Smaller Companies – force change and think differently about group health insurance

It’s time we all think a bit differently with health insurance and healthcare services. We too are a small company of less than 100 employees. What we’ve built for our small business customers came from an initial desire to help ourselves first. It’s just like the opening remarks by flight attendants explaining if oxygen masks drop, put them on yourself first, so you can then help others.

It just so happens we’ve done this several times over the last 3-4 years because of the ACA waxing and waning. The result has been a good capacity for seeing changes coming, building products swiftly and then testing them on ourselves. Then we bring them to others.

The ACA (Affordable Care Act btw, or “Obamacare”) came on strong as the President who signed the legislation was in office…we saw change coming and built the Navinsure WBE (web-based entity) -fast. In a period of about 90 days we got through management consultants, compliance and the U.S. Government – CMS (Centers for Medicare & Medicaid Services). Those were exciting times and we grew quickly teaching employers with less than 50 employees to think differently, as we had learned to do ourselves. This entailed a case to a group health insurance solution, but rather, implementing a system very similar to how we offer and fund 401 (k) to employees. A defined contribution strategy – so set a dollar amount we could afford and then give our staff tools to shop/compare plans with experts (us in that case)  to get specifically what fit for each employee. It was awesome, worked great, and employers started finding us quickly.

I mentioned we have been good at seeing mounting changes, and adapting, and boy did they come rapidly. The enrollment numbers published by the ACA were not accurate, and unfortunately set the stage for more and more high risk buyers (large claims) rushing to the marketplace, with the healthy low risk buyers sitting on the sidelines. We call that adverse selection – no one healthy to pay the claims for the very sick. Insurance carriers started created problems as they were quickly losing billions of dollars. That started by not availing agents/brokers any way to earn a living helping employers shop on the marketplace. And more and more insurance companies pulled agent commissions (btw this is NOT the problem with healthcare, read below) and products so very quickly you had no products to sell and no way to earn a living as an agent. Now before you go on a diatribe of why insurance carriers are evil, please pause, take a deep breath as I do sometimes, and wait til I explain the racket below to give you more context. Please.

So we “took a knee” and starting thinking about the next solution. Today we have it. And as before we tested it on ourselves, and worked out some kinks and then starting taking it to some trusted advisors and companies (both big and small) to test it out. The savings have been astonishing. So, we stopped selling individual products over a year ago,  as in a period of 3 open enrollment periods, we watched client’s pre-Obamacare plans versus Obamacare plans soar by 500, even 700%. A complete disaster……NC insurance rates are at, and in some cases above, NYC rates in a few short years.

Many including us new when Obamacare passed that if they got this thing wrong, it was going to be what we call the “death spiral.” That said, when we advise clients we owe them due diligence, thoughtfulness and as a fellow small business the ability to innovate. So regardless of what instinct told us from a couple of decades as experts in this industry we pressed on.

Then unfortunately like own predictions, the floor starting dropping….. and that coincided with a massive pendulum swing in the Presidential Elections. So now the ACA is officially on the chopping blow, just pick up your iPad, or smart phone, or even an old fashioned newspaper and read. How it is now cannot be sustained. It has imploded from the standpoint of premium affordability as well as product selection. Health Insurance carriers have abandoned the marketplace in droves, and we’re left with 1-2 health insurance carriers per marketplace at best. Some counties in states with the Federal Marketplace/, don’t even have a carrier to avail residents who qualify for huge premium subsidies. So the largest entitlement in decades, has entitled people to a product that does not exist.

Many of the more “blue” states have pushed for a single payor agenda – massive, constant failures. Unfortunately we are not Switzerland, the U.K. (again pick up a bipartisan newspaper and please read, their NHS is imploding massively finally), Germany, or France. The U.S. is massive and like a conglomeration of many many nations now from our population’s standpoint. And given the state of political and civil discord, many do not appreciate or agree with each other. Suffice it to say, getting single payor in, would be like setting up a love affair between the Head of the NRA and Nancy Pelosi. No chance.

The more red states seem to do anything but what blue states do and pander more to our current brokenness. So just think big insurance companies, big pharma, big hospitals. BUCA – Blue Cross Blue Shield, United, Cigna, Aetna (just acquired by CVS as of this writing) is the big insurance mess. Just watch TV for more than 30 minutes….you’ll see more specialty pharmaceutical commercials than anything else – they’re a humongous problem with the cost of healthcare in the U.S. Then hospitals, my gosh, the biggest mess of all. A Motrin can cost $50 in a hospital, but you can buy a few thousand when discharged across the street at a local grocery store.

So we found the problems rest in 3 big areas – the billable, costs of care….. – Hospitals/Ancillary Facilities, Pharmaceuticals, Physician Services. Before I was old enough to be in this industry, these services were not all bundled under 1 insurance policy or contract….you could in fact by them separately and “wrap them around” each other. This would bring you to a similar product like the copay plans common today. Unfortunately they’re the biggest product problem contributing to costs spiking up for 20 years. This is because we have no idea what we’re paying for; I’m talking about the actual charges by the doc, hospital, pharmacy. So Pharma, and Hospitals have not been attacked like the insurance companies that pay for this mess. They need some humble pie, and if they can’t be regulated to not overcharge for services  the only fix is what we found for ourselves. Reference-based pricing (RBP).

Before I finish with RBP, think of this – it’s a fact the U.S. does not have the best healthcare in the world. Also some of the most unhealthy people on earth. Search the World Health Organizations annual list and you’ll see the U.S. not even break the top 15 many times. What we do score incredibly well in is egregious costs. We are the most expensive nation on the planet many times over for healthcare, with this most unhealthy people. We are a sad mess. Health Insurance Companies are complicit as they have allowed the dumb contracts between themselves and the hospitals, and pharma companies to hide the costs, let the prices go off a cliff and do nothing to unplug the profit racket. Some say it’s okay to keep us dumb and insurance poor, not us.

Additionally our government has really not done anything with the ACA. Remember we’re a divided country right now with people spewing hate from both sides. And we expect our government to fix healthcare, they can’t, so we the private citizens and companies have been forced to do it ourselves. Now back to RBP.

Products sold by insurance companies highlight this massive discount you get joining their network and using “their” doctors and hospitals. Today, unfortunately not true. Remember, the whole system is both broken and a racket. If I have a hospital for surgery charging me 500% more than Medicare, for example, but there’s no attachment to the outcome or quality of care, there’s no substantiation for the 500%. We see the 99% of the time. So I’m a member of BCBS of “whatever state” who prides a 45% discount because of them on 500% of an up-charge and I’m supposed to see value? Nonsense. And this is the racket folks. I’ll save you 200 more examples, trust me, we’ve got them. RBP flips this upside down.

RBP gives the providers the acceptable charge as the start of the negotiation when a patient faces care. An army of negotiators and lawyers are popping up in these third-parties to help employers  set the stage on cost of care. Best part is they take the legal liability, not the employer, not the patient. It is flipping hospital charge-masters (forgot to mention him/her…like Vito Corleone from the Godfather) upside down and hopefully their dollars and falling out fast. They are the secretive person that guards the racket at all costs. Now we’re starting to understand how costly those hospital practices have been to us consumers. Also chalk one up for Obamacare forcing electronic medical records (EMR) which are getting us all data. If you want to be credentialed to offer care in the U.S. you must use them or else…..and data is king. So now armed with data, a team of lawyers negotiating against hospital charges  and being in charge of what is acceptable for a reimbursement, the game changes with RBP. So rather than the 200-2000% of Medicare reimbursements that I see every day with employers using “BUCA”, we get this figure down more to 50-90% over Medicare or 15% over the cost-of-goods submitted by providers. Total game changer.

So 60% of payments to hospitals in the U.S. are from Medicare. More than 50% of those same hospitals are profitable on just their Medicare businesses. So what’s the problem here with RBP? It breaks up the racket, and forces change, but boy do slow-moving bureaucracies hate change.

So RBP and abandoning the traditional big insurance carriers (where it is suitable based on size of employer) is the game now.  We change the vehicles  (Third-party administrators instead of BUCA)  to pay claims, get way better data, offer gigantic selection of providers (no networks, go wherever you want) and get some bigger tax savings as we don’t need to pay lots of the additional fees built in to the broken game outlined above from “fully-insured” health insurance plans.

This is not something new, I remember it 15 years ago when I was much younger, working in the benefits consulting area inside one of the largest Banks on earth. I worked with some larger U.S. employers, who used a self-insurance methodology for their benefits but because the lack of technology/apps/systems forbid good data, were not ready for RBP in droves. That is now changing with the tech-revolution folks. The only problem for now is helping our very small employers with only a handful of staff as the products are not there yet. We have yet another milestone fix which is a stepping stone which I’ll talk about in another blogpost for them. Think just the basics from full-insured BUCA plans, and a tax-favored vehicle filling gaps left by huge deductibles. It’s quite easy and is step 1 in our normal 5 year plan to get a broken employer from point A to point B methodically. And you save all along the way…..


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