Tag Archives: Private Exchanges

“Fire” – Obamacare is Not the Only Healthcare Plan That is Burning


I had a short conversation today with a woman that was somewhat surprising and maybe very telling. I was having a prescription filled and I spoke briefly with the women handling my order. I had to give her my new insurance card (third carrier in 3 years) and mentioned how I had to switch often because of price increases. She then told me that she had a $4000 deductible and close to $15,000 in debt from medical bills. I was shocked. Her employer is a major employer and more than likely a benefactor of Obamacare, yet her deductible is $4000 and she has medical bills causing financial duress. I would imagine this story plays out across America. It is a system that is more than broken. It is on FIRE!

In this political environment where Obamacare is in the news daily I think the problems with employer-based insurance gets lost in the discussion. It seems like people have created a one-to-one relationship between Obamacare and the Exchanges. It is the Exchanges getting huge increases. Insurance companies are leaving the Exchanges because of big losses. Many markets only have one option. And of course you won’t have to switch your doctor. All this noise may be hiding the fire that is also burning in the employer healthcare market.

On the employer side, some of the same dire stories are playing out except the press seems to be ignoring them. Sure, if you look for stories like I do you will find them, but they aren’t on the front page of the NY Times or the lead story on the Nightly News. Relative to the fire burning in the Exchanges the employer fire is smaller, but it is still a big fire. I am sure the woman at the pharmacy was much more concerned about her personal “fire” from her healthcare expenses than what is going on with the Exchanges.

If you have employer based insurance, then you more than likely have a single medical insurance option. Your contributions may have increased by 30% or more over the past few years. Your deductibles and coinsurance may have doubled. You don’t even know what coinsurance means. And the odds are greater than 50% that you don’t have enough money in a savings account to pay for your deductible if needed.

If you are an employer, you are tired of the regular rate increases and delivering bad news to your employees. You have not been able to give employees raises. You may have tried PEO’s, captives, wellness programs, cost shifting, HSA’s, self-funding on smaller and smaller groups, or private exchanges, to try and control costs, but at best, are these are temporary fixes if they even work at all. I was once asked how can you reduce health care costs. I said don’t hire anyone old. Is that what this will come to?

While the focus of Obamacare has been on the Exchanges, Obamacare technically covers health insurance in its totality. Employer based insurance is a part of it and it is part of the problem. Fixing health care includes all of it, not just the Exchanges. It is all related. Government intervention putting the squeeze on individual policies, small group, Medicare and Medicaid only shifts the problem to employer plans. And when an employer with a younger population counters that action by going self-funded this results in the younger, healthier people, not contributing to the pool. We heard this before, you need the young to participate for this to work. The recent race to get younger groups self-insured impacts the entire system. The game goes on.

We can all speculate as to what Trump is going to do to try and fix the healthcare problem. Based on what I have been reading his focus is not limited to the Exchanges. He recognizes the problems span the entire healthcare industry and that includes the problems with employer-based health insurance.

For benefits brokers it would be naïve to think that the only change to employer-based insurance will be the elimination of the employer mandate. There is a fire burning at the employer level too and this fire is not unrelated to the other fires burning on the Exchanges. Most of the conversations I hear, or articles I have read, reference the Exchanges as something totally separate from employer-based insurance. I believe one can’t be solved without significant changes being made to the other. Anticipating what those changes will be and becoming part of the solution is a big opportunity. Stay tuned because we are about to see what the next administration has in store.

Consumerism in Healthcare is Not Practical


I read a lot of articles about consumerism and how employees need to be better consumers. And as one who implements technology I am very familiar with most of the decision support tools in the market and all the online symptom checkers. So let me make a bold statement. It is all garbage. I have always thought that individuals will never have enough knowledge to make educated health care decisions. Health care is too complex and always changing so how am I ever going to have the time to keep my knowledge current. I don’t want to, trust me. And the last time I needed health care I was driving very quickly to the emergency room. Not a lot of time the think there.

I recently listened to a presentation that Aetna CEO Mark Bertolini gave a few years ago at Stanford. (you can see it here) The final question asked of him was as follows: “How do you create a more educated consumer in a marketplace where they are being directing their own health care decisions?” What surprised me was his answer.

“Trying to educate to everybody on how the health care system works and the level of detail isn’t going to work. Sorry to say. And the reason is that unless the amount of information I can gather is immediately available and that when I act on it has an immediate response I am not going to pay attention to it.”

With all the articles out there about consumerism and directing one’s own health care I thought I was the only one that had such view.

Every time I have my car fixed I am wondering whether I am getting ripped off. I don’t know enough about cars to “shop the market” for service. I remember watching 60 minutes or one of those shows where they show auto mechanics taking advantage of everyday consumers by doing things people didn’t need. That’s me. I wish I had a trusted auto consultant who would tell me whether I really need the services some mechanic is saying I need. You get my point. If I don’t know whether my car is getting the proper treatment how the heck am I expected to figure out whether my doctor is doing the right thing.

Just last night my wife and I had a debate about the value of multivitamins and we couldn’t even agree on whether they worked or were a waste of money. So I Googled the topic, read a bunch of articles, and still don’t know whether multivitamins work.

Let’s not confuse choosing health care versus choosing health insurance. When choosing health insurance is one supposed to be predicting what their needs are going to be in the next 12 months to essentially “game the deductible”? Insurance is supposed to protect one from an unanticipated event that may cause financial duress if one were not insured. Anything that doesn’t fit into this category is simply a reimbursement plan. Dental insurance is almost not insurance. It is a prepaid reimbursement plan for most. There should be two types of insurance plans. One that runs like dental and is simply discounted reimbursements, and another that is real insurance. It is for this reason health savings accounts should rule the day.

So what is the solution? I don’t like when people run around talking about the problems without giving viable solutions so I won’t do that myself. I always say that stating the problem is easy, it is the solutions that are tough. Let me start with what I would want as a consumer. I would want someone who would give me sound advice as to what is proper treatment. I want someone who has an incentive to do the right thing for me. I want someone who would spend my money as if it were their own.

I think the solution requires properly placing incentives. I want to live a healthy, happy, long, and financially viable life. I want someone advising me who understands my goals which I will safely say that these goals are more than likely shared by many. I am all about incentives. It is funny how when you have the right incentives you get better outcomes. That requires having someone who wants me to be healthy and not just fix me when I am broke. This sounds like the things I would want from my car consultant who would advise me on how to take care of my car. I want my car to last long, be healthy, and financially viable. I am not sure what a happy car would look like.

There are emerging models out there that will provide this type of service. And making consumer based decisions around the small stuff may become common. But as a means of controlling healthcare costs, no way. We all know that the majority of health care costs come from few people with chronic conditions. If I need to have my oil changed maybe I can shop the market. But if I need a new engine I would hope to have a very educated mechanic at my side to help me make the best decisions.

Participate in our 2016 HR/Benefits/Payroll Technology and Services Survey


HR Technology Advisors is conducting our 2016 National HR Technology survey for the small to mid-sized employer market. We conducted this survey two years ago with great success and we are doing it again. Much has changed since then. This survey will help benefits brokers and employers gain an understanding of the following:

• What employers are using for technology (HR/Benefits/Payroll/Time and Attendance/ACA)
• Satisfaction levels with their vendor
• Who is looking for new solutions
• Who they are moving to and who they are moving from
• What employers are looking for from a capability standpoint
• Who is deploying employee self-service via web and mobile
• Vendors employers are using for ACA Tracking
• And more…..

With old brokers and new brokers leading with some technology solution, many giving solutions away for free, we think it would be important to:

• Know what your clients have
• Know what your clients want
• Know who is shopping
• Find out what vendors employers are really using versus listening to the sales pitches from the vendors.
• Provide your clients with valuable market information

If you are a broker and want to participate you can do so by clicking on this link. There is a fee to sponsor the survey and personalize it for your firm. Considering all the money and time brokers are spending on evaluating and paying for technology this is worth it.

If you are an employer and would like to participate send me an email or give me a call. Contact information is below. I will send you a link to take the survey. A summary of the results will be provided when we close the survey.

Participants will be eligible to win a $500 Gift Certificate.

Brokers Click HERE to Participate

Contact information: Joe Markland – 508-530-5043 jmarkland@hrtadvisors.com

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.

Fidelity Enters the Benefits Business – Why Many Others Will Follow


You may have seen the press release announcing that Fidelity has entered the benefits business as a broker. According to the Boston Globe “Fidelity will act as a broker, selling the plans of traditional insurance providers and competing against hundreds of other agents and brokers for that business.” Fidelity has been in business since 1946. Most know them as an investment company and 401k administrator but fewer know that they are also a benefits outsourcing firm and even have payroll services. Yet, in spite of being in these businesses for years, they decided to get into the benefits business now. One has to wonder, why now? And after Fidelity, who is next?

If you are a benefits broker this is big news but should also be viewed as another “shot across the bow” sending a signal to the market that this is not business as usual. First we have Zenefits – now Fidelity. Though these companies are very different and entered the brokerage business from different market positions and with different value propositions, I believe the market conditions driving them into the business are somewhat similar. So what are these conditions.

Employer desire to simplify. Employers are getting overwhelmed with technology, new laws, new benefits, and a changing workforce. They are looking for simpler solutions from fewer vendors. Both Zenefits and Fidelity are promising simplicity by combining things that have been delivered in silos in the past.

Demand for more and better outsourced services. Employers will be looking to outsource more services, especially in the SMB market, as the HR world gets more complex. Zenefits says just enter your new employee data and “we will get them on benefits. We will get them on payroll.” Fidelity already provides a broad range of HR, Benefits, and Payroll services and is now adding more.

Advance of Defined Contribution Plans (aka Private Exchanges) –We have all seen the articles on Private Exchanges. Fidelity has already developed the service infrastructure to support employees who are already making financial decisions with more options (401K). If I am an employee and now have five medical options will I have a place to call if I need some help to decide which of the five I should pick? Fidelity has the tools and the call centers to provide these services.

Financial Wellness in the Workplace – According to some statistics up to 40% of employees lose productivity at work due to financial stress. With defined contribution plans employees are given even more options often creating more stress. And we all know there is a lot of cost shifting onto the employee going on. The problem with such plans is they are too narrow in their scope. Most decision support tools take into consideration employee benefit decisions but leave out other parts of an employee’s financial life. Isn’t there a relationship between the medical plan deductible I should choose and whether or not I maximized my 401K contribution? Should I buy more Life Insurance or should I have a 6-month cash reserve first? In most peoples lives the type of car they drive is somewhat related to how big their mortgage is. You get the picture. Things that should be related are presently disconnected in the typical benefits model. Fidelity, by combining financial counseling or decisions with other benefits decisions delivers a more holistic approach to the decision process thus creating a higher probability of a better outcome for the employee. For the employer this employee may be more productive. Joe Laurin, who runs the health marketplace business at Fidelity, said in a telephone interview. “The real distinguishing point is this ability to bring the health and financial wellness together.” (Bloomberg)

The Broker Commission is in Play

One of the problems in the market is the employers are looking for simpler solutions, better technology, with “white glove” outsourced services, but they often don’t have the budgets. Zenefits has shown that the market is willing to change their broker to get these products or services. The benefits commission is in play and the whole market knows it. You won’t read this in any press release and most likely not from any Fidelity representative but this is a market reality that few talk about. That is of course, other than Parker Conrad, CEO of Zenefits, that will talk about it all day.

So Zenefits, Namely, Gusto and now Fidelity enter benefits brokerage business. They are not alone. I know local payroll companies and HR consultants that have gotten into the business too without the fanfare of these bigger firms. Why? Because benefits brokers compensation ranges from $25 – $50 PEPM while Payroll companies get $7-$10 PEPM – HR Tech Companies $5 – $8 – Benefits outsourcing firms – $7 – $14 PEPM – and HR Consultants fight for $150 – $200 per hour. I hear employers, and many times their brokers, complain about the service from their payroll company. I can guarantee you this, if they made $35 PEPM versus $8 PEPM their service would be much better. The reality of the market is that many employers will see a reallocation of their HR spend from their benefits broker to other service providers as a way to fund the technology and white glove outsourced services they desire. And if they don’t know they can do this someone will point it out.

What can other brokers do?

I have read many articles about how brokers need to “sell their value”. Value is not only a function of the product/service that the broker is providing but also includes the price for that service. This is the elephant in the room that nobody wants to discuss. How can one discuss value without price? I like the kid who plows my driveway. He even gets out of his truck and snow-blows places his plow can’t get to. But I also like that he charges me $40. If he charged $100 he would still be a great snow-plower. He just wouldn’t be mine.

These other vendors that provide products and services that are now in greater demand think what they offer is of great value too. Nobody is questioning whether the benefits broker delivers a valuable service. What is in play, and people are now challenging, is the price for that service. This is the real catalyst that will continue drive companies into the benefits business. To compete, traditional brokers will either need to sell their “value” with their price on the table relative to what these new entrants are providing, or start providing some of these new products and services that seem to be in greater demand. Think about a call center on nights and weekends. Brokers will want to silo off the benefits brokerage service but these other vendors are going to make every effort to no longer let that happen. The only thing that will slow this down would be a total market move to fee for service.

Fidelity is the tip of the iceberg. More press releases from companies that provide some solution in the HR, Benefits Payroll technology or services space will be coming in droves. Zenefits made noise. They are new and interesting. Fidelity is a whole new ballgame. All the comments about Zenefits can’t be applied to Fidelity. Zenefits was version 1. Most brokers are hoping they would go away. But what usually comes after version 1 is version 2. And version 2 is better. Now we have Fidelity – and things will get better.

False Perception of Private Exchanges Causing Problems for Brokers


Private Exchanges are still in the news with firms like Time and Walgreens  moving some employees or retirees to Private Exchanges. Some polls still claim that Private Exchanges will dominate the market in a few years. Yet I would contend that most people still don’t know what a Private Exchange is. I have written my perspective on this in previous articles on this blog. Regardless of what one would define as a Private Exchange what really matters is what employers think it is. While brokers may not believe Private Exchanges may take hold or they do need to compete with the idea or a Private Exchange and more important the employers’ perception of what a Private Exchange is./

I have given speeches about Private Exchanges at many employer conferences. One of the first slides I show is a study that claims that 70% of employers would be interested in a Private Exchange. Yet when I ask the audience what they think a Private Exchange is few know. What is more interesting is that when I sat with a group of employers they spoke about what they hoped it was. The most common answer was that they thought a Private Exchange would get them out of the health insurance risk business. Those employers with over 100 employees that are experience rated simply wanted out. They were hoping this is what a Private Exchange was. Some were disappointed when they found out that Private Exchanges did not deliver this.

These employers are more than willing to give employees money for health insurance. What they would prefer though is that they can just give them money and let them worry about things. They don’t want to worry about whether they just hired a person with a spouse or child that has some major medical condition. They don’t want to worry about helping manage catastrophic claims or running wellness programs. They don’t want to deliver the bad news once a year to employees that their costs are going up or their plan is changing.

So while brokers may or may not believe in the value of a Private Exchange, they do need to worry about other brokers who aggressively market Private Exchanges because employers who think they can get out of the medical insurance “risk” business will take the call and schedule a meeting. It is the employers’ perception that is the key.

Brokers need to engage their clients in a conversation and educate them as to what a Private Exchange is and isn’t. You don’t need to spend money with any vendor to be able to engage your clients in a conversation about Private Exchanges. In fact you don’t need to spend any money at all to offer one. What you should keep in mind though is what these employers may be looking for. I believe that the brokers or carriers that can deliver a solution for larger employers that can get employers out of the risk business will capture a market opportunity that few have yet to recognize. The opportunity is there. Who will act first?