“No one is telling you that what it takes to be successful has changed……until NOW” -Jim Keenan, author of Not Taught
“Five percent of the people think; ten percent of the people think they think; and the other eighty-five percent would rather die than think” – Thomas Edison
I started in this crazy business when I was 17…..I am 41 now. (You can do the math.) For the entirety of my career, until about 5 years ago functionally nothing changed (and even then, I had to force the change against massive and continued headwinds not do so). PPO networks and commission based compensation ruled the day. For the first 20 years of my career, all I did was more of the same. That entailed the following, at least 90% of the time:
- Delivering rate increases in premiums year after year in excess of wage, revenue and profit growth.
- Offering “innovative” strategies that offset SOME of that increase, all which ultimately was a slow death spiral of cost shifting to the employees.
- Relying on the carriers to do all the thinking for me (What plans can I offer? How much will it cost my clients?), my business (How much will I get paid for my services?) and my clients (How much will it cost to provide coverage. What kind of coverage and what data will we get on how our employees are using the plan?) and their employees for everything health related (What is covered, who can I see, what can they do to me, how much will I pay?)
- Rinse and repeat….year after year after year.
When we, as trusted advisors, consultants, brokers sit back and really reflect on how rare and temporary the wins have been, doesn’t it seem logical that we should be the ones leading the charge? It’s time the tail wag the dog.
What is different now? First, the pain point is at an all time high. Rising premiums have long been on an unsustainable path, but what has really skyrocketed are members’ out-of-pocket responsibilities. The dollar exposure has increased more rapidly in recent years but so too has the volume of coverage subject to those out-of-pockets before any coverage even kicks in. (That is, HSA compatible plans REQUIRE ALL coverage to be subject to the deductible, except very basic preventative care. This approach often leads to unnecessary test and procedures. So the only thing that actually is covered right away is more likely to require us to use the plan, when it’s not really needed). In other words, we are now at a point where the coverage is so poor, most employees in America have less than one-fifth of their out-of-pocket liability in their savings account. This is causing two problems…..first is sheer anger that employees are contributing a large amount (forgetting even the employer’s share) for coverage that will put them into bankruptcy should they even actually use it. But there is another problem…..by NOT covering the exact type of care that can make a chronic disease both manageable and affordable, we are increasing the likelihood of major claims, which not only puts more pressure on the rates, and of course makes the patient’s life more challenging just to get by (and work, of course) but it also leaves that employee owing their full out-of-pocket that they simply don’t have.
That causes the facility that provided the care to write off more and more bad debt. Which gives them fodder to demand reimbursement increases from the PPO networks, which the PPO’s absolutely have to give them. (Think if Blue Cross didn’t have the large hospital system near you in their plan. Would ANY employer choose a carrier that didn’t have them?)
This illustrates who the carriers’ REAL customers are. They’re the hospitals and doctors, not the employer and their employees. Those higher reimbursements lead to the carrier charging higher premiums, which leads the broker and employer to settle on even higher out-of-pockets, which only makes this problem worse.
But all this was a path that was created decades ago, and certainly didn’t take a genius to see. So what is the real change that is occurring? I think the Stockholm syndrome we have been suffering under is starting to break. What do I mean by Stockholm Syndrome? We have fallen in love with the large carriers. The entire healthcare continuum asks them for permission for everything.
Patients: What doctors can I see? What can be done to me? How much of the costs will I pay out-of-my-pocket?
Employers: What benefits may I offer my employees and their families and how much will it cost me to do so?
Doctors: What medicine may I prescribe? What treatments can I prescribe? How much and when will I get paid?
Hospitals: How long can a patient stay and how much and how quickly will I get paid?
Brokers: What products and services may I offer my clients? How much will those things cost? How much will I get paid?
How did we get here? How did we literally relinquish all control to an entity that makes more money as costs go up? And when did we decide to trust these very same entities to a level we would NEVER trust ANY other business? Remember, health insurance and healthcare are very different things. This isn’t about trusting someone with our health care. This is trusting someone in how we finance that care.
Imagine if we trusted American Express in the same way? We would give all our employees a corporate AMEX card and just get a total bill each month with zero line items or understanding where our employees spent all that money. We would never do that because we know AMEX makes money on each swipe, so if they had their way, your employees would plow as much through the credit card as they could.
Did you know the revenue model from the large carriers is EXACTLY the same? It’s cemented in federal law. It’s a part of the ACA called Medical Loss Ratios. If carriers actually tried to keep underlying medical costs down, this is what their revenue model would look like….if ANY carrier CEO presented that to their board, they would not be CEO very long.
So, what is the biggest change? I think it’s in the hearts and minds of many of the stakeholders. Brokers and employers are starting to see carriers for what they are, businesses with a profit model (and motive) like any other, that have betrayed and taken advantage of their purchasers’ trust, and that have reneged on the moral responsibilities associated with managing their patients’ health.
This change has also pushed a small but growing number of benefits advisors (nee brokers) to voluntarily change their compensation structure and to better align with their clients. (After all, advisors work for whoever pays them. If you are not paying them directly AND exclusively, they work for someone else. If they’re getting paid by the standard carriers, they are not likely to look for alternative solutions.
This growing group of advisors have finally changed the game by aligning the incentives and getting as many middlemen out of the way as possible. Their employers clients (and their employees) are seeing 40-50% reduction in total costs, all while IMPROVING benefits. (In my company’s model, for example, literally thousands of procedures, services and medications are available at NO COST to the employee. We just inked a deal for $30 ultrasounds in multiple states where the carrier PPO price has been over $1,600!).
Recognizing that health care and health insurance are two different things makes us wonder why we so beholden to insurance? After all, do you love your Honda or do you love Geico? Most have a deeper love of their car. And if you change from Geico to Allstate, does your commute get any shorter the next day? Do you get any better gas mileage? Of course not! The car doesn’t change, and neither does the care when you change your insurance. Not when all the incentives are aligned, anyway.