PayFlex Engage Health and well-being: Part of the purchasing power conversation
Purchasing power and well-being
What is purchasing power?
Purchasing power is one’s ability to buy things within one’s means in the short and long term, while also being financially prepared for emergencies. This means everything from regular day-to-day living costs, little (and maybe not so little) surprise expenses, and being able to invest in future financial, physical and emotional health.
Purchasing power also means having the ability to:
- Save for retirement
- Pay for preventive health measures, like regular check-ups, routine testing and even gym memberships
What is health and well-being?
Simply put, health and well-being are a sum effect of a person’s physical, mental and emotional health. Each element is vitally important to one’s overall life satisfaction and happiness. So is one’s financial stability. In uncertain health times, it’s important to us to know we can take care of our needs without relying on credit cards or help from family. Such self-reliance gives us feelings of empowerment and peace of mind. It can help reduce the stress that comes with financial insecurity.
Purchasing power needs to include health and well-being.
When we talk about purchasing power and how it can enhance our lives, health and well-being must be part of the discussion. We’ll talk about:
- The high costs of health care
- The financial reasons to avoid ill health
- The unpredictability of health care costs
The impact of health care costs on our lives
Health care is expensive.
Ignoring the potential impact of the costs of health care on our lives will only lead to stress down the line for ourselves and our families. Let’s talk real numbers to gain some perspective.
- Health care costs in retirement: $387,644 expected for a couple after age 65.1
- Health care costs of working families are significant.2
- Premiums are rising faster than increases in income.2 So less spending money is available across all needs.
- Nearly 24 million Americans with employer coverage spend more than 10% of their income on their premiums or out-of-pocket costs, or both.3
- The average American household spent 8% of their expenditures on health care in 2017.4
- The total costs of health care are even higher when you include other costs like employer-paid premiums and taxes.
- Households in the bottom 20% of income have health care costs equaling 34% of their income. The highest-income households have costs that equal 16% of their income.5
- Medical bills are the No. 2 reason people file for bankruptcy. The No. 1 reason is income loss (including medical-related job loss).6
What does all this mean?
The daily financial burden of health care is felt by nearly all Americans. So it must be part of any conversation about purchasing power and financial wellness.
Health care costs are unpredictable.
The final reason to keep health and well-being in conversations about purchasing power is that health care costs can be unpredictable. Sometimes unpleasantly so. And that can lead to unplanned and often significant financial obligations.
This can be due to the complexity of benefits, bureaucracy in claim filing or lack of health literacy among members. These factors may make it difficult for them to understand how they can better use their benefits to plan and save for health care costs.
- Even though members often need to pay for procedures at least partially out of pocket, it is still difficult to get a good sense of the cost of health care beyond premiums and deductibles. How much will that colonoscopy cost? How much will it cost to go to a specialist? It's difficult to know.
- If employees don't know how to use health insurance benefits, they can put off preventive care until issues become more expensive to treat. Everyone loses in this scenario — from the employee to their family to their employer.
- It is challenging, but still achievable, to think ahead about how to save for future health care costs. While the actual out-of-pocket costs of a certain medical procedure may not be easy to know, it’s still a worthwhile goal. Employees should be able to know which tests, treatments and procedures they might need, and how much they will have to pay. For example, we all know someone (perhaps ourselves!) who has gotten a simple biopsy. But did they know what it would cost them? What steps does the employee need to take to make sure their costs are minimal? A biopsy is a relatively common procedure that, if the costs are known upfront, can be planned for with a health savings account (HSA) and other strategic moves. No one wants to be surprised with a several-thousand-dollar bill.
Being healthy saves money.
In the day-to-day as well as the long term, being healthy costs less than being sick. Period. The right mindset, along with the right guidance — encouraging healthy behaviors among employees — can improve their short- and long-term health, and therefore improve their purchasing power. Programs that make it easier for employees to put money into being healthy now, rather than later, can go a long way in improving their purchasing power.
First, let’s look at some real examples of how being healthy saves money.
- Individuals who meet the recommended minimum of 30 minutes of moderate exercise five times a week spent $2,500 less a year in health care expenses for heart disease than those who did not exercise.7 This includes spending less on prescription medicines, as well as less on hospital visits and care. This study is not cause-and-effect, but it points out that a larger focus on well-being tends to go hand-in-hand with lower health care costs.
- Healthy people accumulate more wealth over time and earn more money. They make about 28% more than unhealthy people over their lifetimes.8
- High blood pressure costs the U.S. $46 billion a year.9
- Unhealthy Americans have lower participation rates in the economy — they work less, so are less able to earn and save money.10
- Mental health issues are the No. 1 reason for disability and untreated mental illness in the workplace is estimated to cost U.S. employers $105 billion a year.11
Those statistics are interesting, but how can we encourage employees and promote healthy behavior? It can start with investing in the right preventive care program.
The best programs actively seek to avoid or minimize health conditions. And that can save money in the long run. For example, a study testing the return on investment (ROI) of a personalized prevention care program found fewer emergency room and urgent care services were used over the study’s three-year span. To enjoy these personalized preventive care services, participants had to pay $150 per month. Yet most individual members realized a net cost savings within a few years. More gains were expected as the years went on.12
Choose programs to help your employees.
Ultimately, if you can help employees plan and save, you can help them be prepared for expected and unexpected health care costs.
This is where PayFlex comes in. We can help your company better understand the specific needs of employees and put together programs to maximize their purchasing power now and in the future.
Read our whitepaper to see how you can help grow your employees' purchasing power.
1. Mercado D. Retiring this year? How much you’ll need for health-care costs. CNBC. July 18, 2019. Available at: CNBC.com/2019/07/18/ retiring-this-year-how-much-youll-need-for-health-care-costs.html. Accessed January 19, 2021.
2. McCarthy-Alfano M, Glickman A, Wikelius K et al. Measuring the burden of health care costs for working families. Health Affairs. April 2, 2019. Available at: HealthAffairs.org/do/10.1377/hblog20190327.999531/full. Accessed January 19, 2021.
3. Hayes SL, Collins SR, Radley DC. How much U.S. households with employer insurance spend on premiums and out-of-pocket costs: A state-by-state look. The Commonwealth Fund. May 23, 2019. Available at: CommonwealthFund.org/publications/issue-briefs/2019/ may/how-much-us-households-employer-insurance-spend-premiums-out-of-pocket. Accessed January 19, 2021.
4. Watson, Catie. What percentage of income do Americans spend on health insurance? The Nest. Updated March 8, 2019. Available at: https://budgeting.thenest.com/percentage-income-americans-spend-health-insurance-31914.html. Accessed January 19, 2021.
5. Carman KG, Liu JL, White C. Burden of health care payments is greatest among Americans with the lowest incomes. RAND Health Research. June 25, 2020; Volume 55 (Issue 2): Pages 224-231. Available at: https://www.rand.org/news/press/2020/01/27.html. Accessed January 19, 2021.
6. Daly, Lyle. Personal Bankruptcy Statistics for 2020. March 24, 2020. The Ascent. Available at: https://www.fool.com/the-ascent/research/personal-bankruptcy-statistics/. Accessed January 19, 2021.
7. Ding D, Lawson KD, Kolbe-Alexander TL et al. The economic burden of physical inactivity: a global analysis of major non-communicable diseases. The Lancet. July 27, 2016; Volume 388 (Issue 10051): Pages 1,311–1,324. Available at: https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(16)30383-X/supplemental. Accessed January 27, 2021.
8. De Nardi M, Pashchenko S, Porapakkarm P. The lifetime costs of bad health. National Bureau of Economic Research. Revised October 2018. Available at: NBER.org/papers/w23963. Accessed January 19, 2021.
9. Paul, Kari. Here’s how much being unhealthy will cost you over a lifetime. MarketWatch. October 30, 2017. Available at: MarketWatch.com/story/heres-how-much-being-unhealthy-will-cost-you-over-a-lifetime-2017-10-30. Accessed January 19, 2021.
10. De Nardi M, Pashchenko S, Porapakkarm P. The lifetime costs of bad health. National Bureau of Economic Research. Revised October 2018. Available at: NBER.org/papers/w23963. Accessed January 19, 2021.
11. Mental Health First Aid. Mental Health First Aid at work. National Council for Behavioral Health. Available at: MentalHealthFirstAid.org/population-focused-modules/workplace. Accessed January 19, 2021.
12. Musich S, Wang S, Hawkins K et al. The impact of personalized preventive care on health care quality, utilization and expenditures. Population Health Management. December 1, 2016; Volume 19 (Issue 6): Pages 389-397. Accessed January 19, 2021.