Anxieties around health care costs are not limited to the uninsured. In fact, nearly half (46%) of insured employees report difficulty affording their out-of-pocket costs. High out-of-pocket expenses are particularly challenging for middle income and high income earners (making around $90,000 annually) who have employer health coverage. While the HSA is a powerful vehicle to help employees save up for future medical costs, balances are not always significant enough to cover out-of-pocket expenses in the near term.
Unfortunately, there is growing evidence that high out-of-pocket costs create an unhealthy cycle of care avoidance that ultimately costs employers in lost productivity and ever increasing health insurance premiums. Here’s the business case for building a health benefits strategy that minimizes employees' out-of-pocket expenses. Let’s start with a closer look at the long-term ramifications—
Out-of-Pocket Costs Drive Care Avoidance
As one journalist put it, “...for many Americans, a trip to the doctor hinges on whether they can afford to go rather than if it’s a medical necessity.”
In 2021, half of U.S. adults say they put off or skipped some sort of health care—including doctor’s visits, medications, vaccinations, annual exams, screenings, vision checks, emergency room visits, routine blood work, and dental care—because of the cost.
With about a third of the population carrying over $10,000 of outstanding medical debt, Americans today are either reeling from the financial stress of previous care or certain that seeking medical attention will result in racking up bills they won’t be able to pay. New barriers in the pandemic only exacerbated care avoidance, with record numbers of Americans delaying or avoiding care even in extremely serious cases due to fear of COVID exposure, rising financial pressures, and hospital restrictions.
But what happens when employees avoid care due to fear of out-of-pocket costs? The truth is….the care they eventually get becomes even more expensive. Skipping treatment can have dire outcomes. Scans, screens, check ups, and preventative treatment all serve to avoid and mitigate serious illnesses and conditions that are often more treatable, and less costly when caught early.
A recent Gallup survey found that 20% of adults say they or someone in their household has had a health issue worsen after postponing care because of its price. When employees get sicker because they delayed care, the financial shocks that result are tremendous, and not just for them, but for their employers too.
So what are the consequences of care avoidance? Here are a few—
Lost Workplace Productivity
High out-of-pocket costs and care avoidance have massive implications on workplace productivity. Employees who delay care are more likely to require sick time, workers’ compensation, disability, and family and medical leave benefits in the long run. According to the Integrated Benefits Institute, serious illnesses, when not treated, result in an average of 1.5 billion lost work days a year, costing employers $575 billion annually.
A Mentally Unhealthy Workplace
High costs around care also lead to serious mental health challenges for employees who are already experiencing anxiety, burnout, and financial stress at higher rates amidst the pandemic.
The organizational need for a mentally healthy workplace is becoming increasingly clear. According to data supplied by the American Psychiatric Association, employees with unresolved depression and anxiety experience a 35% reduction in productivity, contributing to a loss to the U.S. economy of $210.5 billion a year in absenteeism, reduced productivity, and additional medical costs.
While many employers have made efforts to introduce counseling services and mental health resources, identifying the root causes such as financial stress related to high out-of-pocket costs will be key in fundamentally shifting how employees feel at work, and how they perform as a result.
Finally, high out-of-pocket health expenses introduce the cost of high employee turnover. When employees do not feel like they’re receiving affordable health care via their employer-sponsored health coverage, they’re more likely to call it quits. A recent report by McKinsey revealed that employees who reported not receiving the care they needed were two times more likely to consider switching employers and half as likely to say they would recommend their employer to friends based on benefits.
In a time where employees are already leaving companies at record numbers amidst the Great Resignation, increasing turnover has high costs for the employer. The resources and funds required to recruit, train, and retain employees will become increasingly burdensome for employers who do not attempt to mitigate rising out-of-pocket health costs.
What We Can Do To Help
So, what can we do about out-of-pocket costs? The good news is that reducing them can mitigate or even completely eliminate the threat of poor mental health, lost productivity, and high turnover. While employers don’t need to move away from tools like the HDHP or HSA, they should consider solutions that help bridge the gap and ease the burden of out-of-pocket costs.
By finding new strategies to build peace of mind and organizational resilience around health coverage, employees will be more likely to seek care when they need it—minimizing unexpected financial shocks and resolving health issues before expensive medical interventions are necessary,