Americans spend more on medical care as a percentage of GDP than any other nation. For the decade ending in 2020, insurance premiums rose 47 percent, and deductibles jumped nearly 69 percent. Even with employer-based medical insurance benefits, employees now pay on average nearly $6,000 toward their employers’ average of $22,221 for family coverage.
Further, obtaining medical care has not only become more expensive but more and more complicated and difficult to navigate.
Consider this: Every year, Americans of all ages, incomes and education levels buy millions of new and used automobiles without the slightest knowledge of all the intricacies of engines, transmissions, and all the software that make motor vehicles run. Yet, even without this knowledge, the American people seamlessly purchase hundreds of billions of dollars of motor vehicles annually because the public can do the research online to obtain expert opinions from Consumer Reports, Edmunds, and Kelly Blue Book, to make informed choices.
But when it comes to medical care, the medical/health care experts tell us there are “asymmetries” in the medical sector, and therefore the public cannot make an informed decision. In other words, the public doesn’t have the same information as physicians and hospitals. This lack of transparency in purchasing medical care and employees’ reliance on employer-based insurance to pay the bills keep them further removed from the true costs.
The way we pay for our medical services violates a fundamental economic principle — namely, in a market transaction between a willing buyer (in this case a patient) and the supplier (a physician or hospital), transparency makes possible the ability of the buyer to judge the value of the service being rendered or the goods being purchased.
The good news for both employers and employees is that America is headed in the direction of the “consumption” of medical care. With costs through the roof, employers have been voting with their dollars by opting out of the traditional medical insurance market.
Fortunately, promising alternatives to traditional medical insurance have emerged. Here are some examples:
Restoring the Doctor-Patient Relationship
Physicians are increasingly frustrated by the role insurance companies play in approving procedures and medications they prescribe for their patients. After all, the physician has had one-on-one contact with the patient and has the expertise to judge what is needed; the insurance company representative has neither. Efforts are underway, such as Direct Primary Care and Concierge Medicine, in which patients pay a set monthly rate to have same-day or next-day access to a physician, taking the insurance middleman out of the equation. Specialized treatments are referred to other doctors, and surgeries are performed in an outpatient center or hospital.
The Free Market Medical Association (FMMA) is among the vanguard of the medical care revolution. Founded by Jay Kempton, owner of The Kempton Group Administrators, and Dr. Keith Smith, medical director of Surgery Center of Oklahoma (SCO), the association has reduced the cost of medical care while revealing the gross overcharging by hospitals and traditional medical practices. Tired of butting heads with hospital administrators, Drs. Smith and Steve Lantier created a cash-only clinic and brought other surgeons into the fold who wished to practice medicine without inference from insurance companies or bureaucrats. One uninsured patient who needed a breast mass removed was quoted $19,000 by a hospital — ten times higher than the price charged at SCO. The group is proving that a more market-based environment delivers efficient, value-based medical care.
With medical care inflation and the resulting skyrocketing cost of medical insurance premiums, more and more employers have been cutting out the insurance companies by self-insuring. At America’s largest companies, 82 percent of employees are covered totally or partially by self-insured plans. A self-insured group plan allows employers to customize employee insurance coverage. Depending on a company’s demographics and culture, a self-funded plan could include benefits your employees would like to see covered, such as dental, vision, prescription drugs, and chiropractic or acupuncture treatments.
By investigating the options now made available through medical entrepreneurs, employers can reduce medical insurance costs and put money into their employees’ pockets, an attractive benefit in today’s tight labor market — without having to skimp on medical care.
Blackrock Benefits is focused on helping business leaders maximize their return on human capital by designing customized strategies to optimize their investments in employee benefits, employee engagement, culture, and total organizational health.