Financial Literacy Month: Give Your Employees Relief from Medical Bills
By Andrew Harris, Head of Growth at Paytient
April is Financial Literacy Month and this year the “celebration” comes as consumers face higher interest rates, inflationary prices, and increased levels of household debt. Less generous health plans for employees also mean this Financial Literacy Month Americans are in desperate need of relief from medical bills.
To be clear: medical debt does not only impact consumers. While rising labor costs are the main factor driving hospital deficits, bad debt from consumers burdens health systems. In a survey of hospital executives, about 36 percent said their institution faced more than $10 million in bad debt. Six percent reported bad debt totaling more than $50 million.
Those numbers are staggering, but what is most startling is how often this debt comes from a health system’s own employees.
Casual observers might assume healthcare workers are the first to pay their medical bills, but hospital executives know, too often, bad debt comes from within. It is not unusual for hospital employees to avoid paying their own employer after they or their loved ones receive care. Having to take action to resolve these unpaid bills creates challenging circumstances for hospital human resources staff who already are facing a difficult market for talent.
There is a way to avoid calling debt collectors on your own workers, to help healthcare employees who need relief from medical bills, and to make sure health systems get paid. But first let’s explore the depth of the problem.
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Americans Need Relief from Medical Bills
Economists may not have formally declared that the United States is in a recession, but this Financial Literacy Month, consumers are in a bad way. A survey conducted in January by Bankrate found 56 percent of Americans do not have enough savings to cover a $1,000 emergency. With the average family health care deductible triple or quadruple that number in most states, that means millions of families need relief from medical bills. In fact, a report released in March by the Urban Institute and the Robert Wood Johnson Foundation found 15 percent of nonelderly Americans have past due medical debt. Nearly two-thirds of these individuals have incomes at 250 percent of the poverty line or below.
The report indicated most medical debt is owed to hospitals. Indeed, 73 percent of the people who said they had past due debt noted at least part of it is due to hospitals.
Hospitals are trying to collect. About two-thirds, 61 percent, of consumers said they had been contacted by a collection agency while more than one third had worked out a payment plan. Five percent had been sued by a hospital. Even with these efforts, health systems are only able to recoup about one-fifth of what they are owed.
Healthcare workers are not immune from collection efforts. In its 2022 Benefits Survey of Hospitals, AON said “[H]ospitals are facing increasing bad debt from patients — including employees — who cannot pay their bills. We continue to observe tactics to address this, such as lower employee contributions and cost share through plan design or an emergency fund, especially for low-wage earners.”
These efforts probably will not be enough. Many health systems will increase premiums and deductibles in 2023 and 2024. Healthcare employee medical debt will continue to grow.
Hospitals obviously cannot simply forgive employees’ bad debt while leaving debt for other consumers intact, but as they consider their health plans for employees they can better prepare their workers for an unforeseen event.
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How Health Plans for Employees Can Build Financial Resilience
While hospitals are working hard to provide better mental healthcare for their workers, this Financial Literacy Month they are getting a failing grade when it comes to helping their employees build financial resilience. The AON survey, which interviewed more than 2.6 million employees at 1,200 hospitals, found only 38 percent of respondents said their hospital was effective in supporting their own employees’ financial health.
These numbers represent an opportunity for hospital administrators and human resources officials. Even if health insurance plans are generous (and, let’s be honest, most hospitals simply cannot afford for them to be in today’s market), employees will face deductibles. They still need an immediate, efficient method to pay for an emergency when it happens. To help protect employees from financial pain of an unforeseen medical event, as part of their health plans for employees, hospitals can offer employees instant access to funds they can access the moment they need care. This option, which Paytient calls a Health Payment Account (HPA), offers dollar one coverage and provides a better way to pay for out-of-pocket healthcare costs for the whole family. Health systems, insurers, and other employers can offer access to the HPA as part of their employee benefits package with just a small upfront investment.
An HPA is a sponsored, immediate, interest-free line of credit. It is not a health savings account (HSA) since there is no upfront investment from the consumer. Employees receive a small line of credit they can tap (without affecting their credit score) to pay the out-of-pocket cost of care including medical, dental, vision, pharmacy, behavioral services. (Even the family pet!)
While consumers get access to funds right away, they then can pay back that out of pocket responsibility by up to 36 months with no interest or frees through payroll deductions or a linked bank account. They can also make payments from an HSA or FSA account. (The health care provider gets paid immediately.) Specifically, after each transaction, the cardholder chooses a personalized interest-free payment plan that fits their budget. While most credit cards start with an introductory zero annual percentage rate, they stick consumers with a high interest rate or fees later. Again, the HPA has no interest or fees — ever. Employers also are not responsible for any unpaid balances.
The concept was developed by a hospital administrator who, for years, had witnessed the growing medical debt burden and wanted to do something about it.
HPAs increase access and affordability for the employee while removing the financial risk that the hospital bears. We have found HPAs can help advance health equity, improve health plan optionality, and ensure providers get paid while helping teams access and afford care.
They also improve employee retention. Engaged Paytient users had a 32% lower turnover rate vs. those who didn’t use the card.
Why? Workers believe it is the responsibility of their employers to help them build financial resiliency. TIAA’s 2022 Financial Wellness Survey found half of workers think employers must help employees with their financial wellness. Among Gen Z respondents, that number was even higher: 65 percent.
Why Hospitals Must Take Relief from Medical Bills Seriously
Helping members of the healthcare workforce afford care is more important than ever — and not just because of workplace burnout related to the pandemic.
A 2019 study published in the Journal of Family Medicine and Primary Careoutlined the significant biological, chemical, and occupational hazards healthcare workers face every day. A 2011 Thomson Reuters study concluded, “U.S. hospital workers are less healthy, consume more medical services, and accrue higher healthcare costs than the U.S. workforce at large.”
Even though they need care, as premiums and deductibles rise, more healthcare employees are deferring or skipping going to the doctor because they do not have the funds to deal with big (or even small) expenses. According to Gallup, the percentage of Americans reporting they or a family member postponed medical treatment in 2022 due to cost increased 12 points in one year, to 38 percent, the highest in Gallup’s 22 year history of asking the question. Americans were more than twice as likely to say they had delayed treatment for a serious condition (27 percent delayed care) rather than a nonserious condition (11 percent delayed care) in 2022.
As medical professionals know too well, deferred care leads to a vicious cycle of higher claims costs and worse outcomes. Health screenings paired with early diagnosis and treatment are essential measures in maintaining overall health. Healthcare providers can detect early signs of chronic conditions during routine eye and teeth examinations and wellness checkups are a doctor’s first line of defense against preventable disease.
Making sure employees stay healthy has important benefits for health systems as well.
Absenteeism has a profound impact on a medical team’s productivity. The average absence rate in 2021 was 3.2 percent, which means employees missed about eight workdays a year. Considering people with cost barriers to care take 70 percent more sick days than their peers, we estimate the average employee would only take 4.7 sick days if their health system offered an HPA as part of their health plans for employees.
Foreseen or unforeseen, medical debt wreaks havoc on families and health systems. This Financial Literacy Month, it is time we all look for innovative ways to help employees avoid and find relief from medical bills.
Andrew Harris is Head of Growth at Paytient, a Columbia, Mo.-based company that builds solutions that deliver value to employers, payers, and health systems by ensuring people can access and afford the care they need to live healthier lives. Learn more at www.paytient.com.