible Health Plans Most Popular with Employers and Employees
High-deductible plans seem to be becoming the option of choice for both employees and employers. In its 2015 Health and Well-being Touchstone Survey, PricewaterhouseCoopers reported that 83% of employers offered a high deductible plan in 2014, up from 67% in 2014. Nearly one-third of employers reported that the high-deductible plan was their most popular offering, up from 17% in 2012.
“There’s clearly an incentive on the part of employers to offer these,” stated Maribeth Shannon, Program Director at the California Healthcare Foundation in a Dallas Morning News article. “Some of it’s financial. Some of it’s philosophical. There are a lot of employers who feel employees should have a little skin in the game, a little more responsibility for the healthcare costs they consume.”
One of the more controversial aspects of the Affordable Care Act (ACA) is the so-called “Cadillac tax” on high-value health plans, which could further fuel the growth of high-deductible plans as employers aim to make workers responsible for more of their healthcare costs.
Beginning in 2018, a 40% excise tax will be assessed on employers offering benefit-rich health plans that exceed certain annual limits ($10,200 for individual coverage and $27,500 for family coverage). While the goal of the tax is to help fund Obamacare and slow the growth of health costs, many employers are looking to avoid paying the tax by scaling back their offerings or increasing deductibles and co-pays.
According to a New York Times article, in the past couple of years several large companies, including J.P. Morgan, Wells Fargo, General Electric and Honeywell, started offering consumer-driven plans as the only option. Bank of America employees earning more than $100,000 have no choice but to select a consumer-directed high-deductible plan.
Pathologists and clinical laboratory managers wanting to understand the economics that favor HDHPs should take note of the following statistic. Mercer’s 2014 national survey of employer-sponsored health plans, found employers’ average cost of coverage in a high-deductible plan paired with a tax-advantaged health savings account is 18% less than coverage in a Preferred Provider Organization (PPO). The survey also demonstrated that HDPs cost employers, on average, 20% less than a Health Maintenance Organization (HMO). The average cost of HDPs was $8,789 per employee, compared to $10,664 for PPOs and $11,052 for HMOs.
Some Health Plan Shoppers Opting for Non-traditional Plans
In agreement is Beth Umland, Mercer’s Director of Research for Health and Benefits. She says cost-savvy employees are opting for non-traditional health plans.
“While new plan implementations are driving up consumer-directed high-deductible plan enrollment, we are also seeing growth in enrollment in existing plans as employees become more comfortable with consumerism and employers provide them with tools to help manage the higher deductible,” Umland stated in a company statement that accompanied the announcement of the survey results.
Healthcare Consumerism Welcomed but Faces Challenges
High-deductible health plans often are paired with health-savings accounts (HSAs) that enable employees to save money on a tax-deferred basis. They can use money in their HSA to pay for routine care or annual deductibles that may be $2,500 or more for an individual employee or above $5,000 for a family plan with in-network doctors and hospitals. Receiving care from out-of-network providers, however, can cause costs to spiral upward.
“It’s a major shift from the old ‘first-dollar coverage’ mentality,” declared Tracy Watts, Mercer’s National Leader for Health Care Reform. “These tools put the consumers in the driver’s seat, giving them the ability to make smart financial decisions about their healthcare spending.”
Nonetheless, even supporters of the shift away from traditional insurance plans acknowledge that “consumerism” in healthcare faces challenges. These range from decreasing competition in medicine as hospitals and insurers merge, to the potential that high-deductible health plan consumers will forgo needed care due to costs.
To offset these trends, David Goldhill, President and CEO of Game Show Network, and Paul Howard, Ph.D., Manhattan Institute Senior Fellow and Director of the Manhattan Institute’s Center for Medical Progress, suggest employers should ensure families with high-deductible plans contribute to health-savings accounts and be receptive to trends that increase competition, such as telemedicine, expert second opinions and medical tourism.
“The rise of high-deductible plans also requires a shift in states’ priorities,” they said in the WSJ article. “Liberating information on the cost and outcomes of various medical services—perhaps through new online databases—becomes key. So does reforming laws that restrict nurses’ scope of practice, limit corporate practice of medicine, or require certificates of need. Paring back these anticompetitive regulations would encourage capital to flow toward nimble startups challenging overpriced, entrenched providers.”
As Obamacare drives more consumers into high-deductible plans, clinical laboratories and pathology groups must position themselves to compete in an increasingly consumer-driven marketplace in which patients can choose where to spend their healthcare dollars.
—Andrea Downing Peck