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.
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.
NOTE: This was written in 2016 but don’t think I ever published it.
With firms like Fidelity entering the benefits business, others like Zenefits and Gusto raising tens to hundreds of millions of dollars, and the national firms continuing their rapid pace of acquisitions, one must wonder whether the benefits game is changing in a bigger way. Is all this money resulting in an improvement in the business? Are the rules of the game changing? Not only the rules, but one must understand what league they are competing in. And if the rules and competition change can one continue to compete? Is the price to compete greater than many firms can afford?
In business as in sports it is important to understand the rules of the game and what league you are playing in. How you staff your team and how you play the game will change as the rules and competition changes. And as we all know we don’t get to make all the rules and control how the competition plays the game.
To compete in an individual sport like golf you need a single talented person. In basketball, you need anywhere from 7-10 skilled people. In baseball, the number is around 12-15 while in football you need 20-25. At lower levels of competition, you generally have athletes playing more than one position. In high school football, I played quarterback, safety and was the kicker. In college I was the 5th best QB so I became a safety, and my kicking skills were such that nobody would have ever called me a kicker. At the professional level, you have very specialized skills and the number of skilled athletes you need to win is even higher. Some NFL teams even have two kickers, one to kick-off and another to kick field goals. At the professional level, you need 40 – 50 quality players.
In some businesses, all these rules also play out. To compete at the highest levels, you need more players with more specialized skills. Smaller firms have fewer employees often playing multiple positions. I heard this the whole last quarter where people would say, “I’m too busy, call me after the first.” So, their 2017 plans are on hold because they could not handle fourth quarter business while planning their 2017 or even starting their marketing or sales efforts. They are playing baseball with 5 fielders and don’t recognize it. Others however, in larger firms, have staff making their 2017 plans and do have the time to start their marketing and sales efforts. They have 9 players and a bench creating a competitive advantage.
How many benefits brokers wear the hat of the sales person, the finance person, marketing, and even service? In these firms, it is not possible to deliver the results that larger firms can deliver simply because of number of resources and skills needed to compete. Some larger firms also struggle because they have the numbers but because of their structure they don’t properly leverage their size or skills properly. I once spoke to a producer in a national benefits firm creating her own brochures. Certainly, not an effective use of time or skills. I am also quite sure the marketing piece did not have a professional quality.
I always felt that lead generation or telemarketing is a very different skill than sales or benefits consulting, yet in many benefits firms the person who dials for dollars is the same person that makes the sale and then does the consulting. They play the QB, safety, and kicker. And speaking from my own experience, most often not very well.
I started creating a list of all the things a benefits firm can do for themselves, their customers, and the employees of those customers, that would be of value that most brokers simply don’t do or struggle to do. If I were to start a benefits firm from scratch today this list would be my opportunity to be different in the market. At this time my list has 54 items on it. I know many benefits firms across the U.S. yet I can only think of one firm that is executing on many of the items on my list. A few others have the ability to do so but more than likely lack the vision. So, I believe the opportunity still exists.
With new entrants to the market looking to disrupt the current benefits community and driving desire to win I don’t think my 54 items will be a secret forever. The bar will get raised and raised again, in a way that the price to compete is more resources and more specialized skills. This often means more money. It can be equivalent to the difference between playing high school football and professional football. My quarterbacking skills would not have won me any games against the pros.
The benefits game may be changing faster and in more ways than people think or see. Sometimes these things sneak up on you and if it does you could be caught off guard, ill-equipped to respond competitively. There will surely be changes coming to the healthcare market from the Trump administration. These changes may be much different than most anticipate.
This benefits game may no longer be a golf event where a single skilled player can compete. It may not even be a basketball or baseball game where 5 and 9 players are adequate. It may require the army of a professional football team with 53 highly skilled players. The increased competition in sports and business is all around us.
You can choose to compete in places where there is less competition. Many assume this is in the small group market but there are a number of new competitors going after that business too. You can sell your business. You can also choose to build your team. To do so you can raise money and hire a team like Zenefits and Gusto. To do this you will need a unique product or value proposition that can scale. You can grow organically like a Fidelity or a Paychex but that takes capital, risk, and time. Alternatives would be sharing resources with your peers as we do at N4one.
So stop stocking your shelves with new technology tools or looking for that new idea at some conference. The technology vendors want to sell to everyone so you won’t end up with anything unique. And I couldn’t imagine finding some grand idea at a conference. I certainly wouldn’t share our secrets at some conference. Even if you found some grand new idea, getting this idea to market effectively will require resources that many benefits firms don’t have. The place to start is with a vision and a plan. Or you can call us at N4one. We have created a plan. Built an army. And we have 54 things or more we are doing that most others are not.
Anyone in sales understands the idea of whether you sell pain avoidance or pleasure. The statistics show, and it is my experience, that selling pain avoidance generates better results. In my last business I estimate that 75% of my clients became clients only after they suffered the loss of an important client. We have all heard the story of Blockbuster turning down the opportunity to buy Netflix for $50 million. I believe, regardless of the sales strategy, that most of us do what we do because we want to do something good for people. Selling pain avoidance may be a necessary evil at times though we do so somewhat reluctantly. Dealing with human behavior is part of business.
In my last article I wrote about, “The Health Insurance Tsunami is Coming – and It Will End Employer Health Insurance as We Know It”. The implication is this is bad because a Tsunami can’t be good, right? Well, in reality, I think what replaces the current health insurance system is going to be great. I come to work every day in my business doing as much as I can to make that happen. The tagline for my new company is, “Helping Employees Have a Better Day”. I really don’t think the current health care system does that. My 22-year-old daughter pays what is the equivalent of 90% of her health insurance premium through work for a $5000 deductible. It is not much of a benefit. The current system is very broken and does need to be wiped out.
Many benefits brokers I talk to hope I am wrong about the Tsunami because anyone protecting the current system may be wiped out. I am not hoping people are hurt. I actually think there is the possibility of a new health care system within our grasps that could really help millions of Americans. My preferred message to brokers would be “Let’s get together and fix health insurance to help millions of Americans”. That is really what excites me every day. We can do something great.
So, what is after the Tsunami? Imagine a world where health insurance and health care costs are 20% less than today. Insurance plans are easy to understand. There may be a small copay or deductible of $500 and then everything is 100%. I won’t need a medical insurance dictionary or call center to understand my health insurance or the health care system. My doctor has an incentive to keep me healthy. I get a text message from my doctor if I gain ten pounds and he asks to see me. My health data is collected on my watch or cell phone and proactively tells me what I should be doing to stay healthy. My insurance is mine and only changes when I choose to change it. I have easy access to all my medical information, and I choose who can have it. There are no claim forms. My primary care physician advises me on the best and most affordable prescriptions when needed. New health care innovations are readily available, and I can learn about them on my cell phone. There will be no need to ever negotiate health care costs or worry about balanced bills. And, believe it or not, this is not Medicare-for-All.
What replaced Blockbuster was Netflix. Netflix is better. I don’t have to get into my car and go to a store to rent something and then pay a penalty when I don’t return it on time. Netflix is better than Blockbuster, though many people who were somehow financially tied to Blockbuster may have suffered financial losses. It is an unfortunate by-product of progress.
This could be a benefits broker’s Blockbuster moment, but it doesn’t have to be. There are companies that will thrive because they help solve a major problem in America. My mission is not to help or hurt benefits brokers. The market doesn’t care what I think anyway. However, I have been promoting a health insurance and health care model that I believe can help our whole country. I think the market is ready for this change. The pieces are coming into place. We can be part of the solution, or not. So, let’s do it, because we can!