By Brian Uhlig
In 2018, employers spent, on average, close to $20,000 on family health insurance premiums and nearly $7,000 for single employees, reports the Kaiser Family Foundation. That’s a huge chunk of change, especially for small business owners. Unfortunately, that expense isn’t expected to get cheaper any time soon—2019 could see another five percent increase.
In light of this increasingly costly trend, we spoke with Brian Uhlig, a Health Rosetta-certified employee benefits advisor and the Senior Vice President at GCG Financial. Uhlig, who has worked with employers of both large and small businesses to reduce the burden healthcare has on their bottom line, talks to us about how employers are dealing with this issue, plus what they should be doing about it.
What are small business employers’ frustrations about today’s healthcare system?
Let’s pretend that Apple put out a new iPhone each year, and that you had to buy that iPhone. But, the new iPhone was more expensive, performed worse and could even kill you if you got your battery replaced at the wrong store. This is similar to what employers go through when buying health insurance for their employees, and they are sick of paying more—premium rates increase by 5-20 percent annually—for poor health benefits.
The reason prices keep climbing is not because healthcare services themselves are costing more. In fact, cash prices have stayed pretty consistent. But not all benefits brokers shop around for the best deals on health plans, so when prices go up, they just pass along this information to employers, many of whom are used to saying “OK” under the assumption that their advisor has done everything they could to keep costs down. Then, to offset the larger price tag, employers often raise employees’ deductibles, making them pay more out of their own pockets before they are covered by insurance.
This is the process employers have grown used to, but they don’t have to accept it any longer. By working with an advisor whose interests are in line with the employer’s—saving money and providing better benefits—employers can see savings in the thousands, especially when those health plans support high-quality, value-based care that rewards physicians not for many tests they order, but for how positive their patient outcomes are.
Because of their size, are small businesses limited in what they can do?
There can be some limitations for groups less than 50 employees but there are still options available to them. Being small, especially when it comes to breaking away from status quo health plans, can also be a major pro. With less than 50 employees, small business employers do not have to answer to the Affordable Care Act’s Employer Shared Responsibility Provisions. This prevents them from being penalized for not offering ACA-compliant plans and gives them the freedom to get creative with their health benefits. If an employer is slightly larger and just misses this cut-off, they’re considered an applicable large employer (ALE). But not to worry—with a skilled advisor and third party administrator (TPA), ALEs can get around the “pay or play provisions” and create ACA-compliant plans which are still better for their bottom line than standard offerings.
So how can small business employers spend less, but still have better health plans, exactly?
It’s all about spending smarter and making sure that employers get the biggest bang for their buck. That means aligning with a program that is focused on changing how providers are reimbursed for services. Today’s healthcare system is volume-driven, providers making more money the more services (test/procedures) they provide. Employers should instead design their health plans around providers of value-based care. Physicians in this care model are paid for how well they do their job: getting and keeping patients, employees, healthy.
To create such a plan, innovative employers should consider doing the following:
- Find a competent, transparent benefits advisor with expertise in self-funding and one who understands how to add value and charge for those services in a totally transparent manner.
- Using a third-party administrator (TPA) to create a self-funded plan. In a self-funded plan, an employer pays for their employees’ medical expenses with their own money, and a TPA—for a monthly fee—will process claims and perform other administrative tasks. Working with a TPA, a self-funded employer will have more transparency by being able to access to their own claims and data.
- This self-funded plan should incorporate a member concierge who can help navigate the system for your employees and direct them to high value providers.
- Purchasing stop-loss insurance to lower risk and protect against large claims—like an employee needing an emergency organ transplant—ideally through a captive program. Stop-loss coverage kicks in when claims exceed the amount an employer has budgeted, and in a captive program, the employer acts the “insurer” and is able to keep any cost savings.
By following these steps and working with a knowledgeable, transparent benefits advisor, employers can create health plans that provide their employees with access to better care, and save everyone money.
In your experience switching employers to self-funded plans, what successes have you seen?
The most important piece when considering a move from a fully insured plan to self-funding is that you are thinking about the move over a five-year time horizon. When we can get employers to stop thinking about healthcare purchasing as an annual exercise, but rather, a plan that is done over the course of five years, it changes the mindset of the employer. They realize that they need to treat this like any other large expenditure (capital investment, long term lease, etc…).
Between 2012 and 2016, I saw great success while working with National Surgical Healthcare, a surgery provider who at the time had multiple locations served by multiple fully-insured and self-funded plans. They were used to seeing 5.4 percent spending increases each year, but I was able to get that number down to only 1 percent per year. Compared to what they expected to spend, this saved them around $3 million annually. On a single self-funded plan, they were able to reduce their employee payroll contributions but still spend less. And upon their 2017 exit, National Surgical Healthcare had an additional enterprise value of $31.1 million.
The numbers don’t lie. Though self-funded health plans may sound scary, their financial gains are tremendous. Employers of all sizes are capable of saving money on their health plans—all it takes is a willingness to step away from the status quo and working with the right benefits advisors and TPAs to create value-based plans. Better benefits don’t have to cost more; they can actually cost less.
Brian Uhlig is Senior Partner at Alera Group and a Health Rosetta-certified employee benefits advisor who works with employers to design high-quality, low-cost health plans.