[00:00:00] Stacey Richter: Episode 406 the Inertia Show Five excellent reasons for the why with the Inertia in Benefits Departments Today I am speaking with Lauren Vella.
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I'm going to run through the five reasons Lauren Vella talks about today for the why with the inertia and benefits departments of self insured employers.
But before I do, let me report that in sum they add up to in many cases, benefits folks sit between a rock and a hard place. You really can't poke fingers at benefits teams who don't have the bandwidth, the resources, the expertise or the organizational power to in essence run a small insurance company in house and also do the rest of their jobs.
This is especially true when benefits teams get no help or air cover from the CFO or CEO of their companies. So the bosses are in effect telling benefits teams to manage the second biggest company expense, this uncontrolled thing growing at multiples of the rates of inflation. They say go get a handle on that, but also don't make any noise, don't disrupt anything.
And meanwhile, I don't know, is the CFO under the impression that all he she needs to do is pop by once or twice a year, issue some nasty grams about renewal rates to people who have no training in any of the financial and probably other skills required to manage this huge spend and or on the other hand, Chro doesn't report to the cfo.
So same result, opposite problem. Here's the five pillars for the why with the inertia that I explore pretty deeply with Lauren Vella on the show today. Number one, transforming the healthcare industry is not actually in the job description of benefits professionals. Number two outsourcing to consultants.
Benefits departments a lot of times don't have the resources or adequate staffing to get deep into the complexities of healthcare. Which means that lots gets outsourced to consultants. If you have listened to the episode with Paul Holmes or AJ Loicano, the problem here is that many traditional EBCs, employee benefit consultants and brokers have a very vested interest to maintain the status quo.
Currently, some are able to skim commissions of up to 30% of pharmacy spend of employer healthcare spend into their own pockets. These consultants have zero interest in upending absolutely anything employer inertia is paying for their vacation home after all. 3. Nobody gets fired for hiring the same ASO or TPA or PBM or whomever as their predecessor hired or they've been using for years.
But they might get fired for doing Something new that doesn't go so well. There might be no patience for even the shortest of learning curves or the smallest amount of disruption. There's also the aspect of a benefits team being capable of selling a transformational idea up the organizational ladder. Does the benefit department really know what the goals of the C suite are?
And if they aren't crystal clear on C suite goals and aren't the best presenters in the world, it's going to be a no go on the new idea. And then, yeah, inertia. Number four reason for inertia. There's no obvious solution, no magic bullet or easy answers. It might be hard to even figure out what to do that might have the positive impact the benefits team might be looking for.
And then we get into the is the juice worth the squeeze Discussions. And then number five, there is a status quo bias. Inertia is human nature. But at the same time, employers are wasting up to 30% or more of their healthcare benefits spend. That's a lot of money. That's these dollars are getting siphoned right off the top and going into someone's pockets in ways that do not help employees get better health.
Dollars that could have been used to give tens of thousands of dollars in raises, dollars wasted by the employer. But also the employee gets ensnared in this financial lack of oversight because employees have deductibles and coinsurance. So it's everybody sagging under the current model of some EBCs and payers and providers and PBM executives getting rich and hardworking Americans paying for it.
So let's cut to the chase. What are two solves? There's many more, but here's two. And Lauren Vella and I sort of ran out of time before we could adequately explore more. But these two will get anyone who wants to started. Here's one. Solve C Suites. Yeah, you get involved, provide adequate air cover for your benefits teams to move in new directions and also resource and staff your benefit teams with the kind of stuff and skills that they desperately need right now.
Attracting and retaining employees has a whole new reality and opportunity. And a benefits team staffed for the market environment 10 years ago, but not for the market today is a growing competitive and financial disadvantage. Number two. Solve. Potentially there is a playbook for how to go about this. Listen to the show with Lee Lewis for his but step one of almost everybody's playbook is to find the right consultants working at the right consultant organizations.
These right consultants and companies are the ones who are not taking indirect money under the table from an employer without that employer's knowledge. And if you're sitting right there thinking oh no, that's not me, unless you've very deliberately changed consultants so that it isn't, don't kill the messenger here.
Again, listen to the shows with AJ Loacano or Paul Holmes. Ignorance is not bliss in this case like many others. Also, Dr. Bricker just did a video on EBCs and broker types link in the show notes so do these solves mean spending more on a department that is already a cost center? Yeah, good question. Wrong question.
As the conversation with Lauren Vella today really gets into, the actual question is can you afford not to spend more on a department so that you aren't getting wildly taken advantage of in the current market environment? If you spend $1 and save more than $1 and also get employees better health, that does not seem to be a bad deal.
As I've mentioned several times today I am speaking with Lauren Vella. Lauren is a very experienced consultant working with coalitions, groups of employers, physician organizations, and also in the PBM space. Connect with her on LinkedIn to learn more about her work. My name is Stacey Richter. This podcast is sponsored by Aventria Health Group.
Oh hey. This episode is also sponsored by Employees first and I could not thank them enough for providing some financial support here to Relentless Health Value. So let me put on my best reading and ad voice and this is what they have to say. If you could find millions in untapped savings to reinvest in your employee benefits, wouldn't you?
Employees first is the next generation of voluntary benefits with a turnkey captive as a service approach that gives employers control and transparency and you may not have to change a thing. Visit myemployeesfirst.com to calculate your savings. Again, thank you employees first. Lauren Vella welcome to Relentless Health Value.
[00:07:15] Lauren Vela: Thanks Stacey. So good to be here.
[00:07:17] Stacey Richter: We're talking about inertia. In fact, we're calling this show the Inertia show. And one of the reasons why is because we use this word inertia. Kind of like it's our arch nemesis in the employer space. Like, why don't benefits change? Well, it's inertia, but I have never heard anyone actually drill into what does inertia actually mean? Maybe we just start out here. What's the situation analysis?
[00:07:42] Lauren Vela: Yeah, I've heard lots of folks about inertia as well. If we step back, it might be a lack of understanding about what is it that benefit managers live with when they're trying to provide a great healthcare benefit to their population. The first thing, and I think this is just critically important, the first thing is that fixing healthcare is not really the benefit manager's job.
The benefit manager's job and the job of the benefits department in every company is to attract and retain employees. That's actually their job. That can run absolutely opposite to how do we fix the healthcare system? I mean, making sure that everybody is happy and that there's full coverage and bringing all these great new bells and whistles.
Benefits is what will keep folks happy, what will attract and retain employees. But that might be just the opposite of what could ultimately fix healthcare. I mean, as a result, we end up buying a lot of low value care because we're sensitive about, about diminishing coverage. I think that's a big disconnect for folks.
[00:08:51] Stacey Richter: If we were going to maybe come up with a list of the reasons for the why with this inertia, would this be what you would consider the first one? The idea that who is saying that these employers are suffering with a major case of the inertias? It's policymakers or somebody who's trying to, in air quotes, transform the industry.
And they're kind of pointing to employers and saying, look, you, you know, you run benefits for 190 million Americans. If you would simply start doing things and get off your inertia couch, then we could actually get some transformation here. Right. So like you've got people within the industry holding benefit managers to account for something that they don't necessarily even consider within not only their wheelhouse, but just they don't even have any conception that it's their job to do so.
[00:09:46] Lauren Vela: Right. And I don't think it's wrong that all these health care reformers want employers to be the ones to fix health care. I don't think it's wrong. I mean, after all, healthcare employers are paying for 50% of our healthcare system and a bigger chunk of profitability. So I don't think it's wrong. The purchasers are typically the ones that can shape what a market looks like in any sort of industry.
I just think that we have to step back and say benefit managers, they're being told fix healthcare. They're also being told, hey, make sure that we have very competitive benefits and make sure that we, that we don't have folks leaving because there's a better benefit elsewhere. It's a bit of a schizophrenic existence for them.
[00:10:29] Stacey Richter: At the same time though, the trade off, maybe that potentially used to exist between cost and good benefits has Become weirdly the opposite in a way. By benefit managers paying attention to how much they're spending and what they're spending their money on, you'd actually think that more employees would be retained.
In fact, I just saw a study, we had Dr. Wayne Jenkins on the show last year who was talking about how just given the escalating prices and the amount of cost shifting that has happened, employees are valuing cost effective care much more in fact, and are willing to trade more broad uncoordinated care that's incredibly expensive and requires deductibles that they can't even afford for integrated care in narrow networks.
[00:11:24] Lauren Vela: I think that is increasingly the case. I don't think that has been the case over the course of the past decade, but I think that is increasingly the case. Lots of studies have shown as a high deductible health plan is bad, right? Folks cannot differentiate between high value care and low value care and so therefore they're not getting the right kind of care.
So we know it's very, very bad. When everybody was having everything covered in full, there was no cost pain for Americans. And so therefore we were just able to go on like that. But we can't anymore. Americans are in pain, policymakers are seeing it and employers are seeing it and we have to do something about it.
One thing I can tell you, I mean I've worked with many, many benefit managers. I consider them among some of my best friends. They care about the health and the well being and the financial well being of their populations. No one should ever doubt that. And so they do want to do things to control the cost.
They know that cost should shifting has reached a point that may be counterproductive at this point and they want to fix that for sure.
[00:12:29] Stacey Richter: I've also heard that a very small sliver of a lot of people in benefits job is health benefits. I mean they're doing all kinds of other things as well. So maybe you'd summarize the number one why for the why Inertia. That no one ever necessarily told the benefits professionals that one of their MBOs management by objectives is to transform the health industry.
They might be worried about their own employees, but lately it gets really complicated and really time consuming really fast. And just to all of a sudden embrace the idea that in order to fix healthcare for their own employees, they sort of in a certain way have to contend with all of the complexities and nastiness frankly of the problems writ large in the healthcare industry.
And it's just a daunting challenge that they don't have the expertise or time to even get into.
[00:13:26] Lauren Vela: Yeah, that's exactly right. And I would say that kind of feeds into another really big issue because of everything that you just said. Benefit folks partner with consultants to help them, as you've had, actually shows about this, right, where the consultants whose job it is to advise benefit managers and to think of these employers as their clients are often misaligned.
I don't think that's in debate anymore. So much so that we have a new piece of legislation, the Consolidation Appropriations act, which actually addresses this and says, look, benefit managers, you have to know how much and for what your consultants are being paid. I mean, this is an issue because of everything you just said.
Benefit managers have had to rely on them. Keep in mind that within employers, and especially within very large employers, benefit departments are cost centers, they're not revenue centers. So unfortunately, they're often under resourced. Benefit managers are some of the hardest working, most devoted people I know.
But they're not always given. I mean, there are exceptions to this for sure, but they're not always given the credibility or the resources that they need within their department, within their companies to do the jobs they need to do. And I remember one time I was on a panel and somebody asked me what would be the one thing CEOs could do to create a better experience in the US healthcare system.
And my response was, CEOs should better resource their benefit directors. They should provide more resources to their benefits departments, and they should give them the leeway and the Runway to do the right thing and to experiment and give them permission to take risk. That's what CEOs should do. Oh, my gosh. I get so much hate mail, Stacy, from saying that publicly.
[00:15:20] Stacey Richter: From whom?
[00:15:21] Lauren Vela: The hate mail, I think folks were interpreting that as well. She just wants to dump more money. And it's not just about that. I don't know who it was. Some CEO somewhere said, the truth is every single company is in the healthcare business. Every company is in the healthcare business. And so allowing the benefits department to really dive in, going into a local community, healthcare delivery is local, really diving in and changing the landscape of healthcare in a local community.
I mean, is that the job of an employer who makes computers for a living? It kind of is. But it's tough for a benefits department to get that sort of attention necessarily from their senior leadership. And this is not everybody. There are some companies out there that do have that kind of senior leadership support.
For sure. We see it because they're doing amazing things, but it's not always the case.
[00:16:09] Stacey Richter: First thing that we talked about was that it's nobody in any benefit department's job really to fix the healthcare industry in this country. The second one is what winds up happening potentially due to, number one is number two, where a lot of the work winds up getting outsourced to consultants. These consultants tend to have longstanding, very close relationships with the benefit departments who really rely very heavily on these consultants to do right by them and may not necessarily.
Paul Holmes talked about this in a recent episode. And you know, really, again, in the defense of benefit departments everywhere, how are they supposed to know necessarily about the conflicts of interest that may be rife at the company their consultant works for? Because like, some of these conflicts of interest may not necessarily be at the personal level, they could be at the organizational level, but the fact of the matter is they're there and they are causing employers all across the country to be paying 30 to 40% too much for benefits.
I mean, these are not dollars that are going to pay for drugs for their employees. These are not dollars that are going to pay for better care, coordinated care, like anything that is actually going to accrue to the members. These are dollars that are going in somebody's pockets, right? So then you start thinking about, all right, how do you solve for this?
And one of the answers might be for CEOs and CFOs also, frankly to figure out how to resource staff do something to help benefit professionals to have the time and the bandwidth and the expertise to work on some of this stuff. I've also heard the CHR doesn't report to the cfo. So, like, even if the CFO wants to get involved, there's just these kind of structural disconnects also.
It just does not sound like the current company's infrastructures have necessarily kept up with the reality of what's going on in benefits.
[00:18:11] Lauren Vela: Yeah, I think that's really true and it is, and it is really complicated because these relationships with consultants are relationships and sometimes they are relationships that are very longstanding in that are at the senior leadership level. So sometimes you'll have benefits departments as they become more aware of this, right?
They're the ones going to the conferences and reading the articles and listening to the podcast and really understanding what's going on. But perhaps there is this long standing relationship with the consultant and a senior leader within the organization and it makes it very difficult to change. I mean, keep in mind, and I would say this gets us into a whole other area which is the risk nobody ever Got fired for hiring IBM back in the day.
That was the saying, I think a lot about PBMs. If you hire one of the big three, then you've hired one of the big three, everybody's hiring the big three. So you've kind of gone with the flow. But if you go out of that realm and you go with a PBM that's different, with a different model and it goes south, that's not great.
And it's the same thing with a consultant. If you stick with the consultant that everybody at your company knows and like, to Your point, the 30% premium on that, well, it is what it is. But if you talk about now changing and wanting to do something different and things don't go well, that's a, that's a really, it's a big ask, it's a big pull.
[00:19:32] Stacey Richter: So that could be our number three thing on our list. Contributing to inertia. You've got number one, as we talked about, it's nobody's MBO to fix healthcare. Number two, you've got consultants who don't necessarily have the vested interest of the organization as their first priority.
[00:19:51] Lauren Vela: I know, I guess, Stacy, and this is particularly true in the PBM space. But it's not just PBMs. I have heard so many folks say, yeah, but my contract is solid, my contract is good, my consultants are really looking out for my best interest. What I would love is for your audience to hear from somebody who talks to a lot of different employers that I hear that from a lot of different employers and it can't be true.
[00:20:14] Stacey Richter: If you ask any individual employer how great are the contracts that you have, every individual employer will raise their hand and say, I've got the best contract ever. But then if you look across the market, everybody thinks they've got the best contract ever. Right? And they don't, clearly.
[00:20:29] Lauren Vela: But honestly, I feel like employers are starting to understand that now. They really get it. These are smart people. These are people who again, want to do the right thing. They have other challenges for sure about making changes, but they're starting to get it.
[00:20:42] Stacey Richter: And which leads us to the number three. Even if you necessarily have an understanding that there's shenanigans afoot here, as you said, nobody got fired for hiring the company their predecessors hired or hiring the company that they hired for the past 10 years. Right. Like you don't get fired for doing the in quotes safe thing, even if ultimately it has become really unsafe over the years.
And again, it's just this kind of thing where the perception has not kept up with the reality. You know, it might be the most unsafe thing that you could potentially do to be putting trust in entities without doing the due diligence to really understand what's going on there.
[00:21:28] Lauren Vela: Yeah, for sure. I mean, one of my very favorite benefit manager friends, it took him two years to leave his incumbent pbm, one of the big three. He said that when he was talking with his senior leadership about it, they were like, yeah, but so and so is so much more experienced. One of the big three pbm.
So much more experienced. He said, yeah, you're right. So much more experienced at ripping us off. I mean, he understood we need something different. And it wasn't, it wasn't easy to convince his senior leadership to make that kind of change. But I would venture to say he's glad he did.
[00:22:00] Stacey Richter: We've talked about three reasons that might sit behind this term. Inertia that comes up in every single conversation whenever you talk about why aren't employers doing more. And again, it's number one, nobody's MBO to fix healthcare. Number two, so much is getting outsourced to consultants and potentially not at an employer's best interest here for all kinds of reasons, whether the employer chooses to acknowledge that actual fact or not.
And then number three, there's personal risk here for a benefit manager who chooses not to hire the entity that the company has had a relationship with in the past. If you were gonna name a number four, what would that be?
[00:22:46] Lauren Vela: I mean, this stuff is hard. There's no silver bullet. It's not like, oh, okay, I'm gonna invest all my time and I'm gonna do this and then this is gonna fix the problem. No, I used to be talking with a lot of the folks I would be working with. And you know, is the juice worth the squeeze? And I get it. I again, going back to benefit managers are overtaxed often and under resourced.
So they have to think about that. They have to. By definition, it's just practical to do that. But there's not like one silver bullet that fixes healthcare. I mean, get low risk procedures out of a hospital. Okay, that's one. Get infusions out of hospital outpatient departments, that's another. Get the right contract in place with your PBA or directly contract with pharmacies, or directly contract with a local healthcare provider in your community, that would be another.
I mean, we're talking like, oh my gosh, so many, it takes so many different levers to create a really healthy and high functioning ecosystem. So I think it's a lot. It's hard. This is hard stuff. And then remember, there's a balloon, you squeeze it one place and it's going to pop out the other. So we are not talking about, gosh, you know, why, why don't we just do abcd? No, it's not that easy.
[00:24:02] Stacey Richter: The number four on our list here is there's no really obvious solution, there's no, oh, here's your easy answer. You simply do X. There's no recipe. And further compounding this is what has been said, and you said this earlier, that healthcare is so local, so even trying to create some kind of national playbook or something like that becomes tough, which again, puts it back on individual employers to plot their own path in a bit of a scary vacuum.
[00:24:38] Lauren Vela: Yeah, for sure. And keep. And again, keep in mind that each one of these, all these different levers that could be pulled, it's a lot. Each one is a decision that has to be made within a corporate infrastructure where. And anyone who has worked for a company knows it's not always easy to get decisions made.
[00:24:59] Stacey Richter: Like, I've also heard this Chro doesn't report to the cfo. So like, even if the CFO wants to get involved, there's just these kind of structural disconnects. Also, it just does not sound like the current company's infrastructures have necessarily kept up with the reality of what's going on.
[00:25:15] Lauren Vela: You have to know, you have to find your champions, you have to sell upstream. You have to. Sometimes there's a short attention span, so you really need to present an argument that is concise and that shows an roi. If that's going to be a driver or whatever the driver is going to be. It's very data laden.
Just the decision making process at big companies is complex. I mean, books have been written about this. I one time had a really big company benefit manager say to me it was about adopting a program that I was really big on at the time, still am actually. And they. And their response was, gosh, yeah, Lauren, we actually know, we know we should do this, but it would take us 18 months to get that through our procurement process, so we can't get it done.
And I just thought, oh my gosh, I get it. I mean, it's complicated. These companies are big and healthcare is not their main business. I sometimes feel like there's an opportunity to educate the C suite about healthcare. Like buying healthcare. These are the challenges your benefit managers are going through.
This is what you should know about healthcare. So I think, yeah, it's not easy. This is not easy stuff.
[00:26:34] Stacey Richter: At the same time though, if you have a company, probably the baseline problem is that this isn't prioritized, it's just simply not prioritized. Because you would think that if a company was so paralyzed and could not make strategically imperative decisions with any kind of alacrity, like everything that they want to do takes 18 months.
And I get these are gigantic companies, but if something is so vital and they, they can't get out of the way of their own processes, you think that that company actually would be at a severe competitive disadvantage in a lot more ways than making sure that their employees aren't unintentionally harmed by a health care industry that has been financialized.
Right. Like you'd think that these companies, especially the ones that are successful, do in fact know how to create processes that are not a quagmire of unfortunate bureaucracy. You'd think that they know how to do it.
[00:27:29] Lauren Vela: I would think so. In their line of business. I do think they can act very, very swiftly when they need to or when they see the opportunity or they can try different things and they're more willing to take risk in their line of business. I think that's very, very true. In healthcare there's a bit of, and I'm going to call it status quo bias which I think is number five.
It's just human nature. There is this thing, status quo bias. It's folks are spending a lot of time and attention on their line of business. And over here we have health care. We know it's a problem. I mean I'm not suggesting any C suite does not know that they're spending the healthcare is a crisis in this country.
I mean they must know it, right? But it is over there. It's not demanding a lot of their attention. Inertia is human nature a bit. So you have all these things working against change. And I think folks are more driven by whatever their line of business is. That's where their attention is, that's where their priorities are.
Now that's not the case for the benefit managers who really like I said, they're between a rock and a hard place. Often they want to be healthy. They are very concerned about the financial well being of their population. But they know that they must. I mean it would be a terrible thing to pick up a newspaper and read that the ABC company is not offering this benefit but all the other companies are.
You know, that's a kiss of death. Remember their job is to attract and retain. So there's There are a lot of dichotomies going on here. A lot.
[00:28:57] Stacey Richter: We now know we've identified the five reasons which are hard coded to some extent within the structure as well as the mentality of employers themselves.
[00:29:09] Lauren Vela: Stacy, here's the issue that sometimes we hear from our health plans. I'm not kidding, our legacy system won't allow us to do that. I mean, we can't do that because of our legacy system. Again, I'm a little skeptical about whether we're going to be able to stay with our status quo vendors, the three PBMs and the Bucas and really make real change.
I mean, I think they, they could if they had the incentive to. But if employers are not leaving them, there's no reason for them to change. Frankly their profits and often in these vertically integrated system, driven in large part by the PBM business, their profits are pretty substantial. Like things are very good for them.
Thank you very much. They're not going to change unless employers start leaving them. And I don't mean leave company A to go to company B, they're accustomed to that. But I mean unless they really feel like folks are going to leave that infrastructure and go to new vendors and go to new models.
[00:30:03] Stacey Richter: If we're thinking about, all right, what do we do now? There's some obvious solves that kind of just bubble up to the top. Not saying any of them are easy, but just based on this conversation, there's some pretty easy if thens, number one is really to have the C suite very aware of what's going on here.
And if they scratch their own itch, what's going to wind up happening within local communities is probably, I think I read in order to have a tipping point, you need like 12% or something like that of the people to do something. So if you have a minority even of employers within a certain local market who have C suites who are thinking through some of these issues and placing the emphasis on this stuff as it probably should be because they're spending 30 to 40% over this impedes their ability to in fact do business and keep the high quality talent.
So number one, get C Suites involved. Number two, we were talking about how there's no silver bullet, there are playbooks. I interviewed Lee Lewis a couple of years ago and basically if I'm going to distill this down, like figure out where your biggest problems are, figure out where you're wasting the most money that's not accruing any benefit to members and then start there.
[00:31:09] Lauren Vela: You're right, I totally agree with you and with Lee Lewis, by the way. Totally agree. I think those are really important things. There is a playbook. We need some incremental solutions. That's the truth. Right? There's not a silver bullet. They have to be incremental solutions. And one of them is we have to pay differently for healthcare. Period. End of day, we need to pay differently.
[00:31:29] Stacey Richter: Lauren Vella, thank you so much for being on Relentless Health Value today.
[00:31:33] Lauren Vela: Thanks.
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