Are Consumers Ready to Shoulder Responsibility for Their Healthcare Costs?

The founding principle of consumer-driven healthcare (CDH) is simple: When consumers have greater involvement in their healthcare finances, they make better decisions.

In order to make better decisions, consumers need two things:

• To understand how their health plan and account works
• A foundation of financial knowledge and habits

But, do consumers actually have those things? Are they really ready to step up and take a central role in their healthcare journey?

To answer these questions, we commissioned an independent survey of more than 1,400 U.S. healthcare consumers.

We didn’t just want to know whether consumers understood basic healthcare terminology. We wanted a complete picture of their starting points, behaviors, and fluency in healthcare and finance.

This is what we learned.

Consumers lack basic financial skills

In order to stay on top of their healthcare finances, it’s essential that consumers develop basic financial habits. Unfortunately, based on the results of our survey, it’s fair to say that many consumers don’t have a strong handle on their finances and they aren’t confident in their ability to save for healthcare costs.

Of the respondents to our survey:

Clearly, this poses a problem for healthcare consumerism. In order for CDH to flourish in the coming years, consumers need to proactively select and engage their health plan and account, and they also need to be disciplined about their savings.

Unfortunately, a high proportion of consumers are undisciplined about saving in general. Of the respondents to our survey, 50% are not disciplined about saving for retirement and 51% have no emergency savings at all.

It’s fair to say that if consumers aren’t saving in other important areas of their lives, they’re unlikely to save effectively for their healthcare needs.

So, how does this lack of financial discipline affect consumers’ healthcare finances? The short answer is a lot.

In 2018, consumers and employers will overpay on healthcare costs by an estimated $107 billion, purely as a result of using post-tax dollars instead of pre-tax dollars.

If those same healthcare costs were paid using pre-tax dollars (i.e., from an FSA, HRA or HSA), consumers would reduce the financial burden of their healthcare by almost a third.

Healthcare fluency is still low

This shouldn’t be a surprise (after all, we’ve written about it before) but our survey highlighted a definite lack in understanding of basic healthcare concepts.

For example, of our respondents:

Even when consumers believe they understand healthcare, the reality is often quite different. While 66% of respondents felt confident in their understanding of basic insurance terminology, only 50% correctly answered a simple true/false test about premiums and deductibles.

This lack of understanding is particularly stark when it comes to health benefit accounts. Of the general population, only 19% of people can pass a basic ten-question proficiency test on health savings accounts (HSAs), compared to 29% for flexible spending accounts (FSAs). Those numbers rise for individuals currently enrolled in those accounts… but only to 35% and 37%.

Yes, you read that correctly. Around two thirds of people currently enrolled in an HSA or FSA simply do not understand their account.

And, it’s not just a lack of understanding that’s getting consumers into trouble. Many people still struggle to predict how much they will need to spend out-of-pocket on their healthcare expenses:

• 55% can't predict the amount of healthcare services they'll consume this year
• 51% can't forecast likely out-of-pocket costs for this plan year
• 58% don't know or underestimate how much healthcare will cost in retirement

There is hope for the future

At this point, you may be starting to worry about the future of healthcare consumerism. While current trends are admittedly a little worrying, our survey did highlight a few positives. On the whole, consumers do exhibit some positive behaviors that can be built upon.

For starters, 82% of respondents were able to track their spending, while 75% said they could curb impulse spending when necessary and more than half had established clear financial goals. While these are fairly basic financial behaviors, they demonstrate an understanding that financial planning is an essential part of modern life.

At the same time, many of our respondents (40%) said they wanted to take a more active role in their healthcare and highlighted key areas in which they would need support:

Predictably, lack of understanding was highlighted as the single greatest impediment for consumers that want to take a more active role in their healthcare finances.

Finally, we saw real cause for optimism in responses from consumers who have already joined the CDH movement. In particular, respondents enrolled in HSAs displayed much stronger than average levels of understanding and behavior.

Combine this with the anticipated growth in HSA adoption over the next three years, and we have clear cause for this optimism.

The route forward

As healthcare consumerism continues to grow, these research results clearly demonstrate that consumers feel the impact of their increased responsibility, and they struggle to manage it. In many cases, consumers have some basic financial systems and knowledge in place, but they aren’t currently in a strong position to manage their healthcare finances.

At the same time, though, many consumers really do want to play a more central role in their healthcare journey. Combined with continued growth in uptake of CDH plans, this suggests that consumers are starting to understand the value of healthcare consumerism but look to employers and plan providers for increased support.

The route forward, then, is simple: As an industry, we need to get serious about providing consumers with the education, tools, and support they need to make informed decisions about their health, wellness, and finances. So long as we can provide this help, the future of healthcare consumerism looks exceedingly bright.