Why Inertia Hurts: The Cost of Ignorance on Your Health Care

Health care in the United States is expensive. Insanely, outlandishly expensive.

Americans pay way, way, way more for health care than anyone else, and it's really an abomination.

The median household spends more on hospitals – not health care overall, just hospitals – than on federal taxes.

Yes, it is the worst performing supply chain partner for most organizations. I'm not sure about you, but I can't think of any other sector you would accept paying more and getting less every year?

As a business, ask yourself and ask your employees how they feel knowing that their hard-earned high-deductible dollars feed into a system that's 1/3 to 1/2 waste.

The root of this problem is the U.S. health care system’s current claims methodology and a lack of transparency and control among employers, patients, providers, and insurers.

"There are a lot of people in corporate medicine who make a ton of money off the lack of market-competitive pricing. And these people don’t want to give that game up.”

So, What's Happening Behind the Scenes?

“If it wasn’t complicated — it wouldn’t be allowed to happen. The complexity disguises what’s happening. If it’s so complicated that you can’t understand it — then you can’t question it.”

Insurance carriers are in the business of selling discounts. However, the higher the prices are to start with, the more money they make in discounting those prices. So that’s part of the problem; a PPO will say that their discount saved an employer tens of thousands of dollars – from which they naturally take their cut. Who does this benefit? Hospitals and Insurance carriers? Yes. Employees? Uhm No. Conflict of Interest? Kinda seems like it, huh!

Problem for Employers:

"GM spends more on health care than steel, just as Starbucks spends more on health care than coffee beans." -Warren Buffett Given the massive amount of money spent by employers on health benefits, it’s brutal to look at just how bad the status quo is for health benefits.

What does your blueprint for sustainably reducing costs and improving care at your organization look like? Or does your renewal give you that used car sale feeling? CEOs have given HR's 2 tasks: keep employees happy and keep us out of trouble (i.e. status quo). The insurance carriers capitalize on this and typically come in with an increase of 11%-14%; then insurance brokers ‘negotiate’ a less bad increase, staying below the CFO’s budget, and there you have it. Check the box, health care can be put to bed. See you next year.

This may have made sense when health care benefits were a small percentage of the company’s budget, but decades of hyper-inflating costs have made it the second or third largest expense.

I understand business leaders are hesitant to undertake a health benefits transformation because they are likely afraid the change may viewed negatively by employees...Especially given that most changes in heath benefits for the last 20 years have meant paying more for less and less coverage...Still, this is not a good enough justification for avoiding it. Change is necessary for any organization to thrive, and we should never settle for something that's "just OK," Especially when lives are concerned.

The good news is that I have seen light at the end of the tunnel. I know that change can happen because I have worked with employers who have chosen the road less traveled and truly demonstrated that their employees are their most valuable asset. I am confident other employers can get out of the hamster wheel too, provided they have the right benefits advisor, take the right approach to leading change, and create a sense of urgency early.

When is Enough Enough?

While it may seem backwards to business leaders, the best way to cut health care costs is to improve health benefits, and understanding the cost of ignorance.

Here are my tips to liberate employers:

1. Develop a Vision of Better Benefits: Every organization is unique, which means that the how and why of an employer’s vision should be tailored to that organization’s culture and circumstances. Establish a vision for profitability and sustainability. Employers should stress that without change, the company will struggle – and that when the company struggles, so do its employees via reduced benefits, increased cost sharing, and flat wages.
2. Create a three-to-five year goal of having better, cheaper coverage: Changes cannot be made abruptly, and you must look at data to weigh the impact both financially and to employee experience. Working with an advisor to build a long term strategic plan can get you out of the volatility and vicious cycle of rate increases.

1. Switch from renter to owner mentality: Switching from a carrier-controlled plan to an independently administered employer optimized plan is a logical progression for CEOs/leaders who have long said that employees are their most valuable asset. Most employers opt to take the fully-insured route because it seems like the only game in town; however, I've seen the ones who abandon "insurance as usual" mentality and have taken action see their health care costs flatten or decline a bit while other employers continue to face ever-increasing care costs. Similar to home ownership, the financial advantages of 'waking up' compound over time. As each year passes, the gap between wideawake employers and those accepting status quo grows.

Health care has been remarkably resistant to forces trying to disrupt it for decades – forces that have driven change in virtually every other sector from financial services to retail to travel. I believe millennials and forward thinking employers and advisors will bring this disruption to health care. I am excited to see change for those who are willing to see it themselves.

Source: "Relocalizing Health: The Future of Health Care is Local Open & Independent." David Chase. 2021.