Health Insurance
September 1, 2023

The Hidden Cost of Group Health Insurance — Discontinuity of Care

How the traditional way businesses have approached health benefits short changes their employees’ health.
Marshall Darr
A red heart is broken in half with a bandaid keeping the two pieces together.

Key takeaways

I noticed this problem after my first ever surgery.

A boating accident resulted in a cut tendon in my ring finger that needed to be surgically repaired. At the time, I was 27. Hot off my first failed startup where we were running so lean that I had been splitting a studio in San Francisco four ways. Paying a couple hundred dollars a month for health insurance wasn’t even slightly within the realm of possibility when my financial reality had me sleeping within arm’s length of several other people.

But I got lucky (…ish), several months before my accident, my startup exploded, and I crash-landed at a trendy scaling startup deep on its path to an IPO. In the never-ending tech race for talent, they were investing hard on the employee experience.

Lunch and dinner were free. I also had unlimited PTO and, crucially, 100% covered health insurance. In the beginning, I was too overwhelmed by the catering to pay much attention to that last part, but it was about to become the center of my world.

My one-hour outpatient surgery to return movement to my finger would have cost $43,000 without insurance. And it was unsuccessful.

Luckily, I had a very attentive support group.

Over the next 18 months, I’d wade through countless hours of physical therapy, another surgery, and another endless round of physical therapy before eventually realizing that the livable crook in my ring finger was the best it was going to get.

During that time period — my well-funded, nationally-renowned workplace changed its health insurance three times. That meant three different physical therapist offices, three rounds of exhaustive paperwork (with, luckily, two out-of-network exceptions) for the one-hand surgeon in San Francisco and a general layer of exhaustion on top of an already draining process.

The whole time, I was at the same job — heck, even the same desk — and I was powerless to stop my world from spinning for just a moment so that I could focus on getting well.

At the end of the day, it was just a finger. Many Americans fight much more serious battles while in much worse insurance situations. But I liked my hand, why was this so hard?

The tainted well we drink from

About 47% of Americans get their health insurance through their employer. It has been the dominant way health insurance has been distributed since the employer-sponsored plan was invented as a work around to a wage freeze in World War 1.

Among the many obvious problems that have resulted in a healthcare system directly tied to employment is the constant disruption that consumers experience when it comes to their healthcare.

This disruption is noticed most acutely when considering the “continuity of care” experienced by the average individual.

What is “Continuity of care” and why does it matter?

Continuity of Care as a concept is the idea that health outcomes improve when taking a long-term approach with the same team of experts. They get to know you and your body, you get to know them and their communication styles, and together you can create a better health outcome.

Improved continuity of care is associated with improved appointment follow-through, better health outcomes, and, ultimately, lower mortality rates. Plus, it just feels better.

Instead of dreading spending 20 minutes in the waiting room each visit frantically scribbling your medical autobiography from memory, you meet with a doctor who knows you and is genuinely interested in how you’ve been progressing.

And it works — adherence rates have been found to be nearly 3 times higher in primary care when there’s a solid relational foundation between the provider and the patient.

The problem is — it’s becoming a rare experience for Americans in a health system where your employer decides who you can and can’t see. Here’s why Continuity of Care has been declining over the past several decades:

It sure feels like people are changing jobs more often

Modern careers function differently than they did when employee group health plans were first introduced back in World War 1. The average tenure with an employer now sits just around four years, and it’s as low as 2.8 years for the 25–34 year old segment.

Yes, there was a “great resignation” in 2022 when about 51 million Americans quit their jobs. In the same year, there were also 15.4 million layoffs. All of this chaos in the labor market has very real effects on our health, given that healthcare is directly tied to employment.

Not only are people switching jobs frequently — but the networks they are landing on with their new employers have never been tighter.

Networks are shrinking

Narrow networks recently had a rebranded glow up and are now frequently called “High Performance” networks.

Health insurance plans are becoming unbearably expensive to employers and their employees — that’s led to a tendency to try and get creative to bring down premium costs. One such way is by reducing the size of the network to eliminate the higher-cost providers within it.

These “high-performing” networks can drop costs by about 20% but tend to include dramatically fewer providers, meaning if you find yourself on one with a new employer, your odds of being able to maintain your existing relationships with providers are even slimmer.

Here’s why: the vast majority of small businesses, as in 75%, offer only one health plan. So a health plan switcheroo, with a new narrower network, inevitably has a new list of doctors that doesn’t include yours. (In defense of small business owners, it’s not their fault they were stuck in this weird position between employees and their doctors.)

Employers are switching plans faster and faster

Health insurance has never been more expensive than it is right now causing employers to look for something else. For example — between 2019 and 2021, more than a third of all employers with fewer than 200 employees have switched their coverage onto a level-funded plan. Many other employers have pursued PEOs and other self-funding options in the same timeframe.

The thing is — the premiums that your employer is signing up for are based on health plan use. Meaning that more and more employers find themselves on shaky ground where one expensive claim causes them to switch coverage entirely the following year.

Our new nomadic relationship with healthcare

The deck is really stacked against anyone trying to form a meaningful relationship with their providers. Odds are your new employer is already noodling on how to switch to a narrower network — it’s rough out there.

It has gotten so bad that the general expectation is that your doctor will have zero context, which means the forms get longer, the care gets worse, and everything costs more.

Higher costs mean more desperate employers means more network switching.

It’s a death spiral! We’re doomed!

Don’t worry — we leave you with some hope in the next section.

Hope on the horizon

Luckily, this wonky system we’re settled into isn’t the one we have to stay in. Just because something was cool immediately following the most catastrophic war the world had ever seen (sigh… thus far), doesn’t mean we need to let that system dictate how we live and care for one another today.

StretchDollar is working on resetting the health insurance industrial complex by providing employers the option to directly subsidize premiums for employee-owned plans.

The goal is to enable employees to pick the plans and networks that work best for them (most of which are actually cheaper than the plans offered to employers), and maintain access year after year.

Together, we can create a world where people find healthcare that works for them, and the path to that is through decoupling healthcare from employment. We’re doing that with StretchDollar, and I hope you join us on our journey.

Marshall Darr is co-founder and CEO of StretchDollar. He knows an unreasonable amount about health insurance and employee health benefits, spending the better part of the last decade working to crack the “access” problem for SMBs. We think he's done that with StretchDollar.

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