Brokers and advisers are the most crucial — and often overlooked — agents for
When congressional leaders propose shifting government subsidies or regulated insurance mechanisms into direct cash payments,
Consumer-driven health care (CDHC) based on high-deductibles and cash accounts is a failed theory that will not deliver better health at a lower cost for your clients' employees.
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The Myth of the individual negotiator
The Republican proposal, whether it's replacing Affordable Care Act subsidies with accounts or leveraging high-deductible plans, operates on one core theoretical premise: if individuals have "skin in the game" (i.e., bear the first few thousand dollars of costs), they will become smart, cost-conscious shoppers, forcing providers to lower prices.
After decades of implementation in the private sector, the evidence is in: this theory is a spectacular failure.
The individual employee holds zero negotiating power against a multi-trillion-dollar healthcare industry. When applied to medicine, the economics of consumer shopping break down due to three structural realities: Unlike purchasing a car or a television, most medical spending is non-elective, opaque and complex.
Roughly half of all medical spending is non-elective. Nobody shops for the cheapest ambulance or scans in the emergency room. You take the care available and the bill follows.
Even for scheduled care, pricing is notoriously opaque, often hidden behind proprietary insurer contracts and varies wildly based on network status and billing codes. The consumer lacks the expertise (information asymmetry) to judge both the quality of the service and the true cost, making a rational purchasing decision impossible.
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The power of scale vs. $2,000
Healthcare prices are set through massive, proprietary contracts negotiated between powerful insurance conglomerates and entrenched hospital systems.
The only entities that exert meaningful downward pressure on price are those that represent massive scale: the government (Medicare/Medicaid), self-insured employers or major insurance payers that control millions of lives and billions of dollars in revenue.
The idea that an individual employee, armed with a few thousand dollars in an HSA, can exert meaningful downward pressure on a regional hospital monopoly is a fantasy. The provider's business model is predicated on the individual's absolute lack of bargaining power.
The behavioral science behind CDHC is also damning. Studies consistently show that when faced with a high deductible, people do not selectively cut out low-value care; they cut back on all care. They delay or skip necessary care, diagnostic tests and medication refills to avoid hitting their deductible.
The consequence is predictable: minor, manageable conditions escalate into severe, expensive crises later. The short-term savings achieved by the employee skipping a preventive screening or an important prescription ultimately translate into catastrophic claims and higher medical-loss ratios for the employer down the line.
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The extraction illusion
For brokers and advisers focused on fiduciary responsibility, the most important function of the cash account/high-deductible structure is this: it shifts the financial burden and risk from the payer (the self-insured client) to the employee.
This approach successfully protects the profits of the insurance carrier and the hospital system by exposing the individual to the first $5,000 to $10,000 of expense. The structural costs – inflated prices for MRIs, generics and simple procedures – remain completely untouched.
The goal of true healthcare reform must be to lower price and increase the quality of care. The CDHC model merely changes who pays the first bill, failing to achieve either goal. It creates the illusion of empowerment while ensuring the system remains singularly focused on extraction.
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The path forward
Self-insured employers hold the ultimate power to drive change, but only if they direct that power toward structural fixes, not payment shifts. Effective strategies that brokers and advisers must champion focus on addressing the cost of care at its source. Consider these important steps for your clients:
- Introduce negotiation power. Support initiatives that leverage the aggregate purchasing power of employers or the government (e.g., advocating for Medicare-like drug price negotiation power) to push down prices systemically.
- Enforce true price transparency. Demand and enforce true, understandable price transparency so that plan sponsors and patients can access the real cost data necessary to seek out high-value providers for scheduled procedures.
- Address market concentration. Actively counter hospital and insurer monopolies that drive up prices with impunity. Advise clients to contract outside of consolidated systems where possible.
- Prioritize optimal medical therapy (OMT). Focus on health delivery models that maximize evidence-based preventative care and aggressive chronic disease management (OMT protocols). Encourage development of advanced independent outpatient primary care focused on best practice treatment of chronic diseases. This, not high deductibles, is what drives genuine long-term cost reduction by preventing catastrophic events.
The latest proposal for "cash back" is just a new package for an old, failed idea. This is not a political issue. Your fiduciary duty demands that you steer your clients away from gimmicks and toward the difficult, but necessary, work of tackling the cost of the service, not just who holds the checkbook. The long-term health and financial stability of your clients' employees — and sustainability of their benefits budget — depend on it.
