We’re at tipping point of health care becoming a real marketplace

Pardon the clichés, but Indiana’s health care market is on the cusp of dramatic change.

Call it a tipping point. Call it a paradigm shift. Call it disruptive innovation. Call it whatever you want.

But Indiana is about to pass a milestone that will be a point of no return on the way to a health care sector that actually functions as a real marketplace.

Nearly half of all Hoosier workers covered by employer health plans are now enrolled in high-deductible, consumer-directed health plans, according to a new survey by Indianapolis-based United Benefit Advisors, a federation of benefits brokers nationwide. (You can download a summary of the survey results here.)

UBA’s survey of 454 Hoosier employer health plans found that 48.8 percent of their workers enrolled in a health plan had chosen a high-deductible plan. That figure was a huge jump from 2013, when 36 percent Hoosier works were enrolled in high-deductible health plans, according to UBA’s survey from that year.

It is also far higher than what UBA found nationally, where 21 percent of workers are in high-deductible health plans. Around the Midwest, the figure is 29 percent.

“We continue to be a national leader in the adoption of high-deductible plans, especially the HSA-based plans” said Mark Sherman, a benefit advisor at Indianapolis-based LHD Benefit Advisors, which is a member of UBA. HSA stands for health savings accounts, a tax-free account consumers can use to pay for health care.

“We’re seeing a lot more of the ‘all-in’ on HSAs from employers,” Sherman added.

UBA found a higher percentage of Hoosier workers in high-deductible plans than a recent survey of Hoosier employers by the benefits consulting firm Mercer. But UBA’s findings are more significant because they come from far more employers than Mercer’s survey and include more of the smaller businesses that dominate Indiana business.

Hitting 50 percent will be a big deal, if you put any stock in the work of Harvard Business professor Clayton Christensen.

In his 2009 book, The Innovator’s Prescription, Christensen and two co-authors predicted that when the marketplace hit 50 percent adoption of high-deductible health plans coupled with health savings accounts, it would induce the kind of fast-paced, far-reaching change that Christensen has famously documented in the computer hard-drive and retailing industries.

According to Christensen’s theory (which, it should be noted, has come under some criticism recently), when 50 percent of consumers have a large amount of "skin in the game," it will induce radical new business practices from the rest of the players in the health care system.

The high-deductible plans in UBA's survey have deductibles that average $2,500 for single coverage and $5,000 for family coverage. In other words, these plans put workers in charge of LOTS of health care purchasing.

The biggest changes likely will hit hospital systems and physician practices, which for decades have operated in a wholesale environment in which the real customers were not patients but insurers, employers and doctors.

They will now have to compete for patients—and compete on price, Sherman said.

“I don’t think we’re far from seeing true price transparency and a competition for patients,” Sherman said.

We’ve already seen a bit of that with urgent care centers and retail clinics skimming some patients away from office-based physicians and hospital systems.

When health insurance, as a matter of course, leaves workers exposed to significant costs, then the truly meaningful health benefit from employers starts to become direct help with the actual health of employees. Many employers that have embraced high-deductible plans have quickly introduced wellness programs and even provided care themselves via on-site clinics.

Those clinics are starting to spark significant changes in how health care services are priced and purchased, as I wrote about here.

Insurers, who have already driven some of this change, will have to adjust even further. Already, hospitals and doctors that want to offer bargains to consumers have been stymied by the rigidity of health insurers’ computer systems.

They’ll either have to change or, if they don’t, they could find themselves no longer the preferred option for handling health care transactions.

And who knows what other new products, services and business strategies will be dreamed up and pitched at health care consumers.

What’s certain is that Indiana, with more than twice as many of its residents now forced to be health care shoppers, is now a key test market for whatever the future health care market is going to become.

Hold on for the ride.