The 401(k) plan was born in 1978 and has since “grown up” to become the dominant employer-sponsored retirement vehicle in the U.S. During that time, employers have learned many lessons about how to play the role of plan sponsor—encouraging employees to contribute (through the use of tools such as matching contributions and automatic enrollment), offering the right investment options (such as through balanced funds and “qualified” default investments), and helping employees through complex investment decisions (such as through target date funds and automatic rebalancing).
Throughout this period, employers have labored mightily to teach employees key principles of saving and investing. This has been a Sisyphean job—a seemingly futile task that must be constantly repeated. And yet, employers continue to provide financial education to employees: under 401(k) plans employees are responsible for accumulating and managing their retirement savings and employers (as plan sponsors and fiduciaries) feel the burden of providing employees with the resources necessary to exercise that responsibility.
Changes under way in the U.S. healthcare system bear a remarkable parallel to our experiences with 401(k) plans. Recent years have seen significant growth of insurance exchanges (both public and private), high deductible (“consumer driven”) plans, health savings accounts, “narrow” carrier networks, and declining employer support for retiree medical plans. As a result of these changes, individuals are increasingly responsible for making decisions about how to purchase and pay for healthcare. Poor decisions can have catastrophic financial consequences.
And yet, individuals are poorly equipped to make these decisions. How many individuals can explain the difference between a copay and a deducible, how much a visit to an out-of-network doctor will cost them, or what Medicare covers? As employers push more responsibility to individual employees, it is safe to say that the lessons from our 401(k) experience—of the importance of providing employees with tools, resources and training, and of the never-ending nature of the task—will be repeated. To date, there has been little focus on developing resources to help employees undertake their growing responsibilities. The challenge—and importance– of teaching employees health literacy and health care consumerism cannot be underestimated.
Changes to the U.S. healthcare system are here. The time for employee education and the creation of a new ecosystem of decision support resources is now.