If consumers could review and shop for health care coverage as easily as they do television sets, costs would decline and we wouldn’t have as large a health care crisis. At least that’s what some folks would lead us to believe. But the picture isn’t that clear.
A recent article in The Wall Street Journal reports how companies are using private health insurance exchanges to lower costs and give employees more flexibility. The exchanges are similar in nature to those mandated by the Patient Protection and Affordable Care Act (a.k.a. Obamacare)—the difference being a private company is overseeing the exchange and not the federal government or states. Employees are able to log on to a site, review coverage plans with different benefits and a range of deductibles, and choose what works best for their budget.
A consultant running one such exchange was enthusiastic about its progress thus far. “When people are spending their own money, they tend to be more consumeristic,” Ken Sperling, national health exchange strategy leader for Aon Hewitt, a unit of AON Plc, told the Journal. (Aon itself, as well as Sears Holdings Inc. and Darden Restaurants are using a new Aon run exchange.) Benefits consultants Mercer (part of Marsh & McLennan Cos.) and Buck (part of Xerox) are rolling out similar private exchanges.
There’s no doubt that consumers are more astute, on average, regarding price for benefit when directly paying for goods and services.
With insurance companies acting as the middleman and cutting deals with providers as they see fit, consumers rarely even know the actual cost of a medical service. That lack of knowledge has fostered a world of outrageous price discrepancies– for instance, an ankle MRI can run you anywhere from $400 to $1861 in a mere two mile radius of Washington, D.C.. Such discrepancies are particularly egregious since higher prices do not necessarily equate to better quality of care.
However, the notion that access to prices alone will enable consumers to choose suitable coverage makes two big assumptions about consumers:
(1) that they are in a position to accurately identify and predict their healthcare needs.
(2) that they won’t be inclined to value the short term (i.e., more money in their pocket each month due to lower health insurance premiums for higher deductible plans) over the long term (i.e., access to health care treatment they can actually afford when they most need it ).
The stark reality is that both of these assumptions are wrong.
And affordable access is key since research shows that the underinsured aren’t that much more protected than the uninsured, and thus exhibit much of the same behavior that over the long term leads to higher healthcare spending when they can least afford it. As the Healthcare Hacks blog reported few years ago:
“…53% of underinsured people (compared to 68% of uninsured ones) do not see the doctor when they are sick, do not fill their prescriptions and do not get recommended tests or treatments because of the high out-of-pocket costs that they have to incur. That means that they are foregoing or delaying needed medical care. Moreover, 45% of them have difficulty paying their medical bills, have been contacted by collection agencies for unpaid bills and have changed their lifestyles to pay their bills. In fact, a 2005 study by Harvard University showed that 75% of medically-related bankruptcies occur for people who have health insurance, i.e. the underinsured.”
This isn’t to say that health care exchanges offer no benefit to the consumer. More flexibility in plan choice can give consumers access to services that are important to them. And clearly defined plans (as the Affordable Care Act envisions) can ensure they are educated about what exactly they are paying for and how best they can use those plans. But exchanges are not a panacea and, frankly, can do more harm than good by accelerating the number of underinsured without also protecting the consumers from literally gambling with their health. And that’s a gamble not even the House wins. We all lose.
Author’s note: John S. Wilson analyzes health policy for a state Medicaid agency. The views expressed here are personal and are not those of the state.
John S. Wilson is a health policy analyst focused on long term care and digital health. His work frequently appears in Forbes, CNN, Black Enterprise and the Huffington Post. He is also a Digital Health advisor to the NewMe Accelerator, a start-up tech incubator for minority entrepreneurs. John may be reached on Twitter: @johnwilson. This post originally appeared in Forbes.