Vincible Ignorance – One of the Problems with ESHI

Employer-sponsored Health Insurance (ESHI) covers just over 55 percent of the U.S. population and accounts for just over a third of the overall health care expenditure for the country. With such significant dollars allotted, expectations for the quality of healthcare and the overall health of individuals would be at the top of every health-related metric internationally.  And yet, it is rife with problems, obstacles, malefactors (intentional or otherwise) and heaps of money. Heaps and heaps and heaps of money. How can such a gargantuan blight upon this nation’s economy continue to exist, unabated, with expected continued growth like a nuclear chain reaction?

Two very simple words: Vincible ignorance.  Trust me, I am not calling anyone dumb.  I am not calling anyone lazy.  Part of the idea behind vincible ignorance is, after all, the notion that human beings can use their skills and energy to overcome it.  And we can.

Vincible ignorance is a lack of knowledge that a person could remove by applying reasonable diligence in the given set of circumstances. Are we all, in a sense, culpable if we allow vincible ignorance in the ESHI world to continue, unabated, at an extremely high cost?  Well, sure.  But that isn’t the point.  The point is to motivate all the stakeholders to gain the knowledge necessary and act on it.  That includes benefit brokers, HR leaders and CFOs.  

For many employer groups, employee benefit costs, namely healthcare, appear as the second largest expense item.  Yet, the vincible ignorance fueling this reality includes benefit brokers not offering different plan options available to their clients during pre-renewal discussion, and instead, proceeding with the status quo.  It includes times when HR leaders, although not directly responsible for the bottom line, allow for premium rates to rise by double-digits, year after year, without consulting their CFO counterparts or understanding their employees’ perspectives on health benefits offerings. It includes when CFOs, instead of introducing new benefits to their employees, indicate that the changes will be too disruptive and cause too much friction to proceed.  

The acceptance of vincible ignorance and lack of reasonable diligence are massive factors in healthcare costs continuing to rise, in the form of both premium and out-of-pocket costs, even as very few accept knowledge or responsibility. 

Now, it’s time to act together to rid the system of vincible ignorance, ensure reasonable diligence, and stop passing the buck. 

Fortunately, a major Rule and Act are set to come in effect over the next year that will unequivocally ensure reasonable diligence. These include the Transparency in Coverage Rule, as well as components of the Consolidated Appropriations Act (CAA). 

Concerning the Transparency in Coverage Rule, Employer-sponsored Group Health plans must publish the following three machine-readable files:

  • negotiated rates for all covered items and services between the plan or issuer and in- network providers;
  • historical payments to, and billed charges from, out-of-network providers; and
  • in-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location

With these files available, employers and their employees are now better equipped to evaluate their plan options considering the costs for services under negotiations between each payer and their preferred providers. Given that a well-functioning, competitive market depends on information symmetry between engaged buyers and sellers, the accurate and timely disclosure of cost information to healthcare consumers will lead to a more efficient, competitive healthcare market. 

The CAA builds off this momentum. It states that the plan sponsor is a fiduciary, removes gag clauses in carrier contracts pertaining to price and quality information, and requires 408(b)(2)-style broker compensation disclosure. Benefit brokers will now have to disclose their compensation for anything that’s paid over $1,000. Additionally, in regard to the healthcare plan sponsor’s fiduciary duty to disclose material information to participants, plan participants must be provided with material information that will allow them to make informed decisions as well as ensure decisions are made with cost-consciousness in mind. Simply put, a fiduciary cannot waste a beneficiary’s money and is obligated to minimize costs. As greater responsibility becomes obligatory, so does greater diligence. 

Reducing healthcare costs needs to be top of mind for all HR Leaders, CFOs, and benefit brokers. A recent analysis estimated that as much as one-quarter of total health care spending in the U.S. is wasteful. That equates to between $760 billion and $935 billion annually. Within this wasteful spending total, overtreatment or low-value care, such as medications, tests, treatments, and procedures that provide no or minimal benefit, and in some cases potential harm, account for almost one-tenth. 

Together, we can ensure that Americans’ hard-earned dollars are not wasted.

As famed healthcare economist Uwe Reinhardt put it so delicately, “It’s the prices, Stupid.” I would slightly edit that statement and instead phrase it, “It’s the prices, Lazy.” 

Yes, we’ve been lazy.  Yes, it’s time to change.  I want to be part of that change, and I know I am not alone because I hear the same passion from clients I work with all the time.

New healthcare cost-containment solutions are being founded and funded, with 2020 total venture funding recording $14.8 billion, a 66% increase compared to 2019. These solutions range from Data Analytics to Social Health Networks. There is no panacea to solve this incredible complex problem. But there are more than a few arrows stakeholders can now place in their cost-containment quivers. 

-Matthew McCormick, Director, Partner Sales 


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Ensuring Compliance with the No Surprises Act and Transparency in Coverage Rule