For those interested check out my latest webinar. It has been recorded. The link to see it is here.
For those interested check out my latest webinar. It has been recorded. The link to see it is here.
Everything a Broker Needs to Know
And Many Things You Didn’t
April 15th 12:00 – 1:00 EDT
You have probably gotten invited to many ICHRA Webinars. This webinar will be different. We get into the weeds. We identify the gotcha’s. We bring ideas that most have never thought of. We will identify sales tips that can make a difference.
In this webinar we will cover the following:
– Review the Consulting Process
– Steps to Execute an ICHRA
– 5 Gotcha’s that Cause Problems
– Review of the Vendors
– The Future – What to Expect This Coming 4th Quarter
– Demonstration of Our Proprietary Consulting and Modeling Tool
Don’t ignore the ICHRA. This will be bigger than most think. We get into the weeds identifying things few have considered. To register just click on the Register Now Button. If you have questions give us a call at 508-498-7591.
Employers Have Alternative Health Insurance Savings Options During Coronavirus
Save Employee Dollars
We realize these are tough times. As employers and employees navigate this “new world”, maintaining one’s financial viability, which includes health insurance, is an issue to deal with. We would like to invite you to a webinar that can ease this burden by taking advantage of new health insurance tax laws that you may not have heard about. It is an opportunity to possibly save your employees substantial dollars.
12:00 – 12:30 EDT
• Review of the Tax Laws and Opportunity
• Examples of Saving Employees $4000+ Annually
• Why During the Coronavirus Should You Consider This
• An Alternative way to think of Employee Health Insurance
• Employee Cost Modeling to Save Money
• Communicating a New Program to Employees
It is time to think outside the box and this webinar is outside the box thinking. Our mission is to help employees who may be struggling financially. We think this new approach to employer-based health insurance can deliver on that mission. To attend click on the Register Now button. If you have questions, please feel free to reach out to us at 508-498-7591.
During the worldwide crisis from the Coronavirus many countries are recognizing problems with their current healthcare systems and the U.S. is no exception. In the U.S. this has prompted new calls for a national health care system. I read an article titled, “There’s Never Been a Better Time for Us to End Private Health Insurance Than Right Now” by Tim Higginbotham from the Jacobin. Tim made a compelling argument that those on the left will support. Others will reject the arguments and claim “Don’t take away my healthcare”. The narrative in the media is an ongoing debate between two options, keep what we have, or move to a national health insurance program. I think there is a middle of the road solution that I would like to propose.
I agree with Tim that change is inevitable because the Coronavirus has exposed some major problems in our current system, though my solution does not go as far as Tim does. In his article he said the following:
“But the pandemic has already disrupted the status quo. We no longer face a choice between keeping things as they were and implementing a major change. Change is coming, no matter what, and it’s our choice whether we respond to it by using public funds to prop up a broken system that constantly kills and bankrupts Americans in the name of profit, or by using those same funds to create a stable, single-payer program designed in the interest of public health.”
I agree that the status quo has been disrupted. The problems with our current system are exposed and the system is broken. It is bankrupting America and what will follow this pandemic will be a system looking to recoup the losses being incurred right now.
Let me start with a basic premise as a U.S. citizen. I think we would all agree that we want every citizen to have access to healthcare. We don’t want people suffering and dying in the streets. On the other side, we also don’t want endless healthcare consumption with no consideration of costs or quality. With healthcare costs skyrocketing something needs to be done. Inaction is no longer an option.
The United States has the highest healthcare costs in the world and there is one thing we do that no other country does. In those markets where there is private health insurance, we are the only country where someone other than an individual chooses the insurance for the individual. In a recent conversation I had with an ex-member of the Trump administration that worked on the recent changes in the health insurance laws that brought the Individual Coverage HRA to market, we agreed that “employer-based insurance” is inflationary. It must change too.
Number 1 Problem: Fee for Service Healthcare
Before getting into the details there is one component to our healthcare financing system that simply doesn’t work. Fee for Service healthcare is probably the number one problem with our current system. Fee for Service incents the system to perform more care. My doctor makes more money when I am sick, and my insurance company makes more money when I am healthy. I want my doctor to make more money to keep me healthy. It also incents employers to hire younger and healthier people. Fee for service healthcare is the impediment to fixing most of the issues in our healthcare system as I will point out throughout this article.
The Coronavirus outbreak has exposed some of the issues related to our current system. The first question I pose is:
What should our healthcare capacity be?
I see our healthcare system much like the fire department. We need to maintain a certain capacity of trained people, equipment, facilities, and drugs, regardless if there is a fire. Usage of our healthcare system increases in the winter and goes down in the summer. Are we supposed to lay-off doctors and nurses in the summer? What would the costs be to put out a fire if it were fee for service? Everyone would complain. The thing is, we need to pay these people when there is no fire.
The Coronavirus has made the shortage of facemasks, ventilators, testing equipment, and hand sanitizers part of our daily news. How many ventilators should we have had in storage? Who should have paid for them to be there? Is there some other equipment we need to start buying and storing now for some other type of virus that could hit next year? I hear everyone complaining now while over the past 5 years the same people were complaining about spending too much.
These are all tough questions that need to be asked and answered. What I do know is that paying for a certain healthcare capacity is inconsistent with a fee for service model. We all need to be regularly supporting our healthcare system. We can’t have money going through the system that doesn’t build and maintain capacity or provide care. In the U.S., only 4% of Medicare funds go to administration. In the Private Health Insurance market, it ranges from 12% to 20%. This money is simply lost. It pays people incomes who are working for insurance companies and other administrators, but it does not contribute in any meaningful way to providing healthcare or build and maintain our capacity.
Over the past several years I have been reading regular entries in LinkedIn by people attacking the Hospital systems including their costs and inconsistent billing practices. Price transparency has been in the headlines for months. I would contend that it is our healthcare financing system that causes this broken billing system. Between hundreds of different payors, different funding mechanisms, cost shifting from government programs, and having to take care of the uninsured, it is no wonder. Everyone wants better care, but everyone is also looking for some way to pay less. However, over the past several years the healthcare financers have declared war on the hospital system beating up the costs and reducing our hospital bed capacity in the U.S.
Use of Technology
Another thing exposed during this crisis is the use of technology. Telehealth has moved to the forefront as we all practice social distancing. Prior to the current conditions, most telehealth services were purchased through an employer. The problem with that is the doctor on the other end of the line would be someone other than my primary care doctor. And the consumer would have to download the telehealth app that the employer provided.
Now imagine I am a primary care doctor with 1500 patients coming from a wide range of employers. If I were to participate in telehealth would I have to accommodate all these different apps? Is the Primary Care doctor even involved? As a consumer, when do I go to a CVS clinic, versus my primary care doctor, versus telehealth? And if I receive some type of care from all 3 how does my data get consolidated?
Fragmented Market and Disconnected Care
Use of technology can be a valuable resource in healthcare and can save lives. Artificial Intelligence can be used to identify health conditions before they become too serious. The problem is, artificial Intelligence requires access to one’s data. At this time, my insurance changes for two reasons out of my control. It changes when I change jobs and it changes when my employer chooses to change it. As a result, there are times I had to change doctors and other medical facilities simply to have coverage. Who knows where my data is? I imagine it is scattered all over, giving me little value. And my new employer may have a different telehealth company with a different app and different providers.
There are other problems with the current system as Tim Higginbotham points out.
“The major flaw in tethering healthcare to employment has never been clearer: workers are constantly at risk of losing their employer-sponsored insurance.”
With the Coronavirus employers are laying off people creating the administrative burden of converting employees to COBRA, if they can afford health insurance at all. Employers, on average(at least in Massachusetts) provide health insurance plans that are 33.7% more expensive than what employees purchase when making an individual purchase. Massachusetts happens to do it right and have a viable individual insurance market. Employees going on COBRA would benefit from having an option to choose lower cost plans as finances get tight. Our current system does not allow that. And worse yet, if an employee chooses COBRA the premiums must be paid on a post-tax basis. This is simply wrong. All insurance should be on a pre-tax basis of our government wants us to buy it. It is a societal obligation.
Bernie Sanders and Elizabeth Warren have pushed national healthcare for years. However, when answering the question of “how are you going to pay for it?” I never hear them give what I would say the right answer is. Well here is what my answer would be.
“We are already paying for it through many means. When you add up the government expenditures from existing government programs, payments from employers and employees, costs absorbed by hospitals to treat patients with no insurance, free services from non-profits, and administrative costs incurred by hospitals and other providers, you would get a number that in the end is larger than a national health insurance program. So yes, people will have to pay more in taxes. However, they will pay less in employee contributions and have higher wages because employers would not have to pay for insurance. In the end, we can reduce costs through efficiencies, adopting technologies, and creating incentives for healthcare systems and consumers to practice better health. Rewarding the healthcare system for keeping people healthy will align the incentives of most consumers who want to live a happier and healthier life.”
I am not a proponent of national health care. I believe that when the incentives are aligned with what we want our outcomes to be you have the best solution. The current system rewards the health care system that provides more health care. Insurance companies are rewarded when they provide less. This is backwards. Government programs simply don’t reward excellence anywhere in the system. I know that may be too broad of a statement but in most government systems that is the case.
I will start by saying fee for service needs to end and there needs to be a move towards full capitation. Kaiser is the model of the future. (Capitation is where the insured pays into the healthcare system a fixed monthly fee rather than to an insurance company who then disperses funds to healthcare providers on a fee for service basis or in some limited capitation basis.) This is no different than the way we fund the fire department. Fee for service also cannot coexist with capitation as the young and healthy would gravitate towards fee for service programs which essentially leaves them not supporting the system. In California and other markets, Kaiser competes with other fee for service insurance plans which leaves problems to contend with. The best solution puts everyone into the same type of risk pool.
The solution I propose is a private health insurance system where consumers buy their own insurance policy. This is similar to Switzerland though we can do it better. Employers may provide funds for employees, and for those in need, there can be a government subsidy. The key component is the consistency of having the individual own their own policy so they can keep it wherever they go. This is also similar to what the Goodman Institute proposed. I suggest looking at the Goodman Institute website at www.goodmaninsitute.org.
The move to an individual market should help local healthcare systems. Employers often choose PPO type programs from national companies to accommodate an employee population that may be in different locations. Individuals will be able to choose local healthcare plans. This shift will enable local systems to get into the risk business and begin benefitting from keeping people healthy and leveraging technology for efficiencies. Aetna is partnering with local systems to create these types of programs. If employees buy their health insurance from the same company that provides the healthcare then that system can use dollars to invest in technology, wellness, and proper capacity.
Other things we need to do:
• Decide and establish what is needed healthcare capacity locally and nationally.
• Set goal of administrative expense at no more than 5%. It is possible.
• Develop 5-10 standard insurance programs. The country only needs 10. By doing this, systems can be pre-programmed to accommodate these 10, significantly reducing administrative costs.
• Make individually purchased health insurance tax deductible with a more progressive program. Full deduction for lower paid employees and less for higher income earners.
• Allow all employees to use employer funds as they choose versus having the employer chose insurance for them. Today, the employer is choosing whether they will allow employees to buy their own.
• Eliminate employer-based insurance. The employer tax advantage is a main reason for health care inflation. (This is another article.)
• Develop standards for managing health data and leverage blockchain technology for data control and security. It is time individuals start controlling all their own data and have this data used to maybe save their lives. (This is also another article.)
• Develop standards for telehealth enabling consumers to use the devices they have in a more secure way with the healthcare provider of their choice. Apple or Android can have secure “Facetime” rather than download a new app.
The move away from the current paternalistic health insurance system is inevitable. The Coronavirus pandemic has exposed the problems in the system and will be one of the catalysts to change. I believe the only way to save the private healthcare system is to move away from defending the current employer-based system and propose and defend a new system that solves many of the existing problems. Let the debate be between single-payor and something more reasonable. Digging in to protect the status quo will only open the door to a government run program. I believe the solution is in the middle.
What is the status quo? In the benefits business, there are many who like to label the “other guy” as protecting the status quo. Yet, after I learn about what the person making the proclamation about his/her competitor is really doing, I conclude that they are protecting the status quo too. I know there is a desire to be different in business. Many books have been written about needing to be different. However, one is not different through a simple proclamation.
I hear new ideas every day. In the health insurance and health care businesses some of these proclaimed “new ideas” are really repackaged “old ideas”. Private Exchanges promoted as new in 2014 were recreations of cafeteria plans sold in 1986. Level-funded plans are similar to minimum premium plans sold in the early 90’s. GAP type plans were being administered in the late 80’s. On many occasions, these were promoted as new and if you didn’t sell these products, you were protecting the status quo.
Now we have an army of benefits advisors promoting things like direct provider contracting, direct primary care, referenced-based pricing, as the new savior of the health insurance system. Yet, according to one-person I quote and trust, Mark Bertolini, ex-CEO of Aetna, “direct contracting will be a failed model”. Those promoting these programs are claiming that those that don’t promote them are “protecting the status quo” while a respected insurance executive says they won’t work. Who is one to believe?
I am taking a different perspective. What if protecting employer-based insurance in general is protecting the status quo? There are brokers running around saying “Mr./Ms. Employer, you are in the health insurance business, get over it and take control”. Put in all these programs to micro-manage your claims. Well I am pretty sure employers don’t want to be in the health insurance business and be in the claim’s management business. (Though they don’t mind giving the employee some money.) If given the option to get out they would.
I am also pretty sure most employees would like more health insurance options versus having the limited options provided by employers. I know I would want more options. Yet I see no lobbying to get the employer out of the middle of health insurance, other than from the likes of Mark Bertolini and President Trump. So, if virtually everyone wants the employer out of the middle, then I would conclude that protecting employer-based insurance is protecting the status quo?
President Trump, through Executive Order, made the biggest change to our health insurance system in the last 60 years. However, rather than embrace it and deliver what most employers and employees want, the industry is somewhat ignoring it. I have some news though; this is not going away. The train has left the station. Employers and employees will eventually get what they want, and when they get it, they won’t go back.
So as one wanders through this health insurance maze, pause before you label “the other guy” as the one who is protecting the status quo. In some eyes, the one protecting the status quo may be the one in the mirror.
Below is a conversation I imagine that could have happened between President Trump and ex-Aetna CEO Mark Bertolini. I would imagine this is a simplified version of a deeper conversation, but you will get it.
Bertolini – It is great to see you Mr. President.
President Trump – Same here Mark, how are things?
Bertolini – Things are great!
President Trump – Mark, as you know, health care costs are out of control. The costs are adding to our deficit and we will never control spending if we don’t wrap our arms around health care. And the citizens are beginning to really feel the pressure from these increased costs and higher deductibles. I know you have been leading the way on how to transform the health care business. What do you think we can do in the short term and long term to stop this trend?
Bertolini – Well, the number one problem is that employers are in the middle. This is a formula that can’t work and drives up costs. Until the consumer is empowered there is little chance to controlling costs. Also, in today’s environment the insurance companies make more money when people are healthy, and the health care providers make more money when people are sick. We need the health care system to be rewarded to keep people healthy.
Trump – How do we get the employers out of the middle? Everyone says you can’t take my health care away.
Bertolini – You need to eliminate the employer deduction for health insurance. As long as it is more beneficial from a tax perspective to buy through an employer than the employee buying directly, then you will have the employer in the middle. It isn’t even fair that an employer can get a deduction, but an individual can’t. Move the deduction from the employer to the employee and that will start the process to solving this problem.
Trump – The Democrats want Medicare for All. They have also don’t like the lower corporate tax rates. I have been talking to other Republicans and they are willing to trade off keeping the lower corporate tax rates and eliminating the health care deduction at the employer level. The Democrats also don’t like the fact that it is regressive. The higher income earners get a much greater deduction in pure dollars than lower income earners. If we move the deduction to the employee, they want to make it progressive. Someone making $50,000 may get the full deduction but someone making $500,000 may not get any at all. This is a compromise that could work.
Bertolini – We did the deal with CVS because we expect the employer gets out of the middle. As I said, we need to empower the consumer. If you move the deduction to the employee, you will essentially save the individual insurance market overnight. You know that right now employers are doing everything they can to dump bad risk on the individual market and you have an army of insurance brokers assisting in this process.
Trump – Well getting this done in the next year or so is going to be tough. Budget negotiations are brutal.
Bertolini – Is there anything you can do now?
Trump – Well I can work within the current laws and do something through Executive Order. What if I made an individual policy purchased through employer contributions tax deductible? I can do that real fast.
Bertolini – That’s a great start. It will put things in motion to start the focus on the consumer. Many employers want to get out of the health risk business. They would rather give employees money and just let them buy themselves. Insurance companies will start supporting the individual market much more if you do this.
Trump – After the next election we will need to pass a budget, and I think we will have to compromise and move the deduction from employer to employee. Democrats and Republicans are on board with that.
Bertolini – This will save the private health insurance market and empower firms like Aetna/CVS to really start focusing on the consumer. I always believed that the companies that provide some form of health care need to be in the risk business. The incentives need to align with the outcomes you want to get. This will do that and drive down costs.
Trump – Thanks Mark. You have been very helpful.
June 2019 – The individual Coverage HRA becomes a reality.
Possibility – Effective January 1, 2023 Deduction for Health Insurance Moves from Employer to Employee
By Joe Markland and Mike Davis
This article is being written after an open and honest discussion with my benefits broker friend Mike Davis this morning over breakfast. Mike is a 30-year veteran in the business who had already sold his first benefits business around 10 years ago. After some in depth thinking we drew the same conclusion as it relates to the employee benefits business. A tsunami is coming at the employee benefits broker and most don’t see it, but it is out there. This tsunami can reduce commissions from $30 PEPM to $15 PEPM overnight. For those not prepared it could be catastrophic, however for those prepared, there may be fertile ground on the other side. Regardless, it is coming.
Mike – While this is something I have thought of as inevitable for several years, this renewal season has somewhat sealed the deal in my mind. Large increases and even a non-renewal in a market where recent tax law changes are giving employers an “out” have made me conclude it is imminent. The problem with employer-based health insurance is the perpetual gamesmanship required to find a different or better risk pool. Solutions like hiding in the pool, self-funded, level-funded, referenced based pricing, captives, and associations are all short-term solutions designed to “game the system”. In reality, the types of plans or funding are segmenting the risk pool which contributes to the larger problem of rising health care premiums in America. Many don’t want to admit this, but we are all whispering to ourselves that this is the reality. As a result, health insurance and then health care is about to change in significant ways and distributors like myself need to act or get wiped out. The phase-out of the current system and opportunity to morph has just begun.
Joe – I have been watching this market for some time and have conducted webinars and written articles about the “Coming End to Employer-based Insurance”. I will be honest, I have taken many arrows from brokers who have not liked my message, though my message is simply based on listening to people like Mark Bertolini, ex-CEO of Aetna, and an advisor to Donald Trump. Both are saying that employers should not be in the middle of health care. Bertolini took action selling to CVS. Trump through Executive Order made an individual policy tax deductible and allows the Employer to use the HRA as a contribution conduit for their contribution. They spoke. I listened and acted myself by forming my new company, N4one HR and Benefits, that is designed to thrive whether the health insurance market changes or doesn’t.
We aren’t saying the sky is falling for the sake of selling fear. From others perspective the current employer-based healthcare market is already very broken. Employers and employees’ skies are already falling because the cost burden of health insurance is significantly impacting profitability and for the individual their personal financial health. For much too long the existing ecosystem of carriers, brokers, and administrators have simply pushed the costs around. And the argument that health insurance costs are high because the cost of healthcare is high will fall on deaf ears. Healthcare costs are high because the current health care financing models do not create incentives to control costs. Those incentives need to change which include empowering the consumer.
Employers are sick and tired of being in the health insurance business. Some have started the process of getting out by looking to offer individual products through an HRA. There will be some this year, more next year, and before long there will be a Tsunami moving to individual options. We believe that after the election the deduction for health insurance will move away from the employer and to the individual, ending traditional group health insurance forever.
People and businesses are slow to change. Employees at Blockbuster were Netflix subscribers and Blockbuster could have bought Netflix. We think this is your Blockbuster moment. The Tsunami is coming. We don’t know when it will hit but it could be much sooner than anticipated. It really doesn’t matter to a certain extent because if 5% of your clients want out and you don’t know which 5% then you need to address them all. This must start NOW as the renewal season has begun, and the law takes effect for this renewal.
We have built a model that we believe can help a broker not only survive but thrive when this wave hits. However, it takes careful planning, hard work, and flawless execution. This takes time and scale. Our model shortens that time and delivers the scale needed.
Mike – Joe has been talking about this for some time. I was a doubter too (as to so soon), but his predictions have come true. A simple stroke of the pen and the world has changed. It can change even more. His argument about market dynamics simply makes sense. I read 3 weeks ago of Cigna’s re-entry into the individual market, then the same last week of United. The ACO/Value Based tight network plans are emerging from commercial carriers and Health Systems as well. While difficult for an employer to choose one ACO plan that serves all, if each individual can choose on their own, the viability increases exponentially…not to mention the individual’s ability to purchase very rich or very lean benefits to suit their needs. Like you, I can’t take the chance that the market doesn’t change. As the saying goes, “Hope is not a strategy.”
Our solution requires three things:
• First, prepare for a world where you can handle twice as many clients with the same amount of staff. This can happen in a future world where service demand decreases substantially as it is supplanted by on-line/telephonic enrollment and member services.
• Two, expand your revenue capabilities by expanding your product/services capabilities.
• Third, market, market, market, the new value proposition to sever existing relationships
We think that the small brokerage firms with deep local knowledge and relationships, and entrepreneurial work ethic, armed with the technology tools and support can adapt most quickly…. yet they don’t have the capacity or capability to do this on their own without a significant capital investment. Our solution is to do this in a shared services model through our N4one HR and Benefits organization, which is an organic broker consortium that will grow and be directed by its’ members. This isn’t merely a technology buying group or scaled product procurement Broker Association. It is a business transformation company.
We are looking for just a few brokers per geographic area to bring a new model to market. Collectively, with a unique value proposition, professional marketing, and educated and armed professionals on the front lines, we can do something great for employers and their employees. However, it requires some clean thinking and a willingness to change. If interested give us a call at 508-498-7591.