Monthly Archives: April 2016

The End of Employer-based HealthCare – An Update

In this blog I wrote one of my most controversial articles in December 2014 titled, “The Coming End to the Health Insurance Business as We Know It – And What Brokers Can Do About It.” I don’t know why it caused a bit of an uproar in the benefits broker community because, for the most part, I am just telling people what others are saying. I also conducted a webinar on this topic in July of 2013 titled, “The Next Big Change in the Benefits Market That Most Brokers Aren’t Prepared For” that can be viewed from the HR Technology Advisors website here.

My article and webinar references a presentation by Mark Bertolini, CEO of Aetna, who believes the end of employer based health insurance is coming soon. In fact, he is positioning Aetna for a world where the provider systems hold most of the risk and Aetna, is essentially, no longer an insurance company in the traditional sense. I found a presentation he did for the Mayo Clinic that validates Mark’s positon. You can see it here. Every benefits broker should watch it. What Mark is saying is that health insurance is going to become a direct to consumer retail purchase. The provider systems will be the risk takers not the insurance companies. And there is a movement in Washington to eliminate the health insurance deduction at the employer level in exchange for lowering the corporate tax rate. I believe this is something Republicans and Democrats agree on.

This did play out to a certain degree in my own business. We initially got a 16% increase in our health insurance premium for April 1 of this year. My broker gave us alternatives but none saved us any money. I had to ask them to quote the local hospital system based insurance plan. Their costs came in at 17% below all others. First, I am wondering why my broker did not quote this company in the first place. Second, I wonder how traditional fee for services insurance programs are going to compete with this.

It is almost 2 years since I did my first presentation on this topic. Since that time my partner Don and I have made many changes in our business to position our firm for this change. We have hired new staff and developed new consumer-centric solutions that we think will provide value in this new benefits world. We still have work to do and the market will continue to evolve. It is a bet we are making but I think not believing the CEO of Aetna, who is now merging with Humana, is a much riskier bet.

I am surprised that few, if any, brokers have made any changes to their businesses to prepare for this new health care market. Most are unaware of the magnitude of the potential changes. I don’t look at these changes as a business threat, but an opportunity. The opportunity could be huge for those that provide some value to support this change because there will be significantly fewer competitors in the new market. The value that can be brought to market and how we will get paid is certainly up for discussion. We have ideas.

I am writing this because we are looking for broker partners willing to think outside the box, and challenge the status-quo to help build and deliver a solution that can survive and thrive in the new health care world. The power of the group can be more powerful than us individually. We are not looking for people who want to fight the change and protect the status quo. And “hoping” the world doesn’t change is not a strategy. The time is now.

According to Bertolini the train has left the station. It is not if, it is when the market will change. The financial viability of America is dependent on radical changes to the delivery and cost of health care. This is not just one company, Aetna, trying to impose their view of the world on others. They are taking real action. There are a real lot of highly motivated people who are working to do the same. We can be part of the solution or hope this does not happen. Join us on this exciting journey to be part of something that will change health care in America forever.

Insurance Education is Poor and on the Wrong Path

I have 6 brothers so when I reference a brother in a blog it is not always the same one. A few weeks back one of my brothers was telling me how he thought his car insurance was a rip-off. He said he is always paying for it and never had a claim. So I said, “well, why don’t you take your car and drive it into a tree and then you will get your money’s worth”. Insurance gets a bad rap. However, I think it is the industry in general that does a poor job developing products, educating consumers, and clearly stating their value proposition.

One of the reasons insurance gets a bad rap is that nobody really understands it. Another is that while the majority pay the minority get some form of payment in excess of what they paid in. Insurance, for the most part, is about having peace of mind. I try to tell my brother, imagine driving a brand new car through Manhattan or in the snow with no insurance. You would be very cautious. If your car was very used then maybe you wouldn’t care, but with a new car it would be different. It is knowing you have insurance that makes it easier to navigate tough situations.

Insurance It is not intended to be perceived as some form of savings plan or reimbursement policy. Insurance is designed to protect someone from an unanticipated event that can cause significant financial loss and harm. This also has been lost on the market and in the narrative. Since when should an office visit be considered an insurable event? People spend more money on Starbucks in the morning or going to the movies or out to dinner on weekends than they do on health insurance out of pocket costs. And what is the average monthly cell phone bill for a family?

Most people also don’t understand how insurance is priced. In fact, one of the major problems with health insurance is that it is essentially a one-year term policy. Medical insurance should give people options like Life Insurance so they can see the costs over their lifetime. If I buy an annual renewable term policy I would see how the costs go up every year as I get older. However, if I bought a 30-year level term I would see that while I pay more when I am young relative to a one year -term, I am paying less as I get older. I understand rates would need to be adjusted for inflation. But people don’t understand this. They need to understand their costs over time to realize why you have to pay more when you are younger. I thought one of the biggest mistakes of Obamacare is the age rating. It is started this division between old and young. “Why should I pay for the old guys?”

People also think the government will take care of things if you don’t have insurance, or you can go to a hospital and get treatment without having to pay. With disability many think the government will step-in. That belief of a safety net makes it too easy to take chances. I know so many people on social security disability it is unbelievable. And I know they can work. It seems too easy.

So what are my solutions? First, make a law that says health care costs are not exempt from bankruptcy. If that is the case, then every parent will be telling their child to not take the chance of ruining their financial lives by not buying insurance. Every financial planner would make buying health insurance a priority. Second, health saving accounts should be available to everyone but, there should be no laws requiring the covering of expenses less than say $1000 or $2000. If ever person who turned 22 saved $50 every month for the rest of their working lives in a health savings account this would total $14,000 before any interest. Most would have enough money to cover those smaller expense for a lifetime. And don’t tell me they can’t save $50. As long as I see people walking around with cell phones I believe this can be done.

I know this blog is a little bit of a rant. I actually don’t think health insurance will be fixed without dramatic changes. I shared my opinions on how it will be fixed in other blogs. However, I also think the current narrative from the government, from insurance companies, from employers, and yes, from many brokers, is not contributing to the education of what insurance is really about. The system, in its current design, is not on a path to make things better. And I am not talking about costs. The current narrative is not educating people or giving them an understanding of what insurance is about or how much it costs. The current narrative says, don’t worry, we will take care of you.

Two health care stories – Which do you believe?

As a way to keep my knowledge of the benefits business current, I read many articles, attend seminars, webinars, and industry conferences, and read all the press releases and announcements. My Google Alerts sends me the news I want every day. One major area of interest is how the market is addressing the rising cost of health care. As I had written in a recent blog my company just got a 16% increase and I think we are reaching the tipping point. I am looking for the business models that can control the cost of health care.

What I have discovered is that there are two different narratives playing out in the market. One narrative represents around 95% of all the “noise” and the other just 5%. The 95%er’s consume the publications and have speaking engagements at all the conferences. They put out press releases almost daily and make wild claims as to how their businesses are growing. Yet I find myself believing the 5%er’s. Their message appeals to my logic and understanding of the business. I think there is hope that health care costs will come under control. However, their message is getting drowned out by the noise created by the 95%er’s which could lead to a false perception of where the health care market is going.

In sports there is a saying that “practice makes perfect”. Well that works if you are practicing the right things. If you practice doing something the wrong way you will master the wrong way. In this healthcare debate, discussion, or whatever you want to call it, if you spend your time listening to and believing the pretenders version of where they think the health care business is going you may actually change your business and start practicing the wrong thing. Who you listen to or believe may matter.

There is a better more believable story developing. One that has a chance of controlling health care costs. One that properly places incentives so that providing better care while reducing costs is rewarded. One that as a consumer myself I would find as a more attractive model than most of the current health insurance/health care models.

When people ask me what I think. I don’t sugarcoat things I simply say “I think it is a bad idea.” Don’t waste your time. Often they don’t want to hear this if they have an agenda. So here is what I think.

• Private Exchanges – Bad idea – 30-year old idea – that does not control health care costs.
• Self-insured for smaller and smaller groups – squeezes the balloon – temporary solution that does not control costs.
• Wellness Programs – Nice try – won’t control costs – may make people feel better – could improve productivity.
• Wellness Programs where you charge employees more who don’t take biometric tests – bad idea – employees will rebel. They should rebel.
• HSA’s – Needed but don’t not control costs.
• Large employers collaborating to negotiate with providers – Why? Is this what employers should be doing? Another squeezing of the balloon. What about the rest of us?
• Decision Support Tools – Help you choose the best high cost product that will continue to go up.
• Captives – Simply another risk pool where costs will still go up, up, up in time.
• ObamaCare – A joke. More cost shifting in the end. That’s why my costs went up 16%, again.

All these tactics simply squeeze the balloon. You can push the numbers around but the numbers only get bigger not smaller. Anyone who understands medical underwriting or actuary knows this is the case.

So who should you be listening to? Aetna and their CEO Mark Bertolini; Kaiser; Partners Healthcare; Intermountain Healthcare; University of Pittsburg Medical Center; Evolent Health; Apple. I am sure there are many more. These firms are painting a much different picture of the future of healthcare in America. However, I don’t see them at benefits conferences. They don’t publish in benefits magazines. They don’t make grand claims of having some new invention. They are simply trying to figure out a way to improve the health care system in America. What they have in common is they see getting the providers in the risk business as the solution. This moves the risk from employers and traditional insurers to the providers. They may not all be perfect but they are trying to bend the cost curve.

These two narratives are playing out. One continues to promote fee for service. The other promotes capitation to a much larger degree. I don’t know who will win in the end, because these stories are still being told. But I know what makes sense to me.