New health care payment protection benefit: Employees can buy now, pay later

Imagine buying the car of your dreams, but you had to drain your bank account to make the purchase. And then, due to the rising cost of gas and maintenance, you can’t actually drive it. Even worse, every year end, the car disappears and, filled with hope, you shell out for a new, slightly more expensive one that, again, you can’t afford to drive.

This is what it is like for thousands of Americans with “good” employer-sponsored health insurance. Due to increasing premiums and out-of-pocket expenses, Americans are being financially squeezed: The average annual family coverage premium in 2023 was $23,968 (with the employee contributing $6,575 of that). Many are paying big deductibles, with average aggregate deductibles of $4,533 per family (2022) for HSA-qualified high-deductible health plans.

Since many of these insured individuals and families can’t afford their deductibles on top of their premiums, they avoid going to the doctor or taking their prescription medicines, or both. According to a recent poll, (43%) of insured Americans are avoiding care due to cost concerns. As a result, the most financially exposed do not benefit from the millions of dollars employers contribute towards keeping them healthy and productive.

At first glance, this missed medical treatment looks like a fact of life that everyone must endure, sharing the pain of rising costs more or less equally. But it’s a lose-lose proposition: Every missed appointment carries some probability of precipitating more, bigger, and avoidable health problems, leading to even higher health care costs, premiums, and deductibles for all involved. Patients’ failure to pay their bills is another facet of the problem, leading to rising costs and undertreatment.

It’s a vicious circle. Rising costs beget rising costs. Welcome to the patient-as-payer model.

Rising deductibles, missed treatment

Insurers used to be considered the payer, but it doesn’t feel that way anymore for many. Not surprisingly, 4 in 10 Americans (44%) with a credit score of 669 or less find their deductibles unaffordable, according to the “Healthcare Payments and Financial Disparities Study (2023).” Half of insured Americans (52%) feel stressed by medical bills, it found, and 92% of those say the stress has affected their physical and mental health. I would consider backing this up with the KFF study saying 43% of Americans avoid or delay care OR maybe also show value of those with a credit score of over 669 from our survey which still isn’t great and that could get to the issue of equity.

And even though the vast majority of adults have health insurance, significant numbers miss care. More than 1 in 4 adults delayed or chose to forego some form of care (e.g., medical, prescription drugs, mental health, or dental) in 2022 due to cost. Take insulin users, for example. Among insured non-elderly adults with private coverage, 1 in 6 insulin users reported in 2021 having skipped, taken less, or delayed buying insulin to save money.

As you might expect, there are demographic inequities as with every other aspect of health care: Hispanic and Black adults delayed health or dental care more often than white or Asian respondents.

The patient as payer model casts a cloud over health insurance. Just like the nice car that’s too expensive to drive, even “Cadillac” private health care is a dubious benefit in the eyes of an employee who can’t afford to use it. Half of Americans (53%) consider a medical bill of $1,000 or more unaffordable. The employer takes credit for supporting the employee’s health, but the employee is left to start each year with zero dollars credited toward their deductible. So unless there’s a major health event or expensive condition, it’s not a terribly attractive benefit. In fact, it makes the term total rewards a misnomer.

Can someone else pay?

If insurers won’t pay and patients can’t, how can we fill the gap?

Novel payment models are showing some promise in addressing the problem. Third-party financial service companies are stepping in to pay providers in full immediately after a claim is adjudicated. The payment covers all allowed in-network charges – including both the employer and employee deductibles – from all patients, regardless of their ability to pay. The third party then assumes the financial relationship with the patient to collect due balances.

This intervention gets providers out of the collections business and eliminates their cash flow problems. More importantly, it helps the patient. The patient receives guaranteed credit for out-of-pocket payments and flexible pay-over-time options at 0% interest. The third party provides the employee with a single, simple consolidated monthly statement (a “super EOB”) listing all services, charges, and flexible payment options. This refreshing clarity helps reduce the stress that comes with the 125 bills and EOBs the average patient receives every year. Related: New medical payment benefit can improve employee wellbeing

Because the provider’s payment is guaranteed, patients save face with their provider, have a better chance of settling their bill, and are more likely to get the care they need. This payment protection  service is packaged as a benefit that employers provide along with health insurance, automatically enrolling all employees in a firm regardless of their credit history. For third-party administrators, the service is a way to expand business and revenue. Their clients get a simplified payment solution that saves them money and lets them improve access to quality care for all employees.

Innovative payment solutions like these have the potential to turn the lose-lose proposition of high deductibles into a win-win solution of bills getting paid and Americans getting the health care they need. They can use their coverage as intended, just like they can enjoy driving the new car in their driveway.

Tom Policelli is CEO of HPS/PayMedix.