The IRS recently released the new out of pocket maximums for health plans to be offered in 2021. They went up (again) and are proof that we must address this area of our economy differently. Here are the new amounts that Americans will need to be prepared to pay out of pocket if they are not in a top-tier plan:
Non-HSA qualified plans:
Self-only -$8,550 (up from $8,150)+ more if out of network
Family -$17,100 (up from $16,300)+ more if out of network
HSA qualified plans:
Self-only -$7,000 (up from $6,900)+ more if out of network
Family -$14,000 (up from $13,800)+ more if out of network
In addition to the new limits, consider these factors:
- According to a December 2019 survey by GOBankingRates, 70% of Americans have less than $1,000 in savings and 45% have no savings at all.
- A March 2019 study in Health Affairs showed that high deductibles cause people to postpone care because of affordability and this results in later diagnosis and treatment of serious conditions such as breast cancer.
- Employer spending on healthcare is up30% in the last 5 years and is now topping $15,000 per employee per year, according to the annual report put out by the Society for Human Resource Management.
- Since the passage of the ACA, stock prices of the largest health insurers around the country have increased 5-10x a growth rate that was 3x the DJIA and 2.5x the S&P.
- Multiple insurers (United & CVS/Aetna) have issued quarterly earning that are double the same quarter last year and yet clients are receiving increases at their renewal.
How did we get to a point where we allowed an enormous and critical part of our economy to become such a mess? How can we fix it?
The Problem is Transparency
In short, we have allowed retail insurers to operate with so little transparency that employers have little to no ability to properly negotiate one of the largest expenses on their P&L. In many states, insurers will simply refuse to provide detailed accounting of an employer’s plan. This can be true even though the very same employer is spending millions of dollars with that insurer AND the employer has fiduciary responsibility under ERISA to oversee the plan. When your insurer uses HIPAA as a reason to not disclose detail about your plan’s performance – ask them if they are the fiduciary! The answer will be no.
The Solution is Transparency
There is another option that is being pursued by top performing employers around the country who demand transparency. These employers know where every penny in their health plan goes and they engage vendors who will work with them to manage the frequency and severity of claims (sounds like supply chain management). They can do this because they have left the retail environment and moved to some form of alternative funding where they have greater control. In this arrangement, they can look at each of the cost drivers in their plan and determine whether better vendors, suppliers, or contracts are available. How do you manage a supply chain that you cannot see?
The results are impressive. While the retail market delivers runaway costs ($15,000/employee/year) and reduced benefits, top performing employers are seeing their per employee per year costs run below $10,000 – often as low as $7,500. They are also able to offer plans to their employees that have exceptionally low out of pocket risk.
How much more will we accept?