Why Rising Insurance Cost is Below the Surface
August 31, 2020

Table of Contents
Symptoms of High Health Insurance
Causes of Increasing Health Insurance Rates
Steps to Overcome the System

IntroductionKFF 2019
The average premium for family coverage has increased 22% over the last five years and 54% over the last ten years, significantly more than either workers’ wages or inflation. Employee contributions outpaced increased premium at 37% and 25% respectively. The net result is employees are paying a significantly greater portion of their compensation to employee health insurance contributions. (KFF, 2019 Employer Health Benefits Survey

In Todd Rose's book, "The End of Average", he outlines how society builds systems and products on the basis of 'average'. In this context, 'average" means typical, ideal, or a norm. We do this to predict and model how the system or product will be most effectively used. However, in most cases, this theory not only fails for many individual users, it actually does not apply to any one individual user.

Why are we doing the same thing in healthcare and employee benefits? Do any of us individually or as businesses fit the commercial insurance market's assumptions of 'average' healthcare needs? Of course not! Employers are frustrated by how they are steered to buy the pre-packaged 'average' product offering presented by commercial insurers.

Forward-thinking companies are shedding 'average' healthcare provided to their employees. A process exists to building a strategy that supports the health benefits employees/patients appreciate while delivering it for a cost that employers desire, making for a more satisfying experience for all. The first step is recognizing that the potential for control exists for those ready and willing to take it.

Symptoms of High Health Insurance
Employers and employees are feeling the pain of rising health insurance. Many employers feel as though they are held captive in a closed system tilted against them.
They often identify that pain with sentiments like:
- "Health insurance is complicated." 
- "Health insurance is too expensive."
- "My employees don't appreciate the benefits we offer."
- "I like my broker, but don't trust I get all the options."
- "I'm having a hard time recruiting/retaining good people."

That pain is real. In response to that pain, business leaders ignore it, assume there is nothing they can do, or take steps to mitigate the pain. Unfortunately, these pain points are only symptoms. 

Causes of Increasing Health Insurance Rates
As the old adage says, 80% of an iceberg is unseen and below the surface. The iceberg perfectly represents what actually drives higher premium. By identifying the symptoms, employee benefit plans can be built to expose the typically unseen causes. The status quo health insurance system is designed to increase, not decrease premium.

Premium drivers:
- Poor health literacy: 12% of US adults are proficient in understanding basic health, healthcare, and insurance terms (CDC). Poor literacy can result in incurred expensive, low value medical care.
- Lack of transparency: "Consumerism" in healthcare is blocked by a lack of transparent pricing.
- Financial incentives misaligned: Brokers on commission make more money the higher the premium. Insurers profit more the higher the insurance claims (Medical Loss Ratio).
- Unknown cost of claims: Business leaders don't know where their spending actually is. 
- Prescription prices: unknown utilization of medications, lack of transparent charges to plans, and misaligned financial incentives plague the pharmacy spend.
- Employees over-treated: the relationship between patients and primary care has degraded and become transactional leading to over-utilization of expensive healthcare services. 
- Limited customization: Employers are often not presented with all options of solutions for their team.

download The Iceberg

These pitfalls and barriers can be overcome by shedding the light on the status quo commercial market most small business fell trapped by.

Steps to Overcome the System
While it may feel like the chips are stacked against the small business trying to provide affordable access to their employees. There are simple steps that start moving the wheels forward. These 4 Stop/Start steps can begin the process of overcoming and building value into employee benefits.

Isolating benefits to a single person or team Gathering input. Ensure initiatives have broad support
Waiting for renewal to make critical decisions Including employee health as part of business strategy
Discussing benefits 1 x year for 30 minutes with employees Committing to regular content, reminders, and training on health literacy
Treating employee health as an uncomfortable appendage Infusing health into the company culture

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Topics: Employee Benefits Health Finance Small Business 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.