Pardon my French, but over the past couple of years I have experienced more than my share of salty language and aggressive behavior from frustrated customers fed-up with the impact that skyrocketing costs and declining benefit levels has had on their business. And I know that I’m part of the problem.
So allow me to elaborate a bit on this thing about impotence, which really is about control, or lack thereof. Employers want to reduce costs and improve benefits, but they feel they have no control..in other words, they are…impotent…
It’s ok..it’s not you–it’s me. Really.
We-me–us–your insurance broker–have promoted the idea that we can add value to you by aggressively shopping the market to reduce your cost of health insurance. And we’ve been successful! Almost every time we take a customers plan out to bid, we save money–5% here, 8% there, 11% here…real money, real results. We feel great because we have helped you balance your budget..you’ve lived to fight another day!!!
But in the process, employers have unintentionally and unknowingly ceded responsibility for controlling over healthcare cost to health insurers by actively (over) using the competitive market to reduce year over year increases. It produces short term savings, but long term problems….like a 131% increase in costs and a 20%+ reduction in average benefit levels over the past decade, according to the Kaiser Family Foundation. So yea, the process works…sort of…and then again… it really doesn’t work, does it?
Before I start to prescribe the remedy for your problem, let me provide a couple of clarifications:
- I am by no means against free market solutions–in fact, I think more reliance on market based competition is what is needed, not less;
- Going out to bid for health insurance every year can be an important tool in managing year over year costs–in many cases, over the past couple of years the savings produced in the aggressive RFP process has allowed many companies to survive and remain in businesss;
- I believe companies that provide health insurance and related risk management solutions need to be a critical partner in any long term solution; and
- I see no conflict with capitalist for-profit health insurance–competition breeds innovation, and I don’t really care how high profit margins are in health insurance as long as the value derived by customers–employers and employees– is sufficient, which ultimately means that prices are market competitive.
Ok, so on to the remedy, or at least the framework we need to establish to implement sustainable results.
1. Re-define “The Market”: Customer frustration stems from the fact that insurers have all the power right now, so employers need to get out of the market for “health insurance”, which is a heavily regulated state by state oligopoly where you are a price taker, and get into the market for “long term health care cost management services”, which is ripe with customer-driven innovation, customer service and free-market competition. Think about it: Why are your costs going up? Ask your insurance carrier this question and they will tell you that they are just passing along the increases in unit cost demanded by hospitals as well as higher demand for services from the obese and chronically ill. It may be true, but this passive cost pass through approach reminds me of a defense contractor or a municipality justifying their property taxes. There is no way the consumer wins in this kind of market. It’s time to get out while you can.
2. Forget about Price: That’s right–forget about the cost of coverage for a second and focus instead on the things you need to compete as a buyer in the market for long term healthcare cost control services, namely:
- More information
- More creativity
- More innovation
If you focus primarily on price, all you will get is relatively lower prices, which are still way to high. Instead, demand the things you need to be a smart, well prepared buyer.
3. Own the Problem Financially-You only want to be in the market for long term health care costs control solutions if you have a problem with cost control that you are trying to manage, and that means you need to own the problem outright. Over time, this will mean moving from a fully-insured to a self-insured or partially self-insured arrangement. The first step is to demand options from your broker or carrier that include alternative funding arrangements–self-insurance, minimum premium, “participating contracts”, etc. They’re out there, and we can use the RFP process to make sure we get the best the market has to offer.
This framework will sound very familiar if you have a self-insured plan. And even if you do, this shift in attitude and approach to the market will increase your sense control and begin to eliminate the frustration that comes from market-induced impotence.
