Let’s just start here: As a general construct, insurance carriers have every incentive for health insurance premiums to go up every year. If you’re an employer, that is a material fact. Is it counterintuitive? Maybe.
Except if you’re an employer and your premiums are going up year after year, it begs the question why, every single year, the already-extravagant amount you pay continues to go up way more than the inflation rate.
You’d think that if your broker and your plan administrator were so great at their fiduciary responsibility over your self-insured plan that this wouldn’t be happening. Oh right, whosever PPO network you’re using, they don’t have any fiduciary responsibility over your self-insured plan. You do, all you CFOs and CEOs and benefit professionals out there. Wait, I misspoke. Plan administrators do have fiduciary responsibility—to their shareholders. The CEO of CVS/Aetna made $36 million in 2019. He’s clearly very good at that job. The rest of them are, too. I’m not singling anyone out here. And also, this podcast is not investment advice.
In short, as previously stated, most major insurance carriers and the brokers they pay commissions to have every incentive for your premiums to go up every single year.
That’s where we’re at, folks. It’s an open secret, yet so many are just getting so wildly taken advantage of by carriers and brokers whom they have really put their trust in. If you work for a self-insured employer, tell your CFO/CEO to listen to this show. Or if you are a CEO/CFO or a benefits professional in charge of healthcare benefits, welcome. I hope this information is helpful.
My guest in this healthcare podcast, David Contorno, has been in the benefits industry longer than he hasn’t been in the benefits industry. I think he started working in a benefits brokerage when he was 17 or something. Currently, he’s the founder of E Powered Benefits. In this episode, we talk about the keys for self-insured employers that lead to better health for their employees at something like 20% or more lower costs. Here’s some of the imperatives for employers that David digs into in this episode:
Advanced primary care—really valuing primary care providers who do not work for hospital systems and, therefore, are not subjected to the ball and chain of perverse incentives that David talks about at some length.
Getting cost and quality data so you can make prospective choices and not get hit in the back of the head with an after-the-fact “gotcha” in the form of an overpriced bill that you are now obligated to pay.
Let me bring up all the articles lately in the New York Times and elsewhere … people paying hundreds of thousands of dollars for something that should cost a fraction of that. Most of them have “good” insurance (keep that in mind) from their employer. Also keep in mind that most of these stories that hit the news are the ones where some poor employee got stuck with a bill—not the metric ton of other examples where the self-insured employer was on the hook. If you’re an employer, you can get ahead of these “gotcha” moments. It’s textbook risk mitigation if nothing else.Create benefit designs to help employees find and incent them to use the highest-quality providers charging a fair price. Listen to EP334 with Sunita Desai for more on the topic of incenting consumerism.
Know how your broker gets paid. If someone is paying your broker a commission and it isn’t you, then your broker makes more money when your premiums and rates go up. They are a sales rep getting paid to make someone else money off of you.
Get a handle on your pharmacy spend. David gets into some nuances here which are super interesting.
You can learn more at epoweredbenefits.com. You can also connect with David on LinkedIn.
David Contorno is founder of E Powered Benefits. As a native of New York, David began his career in the insurance industry at the age of 14 and has since become a leading expert in the realm of employee benefits over the last 22 years.
David was Benefits Selling magazine’s 2015 Broker of the Year, and in March 2016, Forbes deemed him “one of America’s most innovative benefits leaders.” More recently, he received the 2017 Leadership Award at ASCEND, the annual conference of The Association for Insurance Leadership, which recognizes those whose leadership in support of improving the value and performance of employee benefits has significantly advanced the industry.
David is a member of the board of directors for both the Charlotte Association of Health Underwriters and HealthReach Community Clinic. He served on the NC Insurance Commissioners Life and Health Agent Advisory Committee, as well as participated in the Technical Advisory Group that helped with the market reforms required under the Affordable Care Act in North Carolina. He is a longtime member of the Lake Norman and South Iredell Chambers of Commerce as well as the National, North Carolina, New York, and Long Island Associations of Health Underwriters. David contributes to numerous publications, including Forbes, Benefits Selling magazine, Business Leader magazine, and Insurance Thought Leadership.
David is committed to giving back to his community and actively participates in the membership drive for the United Way, assisting the local chapter of Habitat for Humanity, and supporting The Dove House Child Advocacy Center. When he is not working, he enjoys boating and traveling.
04:20 How do you ensure better care for patients?
05:10 “What’s required to correct those things is not really a massive degree of intellect or even innovation.”
05:38 What’s the road map for self-insured employers who want to take control of their healthcare costs?
10:06 “Higher costs equal more profit and more revenue.”
14:03 “The problem with devalued primary care is … that most people pass over the primary care provider and go right to the specialist.”
19:41 “Every employer should have every broker sign a compensation disclosure form.”
20:06 “If you think there’s perverse incentives on the medical side … it gets even worse on the pharmacy side.”
21:01 What changes do employers find when they follow the road map to taking control of their healthcare costs?
21:44 “It’s not uncommon for us to reduce total healthcare spend for an employer by between 20% and 40% at the end of the first year.”
22:09 “I can’t change [the] outcome without changing the path you walked to get there.”
22:41 “Going self-funded is where the journey starts, not where it ends.”
24:47 “If most employers truly understood how badly these carriers and health systems are taking advantage of them … [it’s almost like] Stockholm syndrome.”
27:09 “The only legitimate fear that employers should have is, How do they message these changes … to the employees?”
29:21 “This has to happen, and if it doesn’t happen, the system’s going to break and … be picked up by entities that are, I think, only going to make the situation worse.”