Monthly Archives: March 2016

I Got a 16 % Health Insurance Increase – This is Not Sustainable

Only 30 days in advance of my April 1st renewal date I got an email informing me that my company’s medical insurance rates are increasing 16%. For a $2000 deductible plan (we do have a HRA underneath) it now costs $20,736 per year for family health insurance coverage. For an employee making $40,000 per year this is 50% of this employee’s payroll cost. If I asked this person to pay for 100% of the increase this would be equal to a pay-cut of 7.35%. This is not sustainable. What is worse is that I have so little control over the cost and I see very few companies really trying to do anything about it.

I have mentioned in previous articles how the two biggest problems the U.S. is facing economically is the cost of healthcare and college education. I get the double whammy as a business owner who pays for 75% of my employee’s healthcare and as the father with two kids in college. I can’t win. “Thank you, sir, may I have another?” (Animal House 1978)

Between the cost of healthcare and college something has to give. Personally I think we are reaching the breaking point for employers and employees. What can be done? Do I not hire people who need health insurance? Do I hire only young people that have lowers costs? Do I start hiring all part-time people? Do I move my business to a lower cost State? Do I outsource some things overseas? One thing I know is that a business owner will do what he/she needs to do to survive so all these tactics will be used. I have always been a believer that if you show me a law or rule I can predict how people will react. You increase the cost of health care on a business and I can tell you what you will get.

I have been in or around the health insurance business since 1986. I delivered my first medical renewal with an employee rate that exceeded $100 for an employee in that year. In fact, I remember the exact client meeting like it was yesterday because the business owner’s father was dying of cancer and now I was delivering more “stress”. He was angry. I am angry too.

I am mad because this problem has gone on long enough and the industry has really done nothing about it. I am mad because I will probably have to switch insurance companies again for the 6th time in 15 years. It is inconvenient. It is stupid. I have had the same doctor for 15 years but my insurer has to change every 2-3 years. What a waste. I am mad because I will have to deliver bad news to employees and then wonder if any of my employees will start looking for a job with a company that pays more for health insurance. It is a business risk.

Here is my message to the industry. Fix it. Or someone else will. And I am no longer going to take it anymore. I am sure many others feel the same way.

The battle for power in health care has begun – Are the brokers powerless?

In this highly energetic election year health care is still one of the major battle grounds dividing the candidates and the political parties. Rubio wants to let employers give money to employees tax-free and let them buy from a broad market. Cruz said he would make an individually purchased health insurance plan tax deductible. Sanders is a proponent of a single-payer system and Hillary wants to bring the insurance and pharmaceutical companies to their knees. As for Trump, I am really not sure what his plan is. What I do know is that there are many people with all kinds of plans and they aren’t asking me what I think.

As someone who is somewhat in the health care industry along with my broker partners the industry around us can change dramatically, yet we have little power to impact change. Are we powerless? Being powerless is a very uncomfortable position especially when the outcome can significantly impact one’s business.

The cost of health care and thus health insurance is a burden on our economy, a burden on employers, and with the cost shifting to employees and higher deductibles it is becoming an ever growing burden on employees. This is somewhat a new dynamic that employers have to deal with too. It is an industry with many interested parties looking for solutions. Those that deliver solutions that can bend the health care cost curve could reap big rewards.

So who has the power to fix this? Insurance companies? Hospital systems? Doctors? Google or Apple or other outsiders with a lot of money? Government? Employers? Employees? Independent consumers? Brokers? Many are trying to solve this problem, some because they honestly care to, and others so that they have a viable future. And for those that think some are “too big to fail” or at least quit, remember this list of companies that used to sell health insurance but chose to leave the business. (Prudential, UNUM, Travelers, Guardian, Metropolitan, Great West, State Mutual) I am sure I missed many others. I don’t imagine these firms that have left the business or the ones fighting to win today care(d) about my interests or the interests of benefits brokers.

The health care system will undergo significant changes in the next 5 years. My business is dependent on the health insurance business because I do business with brokers so how the industry changes is pretty important to me. If the business did not change, then that would work for my business. If I could dictate how the industry evolves then that would be fine too. But without the power to stop the business from changing or dictating its future then those of us on the fringes of the business will need pursue another strategy.

So what are brokers to do? You can fight the change as many of the cab companies are doing to stop the advances of Uber. You can develop the solution and therefore ensure the outcome. However, I doubt that any broker is in the positon to change the health care system or have the capital to do so. You can hope it doesn’t change. You can wait until it changes and then react fast. You can quit as the insurance companies did in the 80’s and 90’s. You can also accept that the world is going to change and that you can’t impact its outcome. If that is the case then you need to exercise the power that you do have, anticipate the future, and bring some value to the market that fits in the new model.

While companies like Aetna, UHC, Google, Apple, and many provider systems are changing or investing in businesses to control health care costs, I think firms like Fidelity, Towers Watson/Willis and other large benefits firms have made significant investments to provide a valuable service to support where the industry is going. Just ask why did Fidelity choose to get into the benefits business now? Why did Towers Watson buy Liazon and then merge with Willis?

We are in an industry where we don’t get to make the rules. We are powerless and have to play by the rules imposed upon us. An insurance company can eliminate commissions with an e-mail as many have done in the individual market. The government can pass a law making individual insurance tax deductible. Carriers leave markets and hospital systems are entering the insurance business. The future is imposed on us.

Don’t think we are the only ones. Those who own Ford dealerships are dependent on Ford to make great cars. A friend of mine has a manufacturers rep business and sells power supplies. One year a manufacturer that represented 60% of his revenue decided to no longer use third-parties to sell their products and sell direct. His business was devastated though he did recover. His problem was that he did not build a business that would have protected him from this risk. Had he planned ahead it may have been different. It is for that reason many car dealers often own multiple dealers representing multiple manufacturers.

In this blog I have written articles on where I think the business is going. (The New Benefits World is Here – Though You May Not Have Seen It I am already making moves anticipating a different future. My experience with benefits brokers is that few have been looking into the future to try and predict where the market is going. Most are hoping the world doesn’t change. Others are waiting until it changes and other are simply selling. I am optimistic. I think there are opportunities for those that anticipate change and provide some value for this future market. In fact, there will be less competition because many will have waited too long to change and others simply won’t have the skills, scale, or vision to bring real value to a new benefits world.

I think a new benefits world will put power in the hands of the consumer. Think about this for a minute, if employers had the power what would they want? If employees had the power what would they want? As an employer, today’s system gives me little power. As an employee I have less. When someone delivers what I want I will say it is about time.

So what advice do I give? If I were a benefits broker, I would start studying where the market is going to go. I would ask employers and employees what they would want. I would gain an understanding of this market like no other. I would engage the companies who are working to create this new benefits world. I would make an educated guess as to where the market is going and when it will get there. Then I would look for the opportunities to provide the value. I would also start now. I have.

PS – I just got my company health insurance renewal today and costs are +16%. This craziness has to end and I feel powerless. Please help!