Are People at the Center of Your Employee Benefits Design?
August 5, 2020

Table of Contents

INTRODUCTION
The average cost of employer provided health insurance eclipsed $20,000 per family (Kaiser Family Foundation, 2019), including premium and cost shares. That rise in out-of-pocket costs has out-paced wage/salary significantly over the past decade (AJMC, 2019). In short, employees are being financially squeezed by increasing healthcare costs and insurance premium. The squeeze coupled with confusion around how insurance works and frustration navigating the healthcare system leads to under-appreciated benefits.

The status quo of healthcare has placed many business leaders into passive position. Amidst intense demands of supporting the workforce, the status quo has left business leaders frustrated with navigating the complex health insurance market. Leaders can take charge by arming employees with the tools to be high performing, confident healthcare consumers. 

Small business employee benefit plans can financially and experientally differentiate one employer from another. Effective benefits planning can be simplified and cost-effective to best position the employer to attract the right talent while managing business expense.

HOW DID WE GET HERE
Small business leaders are busy running their business and are often under-served with limited access to scalable employee benefits solutions. The status quo process leads to an (insurance) product-centric benefit that typically has low value to both the employer and employee.

Business leaders have been conditioned, and maybe in part assumed, that the players in our healthcare system are incentivized to help drive down healthcare costs. That is not the case. While that may be an intrinsic motivator for many, when it is paired against the converse financial outcome, the result is a stagnant, status quo system. On a high level, the reality is:

  • Hospitals and facilities are engaged in preferred-provider organization (PPO) contracts largely arranged on a percent discount basis with insurers.
  • Insurers make more money by having more frequent, more expensive, and more people incurring claims.
  • Brokers traditionally make more money the higher the premium (commission model).
  • Prescription drugs are the wild west.
  • Fee-for-service pay arrangements for physicians has degraded the physician-patient relationship.

The financial misalignment of the healthcare system drives up cost for employers and creates a scenario where we buy insurance to access healthcare.

PRODUCT vs PEOPLE-CENTRIC
In health and healthcare, business leaders and consumers are bombarded by confusing and conflicting messages. All that overlap and marketing has led business leaders down a path where they are saying, "how did we get here?" Let's pause and separate two things: healthcare and medical insurance. Somehow, these 2 distinctly different resources have been convoluted into one.

Patients engage in healthcare, the service, to resolve a risk of or actual medical/health event. A patient sees a doctor, goes to a hospital, gets rehab, etc. The service stands alone.

Medical insurance is one mechanism to pay for our healthcare, especially in those circumstances where treatment, medications, or diagnostics would otherwise be unaffordable. It is a financing tool intended to keep the consumer from going broke due to a medical condition.Consumers theoretically share the risk in a pool of other consumers.

In addition to the mandate for larger companies, businesses typically intend to provide a competitive employee benefits program to support their employees, and help them stay as healthy and productive as possible. There was a time when employers providing medical insurance was a cost-effective way to support the health and access to healthcare of its employees. Traditional group medical insurance is increasingly unaffordable and not protecting employees from financial risks.

People-Centric Calculator

In order to flip the script, business leaders can invert the priority away from a product-centric (insurance) and transition to a people-centric (health) model, where the goal is helping employees stay healthy and navigate the healthcare system. Then, pair that with the right finance tool which may be or may not be insurance. Increasingly, employers adopting a people-centric benefit model are finding greater value.

Are your benefits people-centric? We have a calculator that can help find out. CLICK HERE

WHAT IS VALUE IN BENEFITS
What does 'the cost of healthcare" really mean? Some people mean that there is more out of pocket costs for the individual. Others might be referring to the rise in insurance premium. And even more may be talking about the cost of providing healthcare services is increases. Let's clear the air:

  • COST is the amount paid by the employer/employee for healthcare as a combination of potential factors (eg total spend).
  • PREMIUM is the amount insureds (patients) pay for the insurance product.
  • COST SHARE is the out-of-pocket amounts not covered by insurance, typically the responsibility of the insured (patient).
  • Healthcare CHARGES are what medical providers submit to patients and/or their insurance.
  • PRICE of healthcare services are what providers are actually paid. Sometimes this is called an 'allowed amount'.
    • Price frequently differs from charges based on contracts and programs. The dynamic of charges and price/payments/allowed amount creates the lack of transparency in the system. 

Price alone does not create value. Value is a function of price, satisfaction, and outcome. In the context of employee benefits, employers can strive for VALUE = increased satisfaction + optimal employee health + lower spend.

ELEMENTS OF PEOPLE-CENTRIC PLANS
Health Literacy: Health literacy is the preventative or proactive band of plan design. If individuals have the training to take care of themselves across the domains of well-being (spiritually, physically, emotionally, financially, occupationally, etc.), they can optimize their personal and professional lives. They will also be less likely to require healthcare services and/or pay for services on someone else’s terms. Health literacy examples might include training on how their insurance works, content on how to create proper nutrition plans, or regular reminders on healthcare best practices.

Healthcare Navigation: Navigation is the containment band in plan design. The healthcare system is complex and especially overwhelming in the heat of a condition. Many people can benefit from resources designed to help navigate the healthcare system. In understanding how the system works, where the financial incentives are set-up, and having the right tools and resources in their pocket, employees can be the driver of their healthcare both in clinical and financial outcomes.

Health Finance/Insurance: Once plans have literacy and navigation tools in place, employees have the resources to become adept healthcare consumers unlocking different ways to pay for services if/when they need them. The cost-effective nature results in real money saved. Multiple healthcare financing/insurance options exist in the marketplace despite most brokers not presenting options outside of fully-insured to their clients.

Well-thought-out benefits and plan design can generate tremendous value. These elements may differ from company to company depending on the culture, needs and readiness of each. To get started down that road a few action steps can get the ball rolling.

5½ Steps to Immediately Boost Value

  1. 1. Engage in leadership-level discussion (vision, actions) about employee health quarterly, aligning with the existing business cadence and strategy.

2. Survey employees around health literacy competency and benefits satisfaction.

3. Emphasize health and access to healthcare service first, insurance last in plan design.

4. Communicate with employee’s monthly on health, healthcare, and/or finance (insurance) tools available.

5. Do business with vendors who promote transparency and align with your financial interests (fees v commission).
          5½. Ask vendors how they get paid, and how much do they make from your business, including bonuses and overrides.

 

Topics: Healthcare Health Finance Small Business Health Insurance Health Literacy Healthcare Navigation Healthcare 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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