Healthcare and Health Insurance are NOT the Same
November 23, 2020

Table of Contents
How We Got Here
Health Insurance Is a Finance Tool
Employers Can Separate The Two

Many leaders see insurance as a low-value commodity. One particular leader fell in that group; however, is very passionate about “taking care of (his) guys". During a meeting, he mentioned that when he adds a location, he prefers to serve as general contractor (GC) in the renovation. He has the experience and capabilities to do it. I asked, “That’s interesting. Do you enjoy that?”

He responded, “I’m not sure I enjoy it as much as I do it well, and I am able to get more for the money I spend. So, it’s worth it to me.”

I added, “Sounds like that creates value.”

He said, “Yeah, that’s a good way to put it… value.”

The conversation around value is a regular part of our ongoing conversations and how to apply the mindset above to his employee benefits, not just ‘buying insurance’.

How We Got Here
Healthcare (services) and health insurance are no more the same than your house and mortgage are the same, or your auto repair shop is the same as auto insurance. Political rhetoric, marketing messaging, and low health literacy has blended the two concepts healthcare and health insurance into one. Healthcare is the service we receive while insurance is one way to pay for such services.

There is no greater indicator of the problem of blending the 2 than the rise in medical debt and medical bill-related bankruptcy (AJPH 2019). Average annual insurance premium for a family in the US eclipsed $20,000 in 2019, paired with significant out of pocket responsibilities have pinched many people (KFF, 2020),

Part of the problem is systemic where the construct of the system is insurance product-centric rather than people-centric. Funneling all medical expenses through the product inflates the cost because of all the middle services that touch a medical claim with their own profit motive (bill from medical provider). 

Health Insurance is a Finance Tool
I regularly meet with business leaders, discussing their pain points around employee benefits and frustrations around the rising cost. There is an immediately executable tip to start down the path towards greater control.

Somewhere down the line, we were conditioned that insurance is a solution. When did the message get so convoluted that insurance protects from an event? Your homeowner's policy does not impact risks of a fire, auto insurance does not decrease chances of a collision, and medical insurance doesn't decrease the risk of getting sick.

Imagine if we expected our auto insurance to cover expenses like oil changes, tire rotations, and installing new brake pads. Those are expected cost of ownership, not a loss from an incident. So why are we surprised when our health insurance is increasingly unaffordable when we expect it to do more than it is capable of?

Insurance, and specifically medical insurance, is a financing tool... not a solution. The solution starts with matching the right tool with the right user, and teaching them how to use it.

While significant work remains on improving our healthcare system, we can start by recognizing we have tools in our hand today that can influence our own outcome. We wouldn't ask a carpenter to frame a house with thumbtacks any more than we would ask a child to hang a calendar on a cork board using a nail gun.

Let's start with matching the tool to the operator and teaching them how to use the tool properly. If we take accountability for the maintenance of our own health, identify the right tools within our broader health strategy, and use the tools effectively, significant in-roads can be made.

Employers Can Separate the Two
One key question starts an employer down the road of peeling these two issues apart: 

What are you trying to provide for your employees: insurance or access to healthcare?

If the answer is "insurance", then that provides insight into a specific path to go down which typically ends in a fully-insured product with minimal customization and influence over cost for an employer group. If the answer is "I'd like to provide access to healthcare so the team can stay healthy", that leads down a different path which opens the door to greater levels of customization, direct contracting, better access to services, and quite often at a lower cost.

Similar to how the leader in the initial story sees value (get more for the money) in self-performing the GC duties, business leaders can add value to their employee benefits design by managing it themselves with the support of the right advisor. If leaders chose to outsource that management to a traditional commercial insurance company, they pay significantly more with diminishing returns. In order to take charge, the right strategy and the right benefits advisor can put together the team, resources, and tools to maximize the spend and deliver best in class employee experience.

As employers begin to separate services from insurance, new finance options may be a better fit like:

  • Level-Funding
  • Captive
  • Self-Funding/Insuring

 

Topics: Employee Benefits Health Finance
Eric Hannah

Written by Eric Hannah

Eric is an employee benefits advisor at Olivier VanDyk Insurance and a catalyst for change. Through a multi-faceted, two-decade healthcare career, he developed a unique perspective on personal well-being, healthcare navigation and insurance systems. This experience inspired Eric to introduce an innovative approach to employee benefits – putting employers and employees in charge of their own care and spend. Eric believes that employee benefits should be a tool to achieve the optimal employee experience. Today, he helps forward-thinking business leaders develop strategies that create value.

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