I’m gonna run through the five reasons Lauren Vela talks about in this healthcare podcast for the “why” with the inertia in 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 nastygrams 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, the 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 Vela on the show today:
1. Transforming the healthcare industry is not actually in the job description of benefits professionals.
2. 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 (EP397) or AJ Loiacono (EP379), 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 (administrative services only) or TPA (third-party administrator) or PBM (pharmacy benefit manager) 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 gonna be a no-go on the new idea and then, yeah … inertia.
4. 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 a benefits team might be looking for. And then we get into the “is the juice worth the squeeze” discussions.
5. 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. 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 Vela and I sort of ran out of time before we could adequately explore more, but these two will get anyone who wants to started:
1. 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 benefits 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.
2. There is a playbook for how to go about this. Listen to the show with Lee Lewis (EP244) 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 Loiacono (EP379) or Paul Holmes (EP397). Ignorance is not bliss in this case like many others.
Also, Eric Bricker, MD, just did a video on EBCs and broker types.
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 Vela 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 one dollar and save more than one dollar 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 Vela. Lauren is a very experienced consultant working with coalitions, groups of employers, physician organizations, and also in the PBM space.
You can learn more about Lauren’s work by connecting with her on LinkedIn.
Lauren Vela is a passionate advocate for a more rational and sustainable healthcare system and recognizes the influence had by employers and other commercial purchasers through their oversight of employer-sponsored insurance plans. As an independent consultant, she partners with entities that are committed to changing the ineffective status quo.
Previously, Lauren was the director of health care transformation with Walmart, where she partnered with the Walmart Benefits team to identify solutions concerning low-value care, site of care, and vendor evaluation. Prior to her tenure at Walmart, Lauren led market strategy and member initiatives for the Purchaser Business Group on Health, where she cumulatively spent two decades working within various healthcare sectors, including health information technology, provider organizations, and pharmacy benefit management. Lauren also served, for seven years, as the executive director of the Silicon Valley Employers Forum, a trade association of high-tech employers collaborating on innovative delivery of both domestic and international benefits.
07:16 What does inertia actually mean in the healthcare benefit space?
08:02 “Fixing healthcare is not really the benefit manager’s job.”
08:22 How could a benefit manager’s job actually do the opposite of making healthcare better?
10:56 EP358 with Wayne Jenkins, MD.
11:56 “Americans are in pain.”
13:31 Why do benefits managers partner with consultants, and why is that bad?
14:17 “Benefit departments are cost centers; they’re not revenue centers.”
15:30 “Every single company is in the healthcare business.”
18:12 Why relationships with consultants can make it very difficult for benefits departments to change.
22:46 Is the juice worth the squeeze?
23:12 “There’s not one silver bullet that fixes healthcare.”
27:42 What is status quo bias?
28:56 Why employers may not be able to stay with their legacy vendors and also change for the better.
You can learn more about Lauren’s work by connecting with her on LinkedIn.
Recent past interviews:
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Dale Folwell (Encore! EP249), Eric Gallagher, Dr Suhas Gondi, Dr Rachel Reid, Dr Amy Scanlan, Peter J. Neumann, Stacey Richter (EP400), Dawn Cornelis (Encore! EP285), Stacey Richter (EP399), Dr Jacob Asher