Benefits, wellness programs, medical insurance/coverage - so much ugh!
These topics can be quite tough for even the seasoned HR practitioner. As medical insurance premiums continue to rise, more and more employers are cutting benefits - increasing out of pocket maximums and deductibles, reducing networks, cutting coverages altogether. What's infuriating to me is how many HR practitioners look to their brokers as the resident expert on the subject and don't spend enough time truly understanding the benefits landscape and other creative ways to build a benefits package without having to cut important benefits and also **gasp** save the company money.
This particular topic is a painful passion of mine. I say "painful" because, no offense, dear colleagues, but HR professionals are woefully uninformed, uneducated and ill prepared to provide solid leadership when it comes to benefits.
There. I said it.
There are many wonderful broker-partners who truly do look at the relationship with their business client as a partnership and have both the company and their employees' best interest in mind. But, mind you, as is often the case in business, incentives, commission structures and bonuses can be quite persuasive, and can distract from what should be done versus what can be done. This is not where I go on a diatribe about brokers, commission structures, and showing up once a year at renewal - I'll save that for another post and another time (when I'm feeling particularly snarky). Suffice it to say, having the right partners is critical.
I implore you. Taking the time to understand medical insurance coverage, healthcare (**ahem** spoiler alert - health insurance and healthcare are not synonymous), the healthcare supply chain, what is actually driving healthcare (and insurance) costs, how claims are paid, differences between fully insured, level-funded (or "partially self-funded") and self-funded (self-insured) options, what preventive healthcare really is, and other benefits that you can implement to augment your plans will vastly improve your company's bottom line, and I would strongly argue, your employees' health outcomes, as well. Once you have a better understanding of how all of this works, you'll be in a much better (and stronger) position to identify benefits consultants, strategists and brokers who will partner with you to bring strategic, innovative, cost-saving and outcomes-focused solutions to your business.
I was so excited when I found the session "Strategic and Nontraditional Steps to Bend Your Company's Health Care Curve," with speaker Dr. Wade Larson. While we haven't had the chance to speak in person (yet), I feel like I found a kindred spirit in this space. I couldn't wait to connect with Dr. Larson on my questions and share his incredibly insightful and important answers with you:
"Stop saying, "Someone oughta" and start saying "I'm gonna."
What is the biggest challenge for companies when looking at their healthcare and health insurance plans?
Understanding the REAL contributor to the problem. The primary driver of healthcare costs for any employer is claims. If an employer can control claims, they can control costs. And where do claims come from? Employees going to the doctor.
This is the key. Now, how do you control this? There are three fundamental principles that can help an employer get to the point very quickly:
Healthy employees don’t get sick, and they don’t go to the doctors. We want them to go to the doctor for preventative care, but that is not what drives up the real healthcare costs. When employees are healthy, they are also happy and that drives of productivity, increases profitability, decreases absenteeism, and reduces turnover. Employee wellness is not just a good thing to do for healthcare – it MUST be a strategic initiative for the business.
Employees need to understand that health insurance works the same way as car insurance. (Most employees don’t understand this.) There is a reason why we don’t speed and we don’t wreck our car. When we speed and we get a ticket, our car insurance rates go up. When we wreck our car, our health insurance rates go up. Well, when we wreck our bodies, and we go to the hospital for expensive procedures to fix them, the claims are paid, and those affect the rates which go up for the following year. If we don’t go to the hospital, because we are healthy, we don’t incur claims… And when we don’t incur claims, not only do we save that money, but our rates are not impacted for the following year. Interesting.
When employees are treated like partners, they start to act like partners and they start working for us. Businesses don’t have a problem sharing the risk when times are bad. We pass along costs to employees when the rates go up. But are we willing to pass along the rewards when the rates go down? Are we willing to share in the profits when they help us contribute to the solution? Are we willing to disproportionately reward those who are part of the solution over those who are part of the problem? When employees can see that their efforts can result in a reduction of cost, and that reduction of cost puts more money in their pockets, they get excited very quickly. When more money gets into their pockets, they become stingy with that money and they start becoming better consumers of healthcare – including taking better care of themselves so they don’t have to spend that money on healthcare.
"If a broker shows up only once a year at renewal time, it's time to fire your broker."
HR is often woefully uninformed when it comes to benefits plans. They often rely on their broker as the expert. Do you feel that this is effective? If not, what can HR do to help drive strategic healthcare decisions for their company?
I agree. HR needs to become informed and educated itself, but it also needs to form a dream team of expert consultants. Having the right consultants and brokers is essential. Let’s talk about who needs to be on this team to make it work and their roles and responsibilities.
HR expertise: If HR is not conferencing, and this means specifically to healthcare conferences or national conferences that are specific to healthcare related topics, they’re never going to get it. Look – healthcare is the second most expensive line item on the books. It is typically worth millions of dollars a year to manage. If the only time we manage this is during open enrollment, then we are acting like fiduciary imbeciles. We need to take care of this multimillion dollar account year-round. This also means that we need to become instructed on best practices and ways to manage the solution. The 2019 SHRM Annual Conference and Exposition has great solutions, as do several of the regional and local events around the country. HR MUST remain current in their education. This requires them to go to these conferences and seminars regularly – not just once year.
Brokers : If your broker shows up only once a year at renewal time, it’s time to fire your broker. That goes without question. A broker needs to be a trusted partner that works for you year-round. They are not going to do that on their own. As HR professionals, we need to push them and drive them to create solutions for us. We need to ask them questions and make them do their homework. Personally, I use Mercer because of the strategy that I get from them. However, I also use a second broker – Yes, I have two brokers. Mercer is my go to, and the second broker offers some services that are “out there” that are not very conservative but offer me some different solutions that I can’t get through Mercer because they are cutting edge and too new. This creates something of a tension much like Yin and Yang. It’s fantastic. While there is a little bit of competition between the two, it also keeps everybody on their toes. This way I have both of them working for me year-round.
Vendors: If the only time I hear from vendors is around open enrollment to pitch me new products, they don’t help me very much and I am not interested in their services. I have things going year-round with my employees. I need partners, not just a one-time solution. Part of my going to conferences is the trade floor. No, I don’t fill my swag bag full of crap. Sure, I’ll grab a pen or two but not stuff my bag full of useless stuffed animals and squishy things. I hit the trade floor to see what is out there. I look to see what services are available, what is new and thriving, and look for new solutions that can help me streamline benefits management and offer new options that can drive performance of my plan.
Companies often only review their health plans once each year - maybe two to three months prior to their plan renewal. When is the best time for HR to start thinking about, and considering changes to, their healthcare plans?
The best time for HR to start thinking about changes to their health plan is the day after the last open enrollment. As soon as you’re done with starting the year off, it’s time to start thinking about the next year. In fact, as we build one year, we are often thinking ahead of what we are going to do the next year. We think in terms of multiyear strategies. There are some things that we want to do, but in order to manage the change process, we may have to implement it over the course of two years.
Remember – as soon as the renewals calm, it is too late to change anything from the past. I cannot magically change my claims from the previous year. When I open the envelope, it is all about mitigation and negotiation. If I am fully funded [fully insured], I’m at the mercy of the health insurance company to negotiate my rate down. If I am self-funded, it is all about assessing risk and setting price points that demonstrate fiduciary responsibility.
Looking ahead, I can influence behavior changes among my employees. I can help them stand how to make better choices as consumers of healthcare, I can help them recognize opportunities to go somewhere other than the ER for primary care, I can offer substantial incentives for them to remain healthy, I can offer alternative solutions such as incentives for medical tourism and pharma tourism, etc. I can’t change the past – that I can change the future, and that future changes as quick as I do. I don’t have to wait for years to make change happen.
Often, companies feel that the only way to make "healthcare" affordable is by increasing deductibles and out of pocket maximums. Why do you think this is this problematic?
This limiting thought process is what got us into the trouble that we are in. At least, it is partially why we are in the trouble that we are in. Because of this mindset, many employers have passed along premium increases, gutted the coverage that our health insurance will actually cover, increased deductibles, and increased out-of-pocket maximums. The result? Employees are paying astronomical prices out of each paycheck for health insurance that doesn’t cover much, requires an annual deductible that you will never reach unless something catastrophic happens to you, includes an out-of-pocket maximum that is almost the same size as your deductible, and does not allow the employee to get the healthcare that he/she or the family needs or can afford.
Why is this a problem?
Let’s say an employee has an HSA (Health Savings Account) plan with a $6,500 deductible, times two deductibles for the family deductible on the plan. That means that before the employee can actually use the insurance coverage for which he is paying $500 per month, he will need to pay a total of $6,000 in premiums per year ($500/mo x 12 months) + $13,000 in deductibles ($6,500 x 2) for a total of $19,000 before he rolls into any kind of benefits “coverage”. If the employee is a typical employee with an occasional medication and doctors visit, it’s likely that he will never benefit from his benefits. In fact, because of first dollar costs while trying to meet the deductible, there is a really good chance that the employee will just not go to the doctor when he should and may stay home instead. So despite having insurance, the employee won’t use it, will get sick and stay sick for longer, will miss work, and will likely come to work being sick and spread it to others in the workplace.
What do you mean when you use the term "sick care"? How does this perspective impact a company's employees?
“Sick care” is all about mitigation. We are simply talking about reactive medicine – how to “fix” what ails us after the fact. It doesn’t talk about preventive medicine or the wellness component of preventing bad things from happening in the first place.
Sick care talks about mitigating the cost of the $55,000 that it will take to fully replace a knee through the local hospital system (all costs taken into account including the hospital, the orthopedic surgeon, the anesthesiologist, etc.). Sick care strategies are all about managing costs – and there is some of that that is important, such as bringing in medical tourism where I can send somebody across the border for the same surgery to replace the knee for $20,000 all costs in. But what if I could avoid replacing the knee altogether by helping the employee to lose 100 pounds? What if the reason that the knee needed replaced is because the employee is over 300 pounds? What if I could help them lose the weight in their 40s through our wellness program for a few hundred dollars which then prevents us from having to replace the knee later on? Or the back surgery? Or the cancer that will come as a result of poor health and eating habits?
By taking a holistic approach to healthcare, we take both mitigation (cost control) and prevention into account to attack the costs from multiple angles.
How can a company address healthcare costs, focus on preventive healthcare (rather than sick care), without busting an already tight budget?
It’s about priorities.
Do they want to spend next year’s money on healthcare increases? That money can go to Blue Cross or you can spend it today on preventive efforts including building a gym, wellness incentives, lunch and learn programming, incentive platforms, materials that you create yourself and distribute, videos that you develop yourself, etc.
We have a fully engaged group that does this as a part of the rest of their job as well. We only have a staff of three in HR. The key is to identify, recruit and engage your wellness committee from throughout the organization. As they become ambassadors of wellness, and they help promote the activities, they will take on leadership roles and begin to run the functions. You don’t have to do it all. In fact, if HR is running the whole thing themselves, this will fail. The more you engage in, the more you can get people excited to participate, the easier this will be to work. Engagement and participation across the board is essential. This CANNOT be an HR event. It MUST be an employee program that engages from the ground up.
What is the number one thing you hope the attendees of your session will take back to their workplace?
At least one useful strategy to embrace, take back, and try to do one or more of the following:
- Increase employee engagement to become part of the solution for the healthcare crisis within the individual workplace. Healthcare reform is local – PERIOD. Finding a way to help employees become part of the solution is the key.
- Reduce Costs of healthcare through a commonsense, proven strategy that is probably right in front of your nose. We have been talking about so many strategies over the past 20 years. Some of these things sound unbelievable – but most of us are not trying them out. Most of these are so easy it is ridiculous. Most of these will not cost you much to begin.
- Stop saying “Someone oughta” and start saying “I’m gonna”. Enough waiting around for somebody else to bring you a solution. It’s not going to come. Healthcare reform will never be solved from the top. After just three years of trying to turn the ship around, we are now wrapping up our second year of being self-insured with over $2 million in the bank and going into our third year of negative trend. And how do we do it? We made partner set of our employees, we gave the money back to them to help them become better consumers of healthcare, and we keep promoting the heck out of wellness.
Thank you, Dr. Larson, for this incredible information. I am beyond thrilled to share this and truly hope that your session is standing room only.
Please join Dr. Wade Larson for this session, Strategic and Nontraditional Steps to Bend Your Company's Health Care Curve, on Wednesday, June 26 from 10 a.m.-11 a.m. in LVCC N201-204.
Please also connect with Dr. Larson on LinkedIN and Twitter.
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