Evolution, not a Revolution - The Battle to Control Healthcare Costs, Part 1
Jeff Bastien
Employee Benefits Broker & Strategic Business Partner | HRiQ Founding Member | Finance & Culture Geek trapped in a Benefits Broker's body! 🧐
Trouble has been brewing.
A study of healthcare premium contributions shows a troubling cost trend for both employers and their employees since 1999.
That equates to a 255% increase over 20 years, which can make your head spin when looking for long-term stability within your business.
More staggering is that as we sit here closing out 2021, costs are still increasing and employee copays and deductibles are continuing to rise.
What is the solution?
Take a page from our founding fathers and bring hellfire to the tyrannical health insurance carriers that are raising these rates and increasing deductibles?
A tad dramatic? Sure. But with this growing problem, it seems the only solution is waiting for someone else to solve our problem. That leaves one to wonder - are we even asking the right questions?
When was the last major Evolution in Healthcare?
For the 15+ years that I have been in the healthcare industry, one this has become apparent - the way we buy insurance has not changed. We throw our hands up at the redundancy of the process, and do our best to pass along some education to employees, cross our fingers against a double-digit increase, and hope.
However, this "go with the flow" approach is different in other areas of business. For example, with Workers Compensation, we spend thousands of dollars annually becoming educated on what drives claims, how to lower our MOD, and implement safety programs with incentives just to lower a line item that is maybe 5-10% of the overall spend compared to health insurance.
RogersGray found ourselves in a similar position 5 short years ago:
"We dreaded the receipt of the renewal quote from our carrier as we anticipated another increase with no relief in sight. Even worse was the thought of communicating another premium increase to our employees despite our increase to our contribution. Ultimately, we had to make the hard decision to increase deductibles, change copays and prescription costs. Even doing all that, we were trending with an increase between 7-18% most years, with heavy negotiations and plan changes."
It was time to think differently - more on our story later.
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Understand your Premium Breakdown.
The only way to make a change is to understand the absolute basics; what makes up every $1 of premium we pay? The below breakdown is based on a study released by America's Health Insurance Plans (AHIP) in 2020.
Following the Pandemic that hit early in 2020, we can add an additional segment for COVID claims [per our fully-insured carrier partners]. Different market segments rates are also derived in different ways. For example:
Question: "Are premiums even the right way to look at costs? Is that the right way to measure if we are winning or losing?"
Trading a Fixed Cost for a Variable Cost is a Win!
Something that has taken hold elsewhere in the country that has not made it to the Northeast yet is alternative methods of funding; specifically self-funding (partial, stand alone, or captive). In Massachusetts we have held on (to this point) to a very conservative approach of offering higher premium plans with low deductibles, while pushing back on alternative funding as strategy and only using it as a reactionary defense mechanism when employers find themselves backed into a corner.
Why? We want good benefits for our employees. We want to be an employer of choice. We want employees to hear, "ABC Company - we want to go work for them!" But what if our choices are going to make that not feasible for the future?
That fully-insured dollar mentioned earlier is a fixed cost - it is very black and white. A fellow RG colleague always says that if you can trade a fixed cost, for a variable cost, you are almost always come out ahead.
How can we trade some of that risk in a fashion that we are comfortable with?
Take action before you are forced to take action.
This problem is not going to fix itself and you will be put in a position where you need to make hard decisions in the near future. Be willing, educated, and prepared for that conversation. Check back for Part 2 next week to bring light on RG solutions available as the market shifts, and how to know if/when the time is right to make a change.
In the meantime, watch our webinar on the future of healthcare in Massachusetts to get a preview on Part 2. The recording can be found here:
The market is shifting, we are bringing more decision-making tools into the marketplace, and sometimes it takes getting back to basics to finding the right solution for your business!
Jeff Bastien - Partner, RogersGray Insurance, a Baldwin Risk Partner