American Companies Should Stop Being Helicopter Parents

Why do American employers act like helicopter parents when it comes to their employees’ health care?

I’m sure you know helicopter parents – the kind who hover over their kids at all times to help them navigate their lives. This parenting style doesn’t typically produce children who can look out for themselves. The same applies to employer helicoptering. Most companies provide a very small number of health-plan options, with the result that workers don’t have to – and never learn to – make significant decisions about coverage.

I recently saw the benefits of greater personal accountability in Singapore, where I traveled as an Eisenhower Fellow. Way back in 1960 – when Singapore was still a developing nation focused on the most basic needs like housing and clean water – the government introduced user fees for clinic visits, recognizing that individuals need to feel invested in their health-care decisions.

Today all wage earners are required to put savings into an individual account to cover future health-care expenses, a scheme called Medisave. Although there are constraints on such things as minimum balances and applicable services, the money belongs to the individual, who decides how to spend it. Nearly a third of Singapore’s per-capita health-care spending comes directly out of Medisave accounts. While Health Savings Accounts have existed in the U.S. since 2003, only about 8% of Americans have one.

The genius in Singapore’s health-care system is that each individual’s stake in health-care financing is clearly visible. The former CEO of a major hospital group told me, “People think twice or three times about using services.” He assured me, though, that no one goes without. High-quality outcomes and indicators suggest that for the most part, he’s probably right.

Today Singapore spends only 4% of GDP on health care, versus 18% in the U.S., and just one-third of health care spending comes from the government, compared with 45% in the U.S.

Singaporeans get better value for their money, too. The country performs better than the U.S. on measures such as life expectancy, which has risen 10 years since 1980, and infant mortality, which is among the lowest in the world.

I don’t mean to suggest that U.S. businesses should stop providing health benefits. These benefits help attract and retain talent. However, businesses can assist their workers in becoming true consumers of their own health care by taking the following approaches:

Let employees do the shopping. Americans are quite good at shopping for most things, so why not let them shop for health insurance? Despite political rancor about health-care reform, a key feature – health insurance exchanges – provides employers new options. Under the Affordable Care Act, employers can send employees to an exchange to purchase health insurance. Employers pay the bill, but employees can choose their own plans from all or a subset of available plans. We’re all experts about our own needs and preferences, so it stands to reason that employees will make better decisions about which health plan is right for them.

Offer plans that align incentives, and help employees understand them. Copayments, deductibles, coinsurance, and tiered pricing are designed to give consumers incentives to make lower-cost decisions. But these features work only if people understand them. A recent survey conducted by a Massachusetts health plan revealed that more than half of respondents had no idea what coinsurance is. Among those on subsidized insurance, the proportion was 66%. When I mention that finding to people, they often say, “Actually, I don’t know what coinsurance is.” (It’s when the patient pays a percentage of the doctor or hospital charge, rather than a flat copayment).

Employers should educate employees about their cost-sharing responsibilities and help them find health-care providers who meet their needs and their budgets.

Push for transparency. Employees shouldn’t be expected to share in paying for health services without knowing the cost. As the primary payers, employers are well positioned to demand price transparency. To retain their customers, health plans will likely respond to those demands.

Encourage savings. Throughout Singapore, I heard about people’s tendency to “save for a rainy day” and avoid spending beyond their means. Singaporeans have, on average, the equivalent of more than $15,000 in their Medisave accounts. In 2011, the average American savings account had just $5,900 to cover a full range of household expenses.

Employers should encourage employees to save. They should make health-savings options available. They should nudge people by making those programs “opt-out” and try even small incentives to get people to save. Higher levels of savings would better enable employees to handle increased levels of financial responsibility and would give them a greater stake in their health-care spending.

There’s evidence that American companies are moving in this direction. Recently, Walgreens announced that it would begin offering benefits on a private health-insurance exchange, which would let employees make their own decisions about how to use health-care money. Indeed, one in four employers is contemplating moving to private exchanges.

Earlier this year, the Chicago Tribune did a piece about “free-range” parenting: Within a six-block area, kids are free to make their own decisions. Proponents cite benefits to children such as skill building in the areas of social decision-making, problem-solving, compromise, communication, and self-regulation.

So why not “free-range” health benefits? By providing education, tools, and encouragement, rather than telling employees what to do, employers may ultimately help drive down health costs. Even if cost reduction proves to be an elusive goal, consumers will be empowered to think for themselves about the most expensive benefit their employers provide.


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