Most employers, and their
Every year they approach their largest organizational expense after payroll,
What does an insurance carrier call the premium it has paid? Revenue.
Do you wake up in the morning wanting to lower your revenue? Why, then, are people surprised we've had double-digit cost increases for the last several decades? Doing the same thing you've always done is easy, and it's easy to make excuses for not changing.
Here are ones we often hear from employers and advisers after presenting a new (i.e., transparent) approach to helping lower health benefits cost: "Employees have been through a lot of change lately," or "That's different from what we are doing today," or "We've had a long relationship with them."
A quick overview of the current landscape establishes a number of things. One is that double-digit cost increases are the norm. Another is that raising employee deductibles, coinsurance and paycheck contributions is the top strategy most employers use to lower cost. There also are misaligned incentives — with carriers, most advisers, providers and a majority of the parties involved in the healthcare system making more money when costs increase. Finally, 67% of personal bankruptcies are traced to medical expenses with most of those households actually having health insurance coverage.
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The current model doesn't work. So what's your plan to improve health benefits cost in 2023? Here are three strategies you might want to consider:
Change your mindset
In 2023, I urge focus to move away from the ROI of change toward recognizing that there is a cost to inaction. Most employers and advisers will compare their "renewal cost" to alternatives rather than asking, "Can I afford to continue doing the same thing? Where has that got me?" Additionally, the mindset around change is hard for most. However, 100% of things in one's life that bring joy, benefit or value require change.
What makes us think we should approach health benefits any different? To help lower health benefit costs, change will be required, but doing nothing is also forcing change. With the current inflationary period, employees and their families are continuously faced with difficult life decisions based on healthcare costs: Do I get an MRI for my hurt back or make rent payment?
Doing nothing is hard. It's just the "hard" that most employers and advisers understand better, so it's easier.
With strategies available that can actually waive 100% of cost for employees and their families for being good healthcare consumers, which "hard" is easier: change, or the status quo?
Not giving employees an option to "win" is not taking into account the realization that their new world has changed. Ask yourself, "does our strategy allow an employee or dependents to win?" If that answer is no, remember the cost to inaction.
Align incentives
Question: In the health plan ecosystem, who wins when an employer wins? For most plans, the answer is no one. That's because the carrier makes more money when more premium is paid, most advisers make more commission when more premium is paid, and employees and their families have no daily incentive to help lower costs.
So how does an employer win?
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First, you must buy less insurance. Yes, I am an insurance adviser. However, if you are paying dollars to an entity that calls that dollar their income and offers no method for you to ever get that money back, then that model will never work.
This means if you are an employer and still fully insured, the time has come to explore self-funding the risk. Even down to the smallest businesses with just two employees, programs exist to protect the overall spend and monthly cash flow and still allow employers to win when claims are lower than projected. The best part is that this move allows clients to access more data, more strategies and more ways to impact future costs.
If self-funding is not an option, increase the deductible and establish a health reimbursement account (HRA). These funds help employees with their out-of-pocket costs and typically can make the actual plan design better for participants. The best designed strategies make the HRA fund contingent on employees and their families being better
For those that are already self-insured or level-funded, do employees have any incentive to help the plan save? If not, consider adding a plan design that incentivizes employees and families to get a $500 vs. $3,500 MRI, or go to the surgeon that has a 95-quality score vs. 22. Without creating a winning structure, employees will never have a true incentive to be better consumers of healthcare.
Does your client's program have ways to "buy" healthcare and prescription drugs differently than today? Does the Rx program use patient assistant programs or international sourcing programs? Do they have access to direct contracts and bundled pricing arrangements to lower medical claims cost? Ensure the program is built with ways to pay less for healthcare.
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Employers that never heard any of this are with the wrong adviser. If you are an adviser and don't know these strategies, reach out to learn more. The two points above allow you to buy less insurance coverage because strategies were built to impact claims.
Communicate and educate
When has the easy option ever been most beneficial? This also applies to designing a health
Understanding options, as well as using available tools and data, has made the average Joe a better consumer in all aspects of their personal lives. From Amazon to car or house buying sites to grocery store apps, families are used to using resources to help them become better consumers. In fact, stats show that more than 80% of consumers do research before making a significant purchase. What can be more significant than one's own health, right? But how do you help employees and their families "shop" their healthcare?
From understanding that MRIs will always be cheaper outside of the hospital to realizing providers "owned" by hospitals are incentivized to refer services within the system, advisers and their clients need to put more emphasis on education and build strategies that teach employees and their families that their actions impact their costs. The push to more accountability is the only way to change results.
