A brief diagnosis of the current state of healthcare payments.
Examine the contents of your purse or wallet and pull out every card you might use to pay for health care. You’ll likely pull out a medical benefits card if you’re insured. And maybe dental and vision benefits cards (if you wear glasses like the author). If you plan for your health care costs, you might also find a flexible spending account (FSA) card or a health savings account (HSA) card. Or a prescription drug benefits card and an over-the-counter (OTC) benefits card if you're a Medicare policyholder. And you very likely use your debit or credit card to cover out-of-pocket expenses.
Question: How many different ways do Americans pay for health care?
Answer: A whole lot.
Besides weighing down our wallets and purses, the multitude of options makes an already complicated space (healthcare) even more complex.
The healthcare payments conversation often centers around medical billing and claims processing. This is for valid reasons—it’s convoluted and prime for innovation.
There are fewer discussions on solutions for out-of-pocket spending, even though it accounted for 9% of total national health expenditures in 2020. And while analysts may categorize out-of-pocket spending differently, it’s just health care to the member. There is no dividing line to a member if they are using a flexible spending account or their over-the-counter benefit.
Let’s discuss some of these different healthcare payment tools that members use.
With health spending accounts, members can set pre-tax funds for designated expenses such as daycare or sunscreen. They’re often offered alongside a high deductible health plan (HDHP) as part of a consumer-directed health plan (CHDP).
They provide employers and consumers great tax benefits, but the use and offering of health spending accounts also introduces complexity.
Language Note: Several different types of organizations provide benefits and savings accounts on their technology platforms. For simplicity, we’ll refer to them as “benefit platforms.”
To help members and employees with expenses, plans and third-party administrators (TPAs) have added more benefits to their offering besides the traditional health, dental, and vision.
Providing supplemental and fringe benefits also has its complications.
Note on the Two Categories: Based on traditional offerings, we've used the categories "supplemental" and "fringe" or "flex" benefits for simplicity. However, all plans can provide these benefits and these terms can be used interchangeably.
All of these healthcare payment tools introduce pain points for both those who provide the payment tools and those that use them.
Benefit Platforms Challenges
Today’s plans and TPAs lean on a hodgepodge of legacy solutions to provide these benefits on their platforms. Here are some of their pain points:
Legacy solutions also impact the people who use them (health plan members). By filling up wallets with additional cards and brains with numerous rules to remember, benefits are harder to use. A recent sponsored Harris Poll uncovered that more than three in ten insured individuals with an FSA or HSA do not use all their benefits. Half weren't even sure what their benefits were.
This confusion leads to members not fully using their benefits and losing access to their hard-earned funds. In 2019, 44% of workers forfeited part or all of their FSA contributions. The average forfeiture was $339, and the median was $157.
Anything that can be done to make benefits easier for members to access must be done. Improving benefits infrastructure is the right thing to do.
Healthcare doesn’t need to look far for potential solutions. With the introduction of the digital wallet, fintech has revolutionized the industry and changed the contents of wallets and purses.
Fiserv’s Expectations and Experiences consumer trends survey found that almost seven in ten consumers (68%) had used a digital wallet in the past 12 months. The digital wallet is taking over the modern consumer’s wallet, and for good reason! 97% of Americans own a cell phone, and 85% own a smartphone. Digital wallets provide consumers with security and convenience for payments with the device they already carry in their pockets.
A healthcare-adapted version of a digital wallet could offer these same benefits and more to members and to benefit providers. By stacking benefits onto one payment tool, a health wallet could both streamline benefit management for benefit providers and simplify benefit utilization for members.
As we’ve noted, there’s a whole lot of regulation in health care. Benefit platforms can’t just integrate Apple Pay and call it a day. To succeed, the health wallet must be designed with healthcare regulations in mind.
The Health Wallet
Let's define what the health wallet should be and do. The health wallet should:
With the health wallet, members would say goodbye to multiple cards, and plans and TPAs would say hello to a software-defined benefits platform.
Fintech can do more than provide an app for sharing pizza costs with our friends. Let's leverage the advances of digital wallets to build a health wallet. By doing so, we can improve member benefit utilization and improve operational efficiency for health plans and TPAs.