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Let’s Talk Price
How to reduce health insurance costs
Health insurance rates are rising at an unsustainable pace, and workers are picking up an increasing share of this. Why do employers and employees tolerate this?
The health care and health insurance industries are in a feedback loop, reinforcing the idea that health care gets more expensive each year and so must health insurance. The price keeps going up but no one addresses it, and nothing employers try – from plan changes, employee engagement to wellness programs – makes any real impact.
"I would like to make a class-action apology for all CEO’s. We allowed the mess on the economic side of health care to happen."
“The real problem with employee benefits is that we in the C-suite simply have not treated our benefits like we do every other key part of our business.”
What is Health Insurance, Really?
At the most basic level, health insurance is a form of risk management. Employers pay insurers a premium to take on their risk in exchange for compensation in the event of a covered loss. In the case of health insurance, insurers manage the health care supply chain and connect employers and end users with different care options.
Change in Share Price 2010 – 2018
Top 5 Publicly Traded Health Insurance Carriers
So, What’s the Problem?
When you review all aspects of the health care supply chain, it’s clear the only players who don’t benefit from rising costs are the ratepayers and end users. Insurance companies, PBMs and others are collecting exponential profits that far surpass the rise of wages and inflation.
It’s a Business
Insurers are businesses, accountable to shareholders. By outsourcing management of the health care supply chain to insurance carriers, employers have lost complete control and the result is a system full of misaligned incentives that reward increasing costs.
The majority of health plans are built around the premise of the network discount where the focus is on the size of the discount off of billed charges rather than the actual price paid for the service, creating an arrangement that benefits both carriers and providers when costs go up. Higher billed charges allow for bigger “discounts” while the actual price paid steadily increases.
15% ANNUAL PREMIUM INCREASE & THE MLR
What is MLR?
MLR, or Medical Loss Ratio, is a prime example of misaligned incentives in the health care supply chain. The Medical Loss Ratio is a provision in the Affordable Care Act that was intended to keep insurance carriers from over charging their customers. It requires that carriers spend $.80 of each dollar collected in the small group market, and $.85 of each dollar collected in the large group market, to pay its customers’ medical claims and activities that improve the quality of care. The remaining portion can be used for overhead expenses, such as marketing, profits, salaries, administrative costs, and agent commissions. If health care costs go up, however, then the carrier is justified in charging higher premiums increasing the value of their 15% or 20%. With a model like this, carriers benefit when health care costs go up.
Total Control Health Plans
Rethinking insurance from the ground up
The biggest difference between a Commercial Insurance Carrier and a Total Control Health Plan is this ability to manage the health care supply chain.
With a Commercial Insurance Carrier, employers don’t know all of the costs and moving parts of the supply chain because they are not managing it themselves. Without the information or leverage necessary to make a meaningful impact on cost, employers have been forced to reduce benefits and shift larger and larger costs to employees. While a turnkey health care package is certainly convenient, the lack of transparency makes the health care supply chain impossible for employers to manage.
One aspect of the Total Control Health Plan is ensuring claim processing is handled by a person, not a computer. By investing in a slightly higher administration fee, employers can save in the long run due to more accurate claims. One employer saved $78,664.86 on one claim alone by implementing a Total Control Health Plan.
A client with approximately 400 employees on their medical plan was contemplating transitioning from a fully-insured plan to a self-funded plan when they discovered one of their members had a medication projected to cost over $750,000 in one year. Armed with one vital piece of information, they were able to save $700,000 with a Total Control Health Plan.
It’s Time to Take Control
Ready to take control of your health plan? In his book, “Not Rocket Surgery,” Mike Hill, RHU, REBC, LIC, explores how to manage your healthcare supply, unleash cost transparency and effectively reduce costs in a sustainable way.
“Mike’s insight into the health care crisis in America is unparalleled. The solutions to this crisis already exist, and Mike has done a spectacular job of laying them out for anyone who cares to take advantage of them.”
Deborah Ault, RN, CCM, CCP, AATMC, MBA – President, AIMM
It’s time to take control of your health plan. Reach out and start the conversation.