AMA Kickoff
[00:00:00] Stacey Richter: Episode 508 Ask Me Anything. First question, Why Don't More Self-insured CEOs Take Bold Action in Health Benefits Strategy? Today I speak with Lee Lewis.
[00:00:31] Stacey Richter: This episode is the very first episode that we have done that is an AMA—an Ask Me Anything—and here is our very first question.
[00:00:43] Sarah Monroe: Hi, this is Sarah Monroe in Chicago and I'm a benefits procurement leader.
And I'm curious why you think so few executives take proactive bold action in health benefits strategy given the magnitude of opportunity.
[00:00:55] Stacey Richter: Thank you Sarah Monroe for that question that so many probably wonder about. To help answer said question, I shanghaied, the one and only Lee Lewis. And wow, is that a good choice by me if I do say so myself.
As just one place that Lee takes this conversation, which is also a wild spoiler alert, so earmuffs if you're opposed to such things. But coming up here, Lee tells the following gem of a C-Suite anecdote, just so you know where this conversation is headed. Lee says, after an M&A, after an acquisition, they looked at the health plans and the one employer had a $2,300 per year of less expense per employee, and the benefits were actually better.
So when they moved over the employees, they made over a quarter billion dollars of instant equity value for the acquired company that nobody had priced into the calculation. Right, nobody had thought about this or looked into it or anything, but it was a quarter billion dollars of additional value because this one company just had managed their health benefits so much better.
I don't know. That feels like the first verse of some CEO love song, right? If you ask me, but let me get organized.
Three CEO Dogmas
[00:02:10] Stacey Richter: This conversation has three parts. The first part are what Lee calls dogmas. By the way, they are all false. You're gonna know if you're a long time listener of the show or even a short time listener, you're gonna know immediately that each one of these dogmas are false.
But many CEOs may believe these three dogmas. And if they do, they're not gonna do anything with their health plan besides, as Lee says, stay in the herd. Right? Just like not be an outlier amongst comparable companies.
[00:03:09] Stacey Richter: In brief, those three dogmas that are all false that we talk about in the conversation that follows are:
Dogma 1: health benefits are a fixed expense. Here's the Dogma 2: saving money hurts people. Here's the Dogma 3: fixing healthcare is never worth the effort. It's high risk. It's high disruption. We've tried things before. They've never worked. You can definitely see how if there is a C-suite that believes any one of those three dogmas, they're not doing much anytime soon.
All right. So after we talk about the internal dogmas, Lee and I, then we talk about the potential external reasons for a lack of action by C-Suites. And in brief, there are four of them. They are, (1) circles a CEO travels in may include hanging out with health system leaders and as I say in the show, that follows, they may be drinking Kool-Aid, they never realized got put in their beverage.
So many shows on what C-suites at consolidated health systems are into. Go back and listen to some of them.
Number (2), external reason for potentially a lack of CEO action, Balance of Trade, threats and promises. Balance of Trade, we talk about at some link later on. So if you don't know what that means, you're in luck. Stay tuned.
Number (3), external reason for a potential lack of action among C-Suites. Personal incentives for a CEO or others offered by some of the big status quo vendors, you know, go on trips, fancy tickets, weekends at a ranch, that kind of thing.
Number (4), external reason why a CEO may choose to not move on certain things that would seem to make a whole lot of sense. CEOs may not be all that concerned about a $5,000 deductible or a higher copay. But a $25 an hour employee? Yeah a very, very different perspective. So we go through each one of those four.
And then we close out this show with Lee giving one good idea after another. Let me say he is on a roll giving advice for how, even if the CEO C-suite is extremely risk averse for a benefits team to get the show on the road, to get moving, to try new things, to try to, despite or in spite of what the C-Suite may want or think, move the health plan forward.
And then he gives some advice directly to any CEOs who may be in the building here. The list that Lee riffs out again towards the end of the show is pure, hard fought, and won wisdom. So if your time is limited, do skip ahead, my friend, would be my advice. You don't wanna miss the end of this episode where the plan comes together.
And speaking of the plan coming together, may I also inform you that next week we have a companion show here we have Patrick Nelli on the podcast with a second view maybe into Sarah Monroe’s original question, but we take it a little bit more specifically from the standpoint of a CFO and how to understand and speak the language of a CFO. So do come back for that. It is a great conversation.
My name is Stacey Richter, and this podcast is sponsored by Aventria Health Group with an assist from Payerset. So thank you very much to both Aventria Health Group and Payerset for offering the financial support to keep the show on the air.
Lee Lewis is Chief Strategy Officer and GM Medical Solutions at the HTA, the Health Transformation Alliance. He is also the host of Broken Benefits.
And with that, here's our first AMA, Ask Me Anything, with Lee Lewis.
Lee Lewis, welcome to Relentless Health Value.
[00:06:57] Lee Lewis: Oh, thank you so much for having me back. It's great to be here.
[00:06:59] Stacey Richter: Let's listen to our first AMA, Ask Me Anything question once again here.
[00:07:04] Sarah Monroe: Hi, this is Sarah Monroe in Chicago and I'm a benefits procurement leader.
And I'm curious why you think so few executives take proactive bold action in health benefits strategy given the magnitude of opportunity.
[00:07:16] Stacey Richter: What a great question. That must be so frustrating to a benefit team, even to a finance team really, who has worked so hard to try to figure out how to move forward against all odds in medical trends and then have this initiative that they've worked so hard on shutdown.
[00:07:34] Lee Lewis: Totally. The question is really well placed. Healthcare is so obviously. A problem for businesses, like it's just so expensive and it's clearly outta control. It's going up too fast. It's outstripping every other major category in terms of, certainly in terms of trend, if not an overall cost.
If that were happening in any other area of the business, you'd think that the C-Suite would be pretty proactive about it?
[00:08:00] Stacey Richter: Yeah. I just read something from Eric Bricker. He said, at this juncture, funding health benefits is like nine to 14% of overall spend.
[[And when I said nine to 14% of overall spend. I meant nine to 14% of overall employee compensation to be clear, which I was not clear that is. Thus this insert.]]
You hear so often just how it's the second largest line item after payroll in a lot of industries and yeah, it is a little boggling that even against that backdrop, there is an aversion to digging in here.
[00:08:39] Lee Lewis: A hundred percent. I think the reason that is, you speak with business leaders, that: “Hey, healthcare's just kind of a plug figure.
We're not gonna prevent cancer from happening. We can't stop an accident at the ski resort. Bad things happen. We can't control 'em. So why try? And we just kind of use it as a plug figure.”
[00:09:00] Stacey Richter: To your exact point, this is not low hanging fruit. Like you talk about health benefits, it's a lightning rod. If you think that lightning rod is intractable, like no matter what I do, this is just gonna happen.
And that could be happen for two reasons. One, because accidents are gonna accident. But the other reason is, they may have been sold a bill of goods so many times, like, how many vendors have walked in? We're gonna, we're gonna, and then nothing happens.
[00:09:25] Lee Lewis: I think about it in terms of dogmas, I think there's like three dogmas that just business leaders in general kind of believe.
They may not say it out loud, but they believe it and they make decisions based on these. Those decisions end up giving us the system we have today.
And the first one is, the one we just described is healthcare costs are fixed expense, illness, and bad things, and accidents happen. There's nothing you can do to change 'em and so don't really try.
So that's the first kind of false belief, the first dogma.
The second one is that saving money in healthcare hurts people. That's one, they never say that out loud, but people believe that Is that either (A), I'm gonna save money by just cost shifting because if I'm saving money, if we the company are saving money and it's a fixed pie, that means I'm just pushing it onto the backs of families.
Or, (B), I'm gonna be sending people to low quality places, right? Like, because the cheap healthcare, if I wanna buy cheap healthcare, that's probably low quality healthcare, right? Nobody wants that.
And then (C) would be narrow. Is that maybe I'm narrowing my network or I'm telling people they can't have their doctor anymore. If I'm trying to, you know, do a very narrow kind of a direct contract or something.
And so when they think about that, no business leader wants to do any three of those things, that feels horrible. And so everyone gets uncomfortable when you talk about saving money in healthcare because that, that second belief.
[00:10:57] Stacey Richter: And you called them the three dogmas.
And the first one that you said was, healthcare is a fixed expense. It is what it is. There's nothing you can do about it. So just if it's trend going up, whatever it's going up, it's, that's what it's going up.
The second one is if you try to save money. That the only way to do that is to cut. You're either cost shifting as you just said. Like, let's raise the deductibles.
I saw an insurance card the other day. Someone sent me a scan. $200,000 deductible. I'm not kidding. Out of network.
[00:11:28] Lee Lewis: What on Earth?
[00:11:29] Stacey Richter: Mm-hmm. So yeah, we're gonna, we're gonna have to do something like that. Or just cheap places.
[00:11:36] Lee Lewis: Cheap places. Two bit healthcare, low quality.
[00:11:39] Stacey Richter: Narrow networks.
[00:11:40] Lee Lewis: Yeah.
[00:11:41] Stacey Richter: Someone's got their beloved family doctor who's now out of network. So like if you're thinking like a CEO who doesn't know as much as people who listen to this show, you're like, these, I rock hard place. I don't know. Like …
[00:11:53] Lee Lewis: I don't even want to enter that discussion. Like I don't wanna talk about it because none of these are attractive to me and I don't want my reputation attached to that.
And the the third dogma is it's never worth the effort that the juice is never worth the squeeze, that it's high risk and high disruption to even try. And those together lead you to a philosophy that we call, keep us in the herd and keep it quiet. And that's how senior business leaders manage healthcare.
Dogmas In Practice
[00:12:26] Stacey Richter: Let me ask you this, Lee, how does this then trickle down to, for example, HR teams? If there is a CEO, who's thinking these three dogmas, what winds up transpiring with the HR teams that that entity will tend to hire?
[00:12:43] Lee Lewis: Yeah, it manifests as a culture of low tolerance for risk. They might have enormous risk tolerance in other areas of the business on mergers and acquisitions, maybe on new product rollouts.
But then when you get to the team that's running this enormous, you know, annual account, there's very low tolerance for risk, and it warps the incentives because now you have benefits leaders who are like, I can make a difference here. I can do the right thing. I'm learning all this great stuff.
Especially if the bug bites them. If they, heaven forbid, they start listening to Relentless Health Value podcast because now they're really fired up to do good.
And they are in an environment where, no, don't do anything. Keep us in the herd, keep us quiet. No disruption is tolerated. We don't want to take any risks. We are not interested in doing something new or, or different because these biases, these dogmas are in place that, that that caused them to be managed in such a way and incentivized in such a way that they can't even do things.
One anecdote, I was, I was working with a company, this was a few years ago. They were spending $700 million a year. We went in and showed them how to save $50 million. And we asked them, what is it that you really wanna do? And they said, what we really want is we want to, we wanna put in rooms in our major locations where women can nurse in privacy. I'm like, okay, that's great. How much would that cost? They're like $500,000.
And I said, okay, we just showed you how to save $50 million. Take 1% of that one time and that'll give you enough money for this whole project. And they laughed and they said, Lee, if I save $50 million at best, I'm gonna get a high five. That's how these beliefs manifest in the way people are managed.
People's bonuses aren't attached to performance of the health plan. Why in the world wouldn't you attach a bonus to the health plan performance? On, on 9% or more of your expenditures. Why in the world wouldn't we be managing that? Just like we manage our sales and operating budgets and cost, you know, other cost categories.
And healthcare just gets this weird pass because of these false beliefs that we have.
[00:14:55] Stacey Richter: As you're talking, Lee, one of the things that I'm thinking of is that if I am a very dedicated human resources individual. And I figured all this stuff out. Like I listened to this show, for example, or I listened to Broken Benefits and I understand the financials and whatnot. But also I was talking to somebody the other day, there was an obstetrician 95% rate of C-section on healthy patients.
[[The target C-section rate for healthy patients is under 23.6%, so a 95% C-section rate is a C-section rate that is a standard of deviation outside of that target. Said another way, it's very likely wildly unsafe for moms and babies to go to this doctor.]]
Dude still is in network. You start to hear some of this stuff like this, or as I've said so many times, financial toxicity is clinical toxicity.
Like you see people dying of cancer because they are scared to go to the physician due to fear of bankrupting their family, right? So let's just say that I am the most, whoa, I see all this stuff. I am now invested personally. Like I feel a personal mission here. I need to do something. And then you constantly get shut down by upstairs.
You also could see that in organizations that have leadership like this, the HR team sort of starts to self-select to very complacent, right? Because the people who really have a calling are gonna go somewhere else.
[[Now is probably as good a time as any to break in here and remind everyone that most CEOs probably went to business school or came up in a world where having anything to do with health benefits was on anybody's punch list.
It just wasn't on the radar. At all. So at the same time that we are ticking through all of these reasons, it is important to remember that many times, maybe even most of the time, what's happening here is due to the reasons that we're talking about, and probably all of these things could be put in the category of doing the best that a C-suite can without fully understanding the full reality of the situation.]]
[00:17:09] Lee Lewis: So this is so funny. Within the HTA, we look for employers who are active in the mission.
We look for employers who want to do the right thing. Who are excited about taking bold action and finding ways to help their people. Like we seek them out and after a couple of conversations with us, if you don't want to do much, like you realize that this is not the place for you.
And what that sometimes means is that we are finding teams who are activists doing the right things because it's the right thing to do in counter, occasionally, to the overall culture within the organization.
How amazing a person is that who is taking on personal and professional risk to do the right thing, even though their organization in some cases might be cautioning them against doing the right thing and just saying, no, no, no, no, just leave it where it is. Just manage the vendor. Make sure we're compliant, right?
But these individuals like, no, I need to do the right thing here. I need to do more. And we work with them in some cases to find good de-risking strategies so that they can do sometimes progressive things to help realign incentives, even if they're in a very conservative culture.
[00:18:30] Stacey Richter: That must feel like a ray of sunshine to some, because I also hear the flip side. Thank you for saying that, Lee. I also hear the flip side, where you hear about a very dedicated person who, again, is mission driven, is trying to figure out the right way forward, and they go to an HR conference and they're just, they're like, I feel like a fish outta water.
Like I, yeah, like I, I don't even just, who are these people? So yeah. You know, flip side also applies.
[00:18:55] Lee Lewis: No, we hear that all the time. We're like, if had a commercial on TV, it would be like these, you know, imagine one of those lawyer commercials, it's like, “Hey, have you been injured in an accident?”
We're like, Hey, do you feel totally outta place at an HR conference talking about healthcare? Do you feel like you're the crazy one because no one else is acknowledging how messed up some of these things are. Then call us. Like, this is your place, we're your home.
[00:19:19] Stacey Richter: Which is also probably why, you know, we just had episode 500 of the Relentless Health Value podcast.
One of the major themes that kept coming up, the importance of the Relentless Tribe and shows like this one. Communities like we have here, and when I say we, I'm including you very much in this mix, Lee. This is a place where people can find their people. So just the importance of community here.
External Forces
[00:19:47] Stacey Richter: So let's go back to what's up in the C-suite. There's internal factors for sure, the three dogmas that you went through, and there's sort of internal guiding beliefs, but then there's external factors. And one of them is the power of local hospitals in a community.
[[And when I said the power of local hospitals, I am mostly talking about the power of the C-suites of health systems.]]
One of the circles that A CEO might travel in, is certainly, meeting with people that happen to be on the board of the hospital. They might be on the board of the hospital, right? And just the conversations that happen and the lobbying that happens, and the kind of just like the underlying beliefs that start to manifest as a result of those conversations.
[00:20:30] Lee Lewis: Warren Buffett famously said when they were closing Haven, and he said, well, we said Healthcare was the tapeworm and the tapeworm won. Even him with as much public expectation on the line to try and make a dent in healthcare, had to publicly admit that he was still so entangled that he was not able to get something done.
I don't see it directly hammer dropping into a lot of the decisions that are made at the benefits team level, but I know that these types of conversations are happening higher up.
[[00:21:05] Stacey Richter: Okay. We talked about the three internal dogmas, which might dissuade a CEO from making positive changes for their health plan.
Now we are talking about external factors. The first one being, there are a lot of employer C-suites who may find themselves running in the same circles as health systems C-suites, and they may wind up drinking Kool-Aid they don't even realize was added to their beverage as a result. That maybe fortifies their belief in the aforementioned dogmas.
Listen to the show with Vivian Ho for more on what can happen here, or the episode with Dr. Suhas Gondi and I would not underestimate this one.
So now in the conversation that follows, we are moving on to a second external factor/reason why a CEO or C-Suite may pull the plug on health plan, health benefit improvements.]]
The other one is the Balance of Trade, as it's called. Some of these entities in healthcare, they are Fortune 550. They are big companies. In such rarefied circles, there is a, they call it balance of trade, right? So if I am a carrier, I will go into a large company and I'll be just like, look, if you cancel my contract, I'm gonna cancel yours.
And I have heard any number of times just how big a deal that is. If you're a CEO and your board just incented you on gross revenue or whatever, and you're just like, oh, well we're gonna have this big customer, and then have to explain why. That could be certainly a thing.
I do wanna bring up though the recent news story with Lilly, who canceled a PBM contract that they had for a long time.
[[And just to be clear, this is Lilly, the employer that we're talking about, that canceled the PBM contract that they had held for their own internal health plan for their own internal employees.]]
And if you read between the lines in that story, the PBM threatened to take some of the Lilly products off of formulary, and Lilly was like, I did the math, and we're still doing this.
So balance of trade has been a big deal for potentially reasons you'll be able to connect the dots on. In the next part of our conversation.
What are things that a CEO may want to consider in the world that we currently live in? How would you start to tee up that list?
Competitive Stakes
[00:23:28] Lee Lewis: CEOs should be thinking about a few items. One is you can't cost shift anymore, which means these high trend items are gonna be barreling right into the economics of the business. And so pretending that you can't do anything about it and ignoring the opportunity to do something about it, will put your company at significant strategic disadvantage.
Because what emerges on the other side of this are companies who are haves and have nots.
But at the employer level, if you're managing the shop really carefully, you are gonna recapture hundreds of millions of dollars in additional economic value better and improve share price. And a really a cost competitive workforce because you're able to manage the trend and manage the cost on your benefits.
This is going to increasingly, it's not just the K-shaped economy that's being created by AI, but there's sort of a K-shaped medical economy that's emerging from this between the companies that were minding their business and those who were not.
[00:24:32] Stacey Richter: Last week, or a couple of weeks ago, we played an interview. Go back and listen to it if you haven't, with Jerry DiMaso from Payerset. You can actually look in the transparency data these days and look up individual employer plans.
And he gave one example of an airline where there was one airline that was paying a whole lot more for there, just like you know, you look at a code and you see the one airline paying a whole lot less than the other airline.
So to your exact point, like, okay, now nine to 14% of spend, you have the one airline that has a whole lot lower expense underlying costs than the other one. So like from a competitive standpoint, we have a problem. I'm also gonna infer there might be a fiduciary problem there.
[00:25:20] Lee Lewis: That's a great point. If you are massively overpaying on a commodity that you don't need to overpay on, that's gonna present shareholder risk. And if your healthcare is so much more expensive and a bunch of that is born by your people, because 30 to 40% of all the healthcare dollars are paid by the families themselves, and you've been mismanaging that, that exposes you to fiduciary risk on the other side.
So you could potentially be looking at both a shareholder suit and a potential employee suit. I mean, either way could come into you if you're, if you're just absolutely ignoring this massive cost category that has real terrible impacts on the families who are working for you.
[00:26:02] Stacey Richter: Absolutely. And to the earlier points that you were making, we're not talking about like oh 2% here, right?
Like we had Ivana Krajcinovic on the pod a little bit earlier from UNITE HERE HEALTH, and she was talking about how two employees cost the plan in excess, $1 million. $1 million because they got an infusion out at one place where if they had gone, literally probably they could have walked to the second location and spent a million dollars of plan assets less.
Right. Like this is a big deal.
[00:26:31] Lee Lewis: Wow. Yeah. To summarize this whole topic of: Hey, why should a CEO care about this? Why should they get involved now? Once they get past believing in the dogmas.
The first is companies increasingly your are, are going to be either competitive or not in their industry based on how they're managing this expense.
Because it is so much money and it has such an impact on your workforce, on your ability to attract and retain and on just the bottom line in a raw way.
One example is one HTA company that was managing their healthcare really well had a merger. When they brought in the other company, they looked at the health plans and the HTA employer had $2,300 per year of less expense per employee. And the benefits were better.
When they moved over 2,500 employees onto that with a PE ratio north of 40. They made over a quarter billion dollars in instant equity value for that acquired company that nobody had priced into the calculation, mind you. Nobody had thought about this or looked at it or anything, but it was a quarter billion dollars of additional value.
Because this one company had just managed the healthcare so much better.
The second area is that your shareholders are increasingly, if there's a quarter billion dollars of just free instantaneous value that nobody is paying attention to, your shareholders at some point are gonna get a whiff of that.
And this was just one small acquisition. It could be, if you've got a 10, 20, 50, a hundred thousand employees, magnify that up by enormous quantities. That if you are mismanaging this area, it's going to get attention.
And then finally, the third area is even if none of those things, even if you're, you know, you're privately held, you don't care about the value of your company, and there aren't any shareholders who are gonna getting up in your business. You know what? You still wanna be able to take care of your people and avoid an uprising on your hands because you've raised the cost so high on these families that you can't retain them anymore. And people will make decisions to leave based on unaffordability because you are just offering something so much more expensive than your competition.
[00:28:48] Stacey Richter: That was a, a great summary. Just the idea that you've got a company who's less able to compete. I mean, we often say that US companies are at a disadvantage already just because of they're the only country in the world that has to absorb healthcare costs.
Perverse Incentives
[00:29:02] Stacey Richter: I do just feel like this conversation would not be complete without touching on a bit of a sensitive topic, but we're gonna go there, Lee. I'm gonna drag you there whether we, let's do this.
Yeah, let's do this. Personal incentives, right? 'cause let me tell you, sometimes when I hear about a C-Suite team who chose not to save millions and millions of dollars or do what seems like a relatively easy thing that would benefit employees.
You also hear things like, oh, well, the trip to Punta Cana. Or, oh, well, I got to go to the US Open and meet the players. Or Oh, well, the box at the Patriots game where you can go on the field after the game.
[00:29:51] Lee Lewis: Yeah.
[00:29:52] Stacey Richter: Plenty of little birdies.
[00:29:53] Lee Lewis: I'm actually way too low in the, uh, in the architecture there that I, (A), I never get, I've never been able to participate in these, but (B), I don't, I don't even have visibility into them.
But I know that they exist. And it makes it really hard for people. It makes it really hard for people to make a big change.
[00:30:13] Stacey Richter: Yeah. So the point that I'm making is that there are many, many very excellent reasons if you start to drill into why a C-Suite might not do things that may have to do with sort of a lack of knowledge. A lack of, again, this is not what many would consider low hanging fruit, but then there's also some other, let's just say less savory reasons why someone may choose not to proceed.
And I just, not the easiest topic to talk about in the world, but it's there.
[[Again, just dropping in here to remind everyone that this is certainly not every C-suite by a long shot. It's probably a small minority, but I hear stories like this often enough that it is definitely a thing that makes me go, Hmm. Especially when the employee handbook, at some of these companies, quite obviously contains huge corporate guardrails that explicitly forbid this exact type of thing.
And especially also when you hear stories about how some fee only broker or entity that clearly doesn't have an outsized profit margin, loses a bid to a vendor who like bought Disney on ice tickets for key decision makers. All I can think about when I hear things like this is that with the millions of dollars that that company would have saved, they could have rented out the entire arena and had a private Disney on Ice show. But maybe for all the reasons that we just talked about, that isn't clear.
So this kind of thing is regarded as maybe less meaningful than it really is.]]
[00:31:50] Lee Lewis: And not to take us even into a separate category, but any benefits team or executive who doesn't want to do anything. It is effortlessly easy to find a consultant who will give you all the reasons to agree with that sentiment.
So you can even get third party experts to very convincingly tell you that you should not attempt to do anything else, and that doing nothing is the best strategic option.
[00:32:17] Stacey Richter: Listen to any [episode] number (Episode 379) (Episode 406), (Episode 481), (Episode 483) about just how many perverse incentives there are in the marketplace. If you wanna find somebody who's just like, yeah, continue to waste your money, to put it really bluntly because they're taking a piece of that waste, then there's any number of people who would gladly agree with you.
But you know what? I'm gonna even add another one to that list. And that is that if we're talking about a CEO, and I hear this often enough where $5,000 deductible or something like that is change in the couch cushions. Then they're buying benefits, and this doesn't pertain to all companies obviously, but companies of a certain size, it certainly could.
They're buying benefits for themselves and their family, not necessarily their employees. And if there is a way to cost shift in a way that doesn't really impact a higher level earner very much, they may be a little bit less inclined. And I'm talking about a certain type of individual here, but there are plenty of people out there who, Patrick Moore wrote a post a little while ago who, again, there was a proposal to save lots of money, do the right thing by employees and a CEO, who's just like, nah. Why would I do that? $5,000. Not a big deal.
[00:33:23] Lee Lewis: Not a big deal. That's exactly right. You mentioned that it, it doesn't strike the same way. Salary bands are significantly more amplified than the amount of cost that you would bear if you get sick.
So the people who are ultimately making those decisions, they don't understand in many cases what it's like for a lower income or an entry level earner to look down the same type of expense. I mean, intellectually, if you bring it up to anybody, they say, oh sure, I get it. It's, you know, if I earn a million a year and I've got a 5,000 deductible. That's different than if I earn 50,000 a year with a 5,000 deductible.
Like people understand that intellectually. They do not understand it emotionally or the way that impacts those individual families.
[00:34:11] Stacey Richter: Yeah, the whole idea of being functionally uninsured.
[00:34:13] Lee Lewis: Yes.
[00:34:14] Stacey Richter: Again, might be a foreign concept that if you've got $400 to your name and your deductible is $5,000, you have insurance you cannot afford to use. And that is becoming 61% I think of Americans have delayed or foregone care due to costs.
You know, we've got another dynamic that's going on just on the industry side itself, where the higher the deductibles are, the more risk provider organizations are taking. Therefore, they're starting to collect copays and stuff ahead of service. Like you literally have people who cannot get care.
They cannot get care unless it's in the ER, by the way.
[00:34:50] Lee Lewis: The ER is the only option that's left. Yeah, because the doctors are wanting to get paid upfront. They the increasing deductibles. Mark Cuban has said this, Doctors and hospitals because of high deductibles, are becoming sort of short-term lenders or high interest lenders, or lenders of last resort to, to their patients.
Because a huge percentage of the care potentially goes unpaid. It's effectively a loan that's being made to the patient and that's pushing that onto them. If you are a, like a smaller clinic or an operator or somebody who's offering relatively high value care, that could be more than half of all your income is coming in from families who may not be able to pay because these deductibles are so high.
De-risking Change
[00:35:33] Stacey Richter: Let's just say I am an HR person who listens to this show. Which means by default, by the way, that it is someone who understands the conversation that we just had, who understands the fallacy of the three dogmas and who might have come up with great programs to save $50 million or however much.
[00:35:55] Lee Lewis: Right.
[00:35:56] Stacey Richter: 15% I've heard and who had an organization inexplicably shut them down for reasons that they may or may not understand, and they know if they did the same thing again tomorrow, they would get the same result. Our listeners are not insane, and they're like, all right. Now what?
[00:36:13] Lee Lewis: First of all, to any of your listeners, anyone, if you're somebody working in benefits, working in in employer healthcare, thank you so much for what you're doing. You are a hero. I love you, and the nation needs you. We really do.
We need people in benefits who are aligned to the mission and who are taking action to make things better. If enough of us can take bold action to realign the incentives in the system, we will get a new system because the system will follow the incentives we give it.
So the actions that you can take, what we've seen is that, look, not every organization is immediately gonna recognize your value, by the way, yours will. It may not happen this year, it may not happen next year.
But if you're doing the right things and you're getting this under control, it will get the attention of your leadership and it will get the attention, ultimately, it can get to the very highest levels of the organization.
A couple of our most successful companies didn't start out doing a whole lot and three or four years in their CEO is talking to Wall Street on earnings calls about the savings the benefits team is getting.
So do trust that you are building skills that are incredibly valuable and the recognition will come.
So now what can you do to actually begin realigning the incentives and getting these great opportunities if like you've already tried a bunch of things and they didn't work. The most effective strategy I've seen is you've got to de-risk the strategies and package them in a way that it looks like the same kinds of things you have been doing.
What's an example of this? One example is if you're getting a TPA, for instance, maybe you want to use an independent TPA rather than a standard carrier ASO. You can get a TPA that uses the same network you have today. So the logo on the card is the same. But you in fact have an independent TPA instead.
That might be a like a similar way to do something that's new and unlock new capabilities that still keeps it in the same window dressing.
Another strategy is in working with your carrier or TPA or PBM, you can activate programs and contracts with different vendors through your carrier, your TPA, your PBM. That's a way that you can keep things relatively normal, but you can still activate new capabilities.
Another strategy is you can do pilot programs that are very narrow. We talk about just trying things or running a test that you can de-risk those tests by making sure that you've got good guarantees in place.
Narrow down the population that's participating the test. Maybe it's just one office in one state with has a couple hundred people there or something like that. You can create a narrow, small sandbox where the risk is very contained and be able to run a simple test with a new concept.
You can try doing it mid-year so it doesn't happen on a high stakes one one. We will sometimes do that. You can experiment with new plan design concepts. We love implementing things off one one because it allows us to focus a little more and we can narrow down the risk profile and the aperture. We, we can have kind of a more captive audience. There's a lot of really good opportunities there.
But there are dozens of little simple ways that you can de-risk concepts so that you can try something new and bold, but do it in a way that does not feel risky, new, or scary.
[00:39:39] Stacey Richter: Right. And it also could just be the whole ask for forgiveness, not permission.
[00:39:42] Lee Lewis: Oh, we do that plenty as well. Yeah, go for it.
[00:39:45] Stacey Richter: All right.
I'm gonna sum everything that you just said, which started out, as you know, you can probably get a TPA without anyone necessarily realizing that you just got a new TPA. If the cards look similar. He talked about narrow pilot programs. He talked about a number of different ways to roll out something new.
If you just look at it from the outside of the box, it looks the same.
Advice for CEOs
[00:40:06] Stacey Richter: And if you're a CEO, let's just say there's a CEO that's in the building here. What would be your main advice?
[00:40:13] Lee Lewis: It would be a couple of small steps you can do. One of them is strongly encourage your benefits team to take bold action because it will pay off.
Oftentimes it's just encouragement that they need to know that it's safe for them to be able to do the things that they know they should be doing. Second is you can create incentives for them as well. You can say, “Hey, look, add a bonus. Why in the world wouldn't you add a $50,000 bonus to all the staff within the benefits team? If they can save you $6 million on next year's cost trend without making things worse for your staff, that's cheating.”
So without cost shifting, how much money can we save? How much can we reduce our overall cost while still keeping great benefits? If you provide that incentive and you believe that it can be done, then that team can be activated and encouraged to take the action that they probably know they can take and just haven't.
Then the third thing is you can staff the team appropriately. Most benefits teams are exclusively staffed with HR program managers, but among the HTA employers, this is in the Fortune 200, among the highest performing health plans that we see there is almost always pretty good intellectual diversity there.
And that is to say there's somebody with an engineering degree, somebody with an accounting degree, there might be somebody with a marketing degree. There's somebody who came from supply chain. One of our highest performing plans was run by an energy trader from Venezuela and she came in with a math degree and a sales background and was put in charge of the health plan.
She absolutely crushed it and they were able to flatten trend for half a decade while improving the benefits every year.
So stock and staff that team with experiential diversity, knowledge, diversity, so that you can get a really good mixture of benefits people and give them visibility. Call 'em out, draw attention throughout the organization to the performance of the health plan, because that also that visibility will attract the best performance out of people and your best talent.
[00:42:25] Stacey Richter: Those are really interesting action steps. The first one is don't be afraid of bold action. You know, a lot of times you've got HR teams who have been just beat down by the D word, the disruption word for so long, and what that means, like if you can't make any noise, you're creeping around in the corners.
So open the door to bold action, at least see what the ideas are that come out. The second thing is bonus for performance. Really think about what performance looks like and how you're gonna incentivize it on the team itself.
And then thirdly, staff appropriately. Without the right team, it's like in any other department, if you wanna expect excellence, you really have to have a team that has all the right people on it, and HR is certainly not some kinda weird outlier to that just Axiom of life.
Wrap Up
[00:43:10] Stacey Richter: Lee Lewis,
[00:43:11] Lee Lewis: Stacey,
[00:43:11] Stacey Richter: If someone is interested in more information, where would you direct them?
[00:43:15] Lee Lewis: Find me really easily on LinkedIn. You can also email me at llewis@htahealth.com.
[00:43:21] Stacey Richter: Lee Lewis, thank you so much for being on Relentless Health Value today.
[00:43:24] Lee Lewis: Thanks for having me, Stacey.