Originally published 3/17/21, updated 1/8/24
For more than a decade, the U.S. healthcare industry has been in the midst of a shift toward consumerism. In other words, we’re training healthcare users to become shoppers—just as they’d look around for a car, a home, or a new dishwasher. But what is healthcare consumerism exactly, and what does it look like in practice?
Well, it hasn’t all been sunshine and roses. The healthcare consumerism model has achieved mixed success, and we still haven’t fully realized our vision to help employees make more informed choices about their healthcare spending and saving.
So let’s explore a few healthcare consumerism definitions and challenges, and discuss how to solve them.
What is healthcare consumerism?
The Institute for Healthcare Consumerism offers the following healthcare consumerism definition:
“Transforming an employer’s health benefit plan into one that puts economic purchasing power – and decision-making – in the hands of participants.”
Hospitals, health systems, insurance companies, startups, and employers have all adopted consumer engagement models from retail, travel, and banking. But what does that look like in the real world?
It’s different for every company, but tactics can include:
- Empowering employees to choose their own health plans, rather than assigning a plan to them
- Increased focus on high-deductible health plans (that put financial responsibility in employees’ hands)
- Offering savings incentives that drive employees pay for health and retirement expenses themselves (like employer HSA or 401K matches)
- Preventative care discounts (free annual physicals, discounted telemedicine, etc.)
The ultimate goal is to put more responsibility on employees to make their own saving and spending decisions. Ideally, healthcare consumerism creates more informed, financially savvy healthcare users.
What’s driving consumerism in healthcare?
Three key factors have been driving healthcare consumerism.
Rising healthcare costs
You’re already well aware of the fact that healthcare costs are rising. Employers spend $1.2 trillion on healthcare every year—and unfortunately, up to 25% of that total is wasted. Whether it’s because of unnecessary treatment, administrative complexity, or a lack of coordination among care providers, wasted healthcare spending is a top concern for C-suite leaders.
On top of that, average healthcare premiums increased by 7% in 2023. Simply put, average American workers can’t keep up. The biggest concern for employees when they choose their benefits isn’t their health, it’s cost. So healthcare consumerism is one attempt to encourage smarter decision-making that contains those costs for employers and employees alike.
More specialty healthcare options
From healthcare system mergers to a rise in new treatments like weight loss and gene therapies, employees have more care options at their fingertips than ever before. And insurance carriers are responding by offering segmented plans that cover niche point solutions rather than overall healthcare.
That means employees have more choices to make—from the types of care they need to the best ways to pay for it.
Lack of employee engagement
The third factor is a lack of employee engagement. It’s not that employees don’t care about their benefits! In fact, they’re paying more attention than ever, and research found that 43% of folks who left their jobs cited “the benefits weren’t good” as a top reason.
The real issue is that employees are disengaged because we’re not personalizing their experience enough. Healthcare consumerism has given employees so many choices that they’re not sure where to turn, and they’re not confident that their decisions are the right ones.
A recent Jellyvision survey found that employees would make smarter choices if they were given a personalized breakdown of their spending habits:
As you can see, these trends haven’t all been positive. Even though healthcare consumerism is trending, it hasn’t enabled people to make better choices in practice. If anything, financial pressure and hard-to-understand benefits offerings have made it more difficult for employees. That’s the opposite of what healthcare consumerism advocates want.
How have we gotten healthcare consumerism wrong?
As we mentioned, healthcare consumerism succeeds when people are empowered to make the decisions that best support their personal and financial well-being. Unfortunately, we haven’t actually given employees much help. They’re still not sure where to get the information they need, and they’re still paying an arm and a leg for healthcare (if they can afford to pay at all).
Healthcare consumerism has gained popularity in the insurance industry because it prioritizes the needs of employers and their brokers. All too often, the focus has been finding ways to split the bill with employees – all while the cost of premiums and deductibles rises faster than employees’ income. Whether it’s driving employees to enroll in HDHPs, contribute more to their HSAs, or get preventative care, employers are too often focused on how those actions benefit themselves—through lower claims costs, fewer payroll taxes, and more productive and healthy employees.
To achieve the original goal of healthcare consumerism—employee empowerment—we’re asking employees to become year-round experts on their benefits. That’s a tall order, and it’s simply not something that employees are going to do.
93% of employees default to the same plans every year, and 47% of employees only make changes to their benefits when they have to.
Remember, benefits only matter to employees and their family members when they need them—like when they suddenly need glasses and haven’t looked at vision insurance before. Or when their child breaks a leg at a soccer tournament out of town and they suddenly need an in-network ER. Or when they receive a cancer diagnosis and need a treatment that insurance will pay for. Otherwise, benefits don’t mean much more to employees than an insurance card in their wallets.
When employers put their own needs first, they run the risk of giving employees lots of healthcare choices—without actually helping them navigate and understand those choices. They may build a great benefits page on their intranet, chock full of comparison charts and other information that explain health coverage in great detail. But if it’s full of jargon, or if employees aren’t actively seeking out that information (spoiler alert: they’re not), it’s a lot less likely that they’ll make the right decisions when they actually need to think about their healthcare.
How can we address the challenges of healthcare consumerism?
The best strategy to help employees become better, more informed consumers of healthcare? Use an employee-first approach that helps employees not only understand, but value their benefits.
Remember, it’s more than annual open enrollment. When employees log into their HSA, file a healthcare claim, or search for an in-network doctor, they’re actively engaged. They’re looking for ways to make smarter health and financial decisions. They want to learn more about their options, all while giving their employers useful information about their healthcare usage.
To make the most of these moments, employers need to observe employees’ behavior so that they’re ready to drive smarter healthcare choices in real time. It won’t always occur during work hours, and there may not be enough HR pros available to handle questions.
An always-available, scalable technology platform is crucial to making healthcare consumerism a success. Tools like ALEX can help employers drive cost savings, improved outcomes, better productivity, and peace of mind.
How ALEX personalizes the benefits experience
ALEX partners with thousands of employers every year to make healthcare consumerism a success at their organization. Here’s how it works:
Get to know every individual employee
ALEX Benefits Counselor asks users about their family makeup, health history and financial situation, so that the platform can make smarter recommendations that will offer the best coverage at the best cost.
The best part? We’ll let you in on what ALEX has learned about your employees, too. Our analytics dashboard offers simple, real-time reporting so that you can monitor the success of your benefits package and gain insights into employee behavior. From there, you can evolve your benefits program design, prioritize high-performing benefits, and control costs.
Leverage the power of predictive analytics
Once ALEX has a clear picture of each employee’s unique situation, the platform leverages predictive analytics and behavioral science to make plan recommendations and nudge employees in the right direction.
Learn more about employees over time
Like an old friend, ALEX remembers employees every time they have a question about their benefits. With ALEX ID, users can create an account that saves their information, streamlines their experience, and fosters smarter choices as ALEX learns more about them over time.
