Employers and employees alike have witnessed the consequences of what happens when prices render healthcare inaccessible. Yet, it seems the
In just the last year,
Can employers and their employees escape this fate? David Contorno thinks so. He’s the CEO of E Powered Benefits, a consulting firm on a mission to bring transparency to healthcare costs. E Powered Benefits works with employers to help them provide high-quality, low-cost options to employees — and since the company prohibits additional commissions from sources such as insurance companies, Contorno says his team is motivated to save clients money.
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EBN recently spoke with Contorno about the rising costs of healthcare, what it will take to combat medical debt in the U.S., and how employers can work to provide their employees with better, more affordable care.
Why do healthcare costs continue to rise?
I tell everyone that I learned everything I needed to learn to fix healthcare by the time I finished my ninth-grade economics class. The problem is, people aren't looking.
Most insurance carriers are publicly traded. A publicly traded company, legally and fiduciarily, only serves one entity: its shareholders. If they lower claims, they would lower revenue and profit, which would violate the only responsibility they truly have to their shareholders. So, they literally are financially prohibited from lowering claims.
Then there's a provision of the Affordable Care Act called the medical loss ratio. It says that every insurance company must spend either 80 or 85 cents of every dollar they collect. So they get to keep the 20 or the 15 cents depending on the size of the employer. For example, if the insurance company gets to keep 15%, 15% of a bigger number is a bigger number. The only way to raise that number is for the cost of claims to go up.
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How does this affect other parts of the healthcare ecosystem?
A broker goes to an insurance company. He says, “Mr. Insurance Company, what products and services can I sell my clients? How much are you going to pay me to do it?” Employers go to insurance companies and say, “What benefits can I offer my employees, and how much is it going to cost me to offer it?” Doctors go to insurance companies and say, “What treatments and prescriptions can I give my patients? How much are you going to pay me to do it?”
We've relinquished all control to an entity that demonstrably benefits from costs going up and quality going down. There's an Upton Sinclair quote that states, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
So insurance companies benefit from costs going up. Brokers who are paid commission, which is the large majority of brokers, benefit from costs going up. Local health systems benefit from costs going up. Drugmakers benefit from costs going up. So who does an employer trust to help control the quality and cost of healthcare: their broker, insurance carrier, local health system, and local drugmakers.
How are hospitals implicated in this?
Let's just take this as a fact: people are avoiding care. When they avoid care, their state of health declines, which makes an emergency event more likely. Let’s say they are rushed to the hospital room — now they owe $5,000 or $10,000. But you can't get $10,000 from the $15 per hour worker. So eventually, the hospital writes off the debt.
So when the hospital's contract comes up with an insurance company, they tell their carrier that they’re writing off more and more bad debt because of all these high deductible health plans. The hospital needs an increase in reimbursement rates to offset that loss. Now the insurance carrier is all too happy to give them that increase in reimbursement rates. Why? Because it benefits them, and it benefits the hospital. They give them an increase in reimbursement rates. That increase in reimbursement rates results in higher premiums the following year.
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What do you feel is the solution to what seems to be an endless cycle?
When I tied my revenue to delivering actual value to my clients in the form of lower-cost, higher-quality care to employees and their family members, it changed everything.
We reversed the incentives so that everyone wins when the employer's goals are reached, not the other way around. With the majority of our clients, we have a performance incentive tied to actually lowering costs — essentially, we get a piece of the savings. The more we save them, the more we make. That's the opposite of the traditional broker model, where it's commission-based.
Now instead of getting a bonus for doing what the insurance company wants me to do, I get a bonus from the employer for doing what the employer wants me to do.
Today, we not only do it for our clients across the country, but we mentor brokers and consultants around the country and teach them how to do it for their clients.
