How to improve your bottom line through better healthcare

management

Emery Benefit Solutions, LLC

Susan A. Emery, President/Owner

Why are we you here?

Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings,

1999-2011

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2011; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2011 (April to April).

Average Annual Premiums for Single and Family Coverage, 1999-2011

* Estimate is statistically different from estimate for the previous year shown (p<.05).

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011.

We are getting sicker!

• Obesity may be more expensive than smoking when it comes to health costs.

• Researchers from the Mayo Clinic found that people who are obese have an extra $1,850 in health costs, on average, a year compared with normal weight people.

• People who smoke, on the other hand, have $1,275 extra, on average, in health costs per year.

• And for people who are morbidly obese, the costs are even higher, up to $5,500 a year.

Some of the causes of high costs

Stressful Worksites and Unhealthy Products

Toxic Payment System that Pays for:• Volume rather than outcomes• Individual units of care rather than episodes

of illness• Acute care not prevention• Medical errors and “do overs” • With no performance based payment

Consumer Entitlement Mentality:• That insulates individuals from cost sensitivity because of

3rd party payment

Why do or should you care?

• Recently, a Gallup poll showed that overweight and obese workers cost $153 billion each year to businesses because of lost productivity.

• Altogether, they miss an extra 450 million days of work each year, compared with people who are not obese or overweight.

Cost of RetentionHow Much is it Costing You?

Several well-regarded studies have recently line cost. The top line cost? If the comp estimated the cost of losing an employee:

• SHRM, the Society for Human Resource Management, estimated that it costs $3,500.00 to replace one $8.00 per hour employee when all costs — recruiting, interviewing, hiring, training, reduced productivity, et cetera, were considered. SHRM’s estimate was the lowest of 17 nationally respected companies who calculate this cost! (some as high as $25k)

• Other sources provide these estimates: It costs you 30-50% of the annual salary of entry-level employees, 150% of middle level employees, and up to 400% for specialized, high level employees!

The GAME

THE GAME BASICS

• THE PLAYERS: – Insurance Companies, – Employers, – Insurance agents/consultants, – Employees/Individuals

• THE GAME: – Who can get the most money or lowest premium

WITHOUT revealing their hand– Though we all KNOW small groups really have no options

• WINNERS and LOSERS– Who usually is the loser?– Are there ever any winners?

MORE GAME BASICS

• See our agent once a year at renewal

• They “SHOP” our insurance to find a better DEAL

• We get a really cool spreadsheet

• Usually lucky to keep increase at a single digit with some cuts in benefits and employee contribution increases.

• Rest of the year: Our agent is available to us when we call.. Or one of his/her staff members

“Learn the rules well, so you can break them properly.”

(Dalai Lama)

EVEN THE SCORE

WHAT YOU NEED TO KNOW….

Insurance vs. Benefits

• Insurance was designed to protect individuals and families from catastrophic illness so they will not become bankrupt

• Employers started to offer to their employees as part of compensation packages (with the thought they have healthier employees – showing up for work)

• Insurance companies begin to add more “protection” into the policies – making insurance more “comprehensive”

Insurance vs. Benefits

• Health care cost continue to rise: – IDEA: Get people healthy so less catastrophic claims–

Add doctor office copays and preventive paid at 100% – Insurance is still paying for this???? =

• Actuary’s Nightmare! – Everyone can use preventive (so you are paying for all

whether they use it or not)

• Example: What if car insurance paid your oil changes and tune ups? What would happen to your premiums?

Insurance vs. Benefits

• Offering to pay for people to be healthy is a benefit not and insurance expense.

–People should pay to take care of themselves

• So the Difference SHOULD also be in the funding (how we pay for it)

Funding Benefits & Insurance

• Fully insure Catastrophic Risk

• Fully insure, self fund Benefits

– HRA, HSA

– “GAP” plans

– Other limited benefit plans

• Plan design and the DETAILS ARE CRUCIAL!!!!

• Not only is it important to COMMUNICATE to employees but HOW is even more!

Why even offer Insurance or Benefits?

• Moral obligation to employees

• Believe employees ARE the business: success of the business is directly connected

• Attract & retain employee – the BEST employees

• Mere cost of doing business – have to offer it

What else do you need to know?

Direct Costs

vs.

Indirect Costs

Direct Costs

• Insurance Premiums (Health, Life Disability, workers comp)

• Health and DI Claims

• Administrative costs

– Internal & external

• Broker Commissions

– Do you know what this is and what you are getting for it?

Direct Cost

What makes up an Insurance Premium

• Administrative costs • Broker Commissions• Claims

– Lots of Influence – if understand human behavior and have access to claims

OR

• Community Rating (less control)– Underwriting:

• Health, • Census (age, status ), • Industry, • Company size

Indirect Cost

• Turnover

• Poor work performance

– Absenteeism, presenteeism, disability

– Affect both direct and indirect costs

• Lack of qualified candidates

• Competition

Small and Mid-sized Employers -Constraints and Advantages

Constraints

• Limited HR resources

• Small risk pool

• Fully insured

• Broker dependency

• Single plan option (not really)

Advantages

• No corporate bureaucracy

• Leadership engagement

• Worksite culture

• Benefit Advocate

"The significant problems we face cannot be solved at the same level of thinking we were

at when we created them"

(Albert Einstein)

Change the Rules

• Claims or Health Status– You can INFLUENCE behavior to affect insurance,

retention and productivity costs

– Encourage health through employee education and other health programs

– Integrate with other employee programs, such as safety, workers comp/disability

– Design a value based plan – find carriers that support your goals

– Use every part of the money you spend to benefit you and your company

Plan Design Approaches1

Financial Design Value-Based Design

Conserve resources through decreased

utilization

Focus on long-term outcome of improved

functional health

Efficient management of each line item Total cost picture to include indirect costs

Cost sharing based on acquisition cost of

service or product

Subsidize effective services through

lowered out-of-pocket exposure

Decrease or eliminate subsidy for

ineffective services

Plan design applies to all membersVary financial subsidy based on individual

needs

1. Mahoney J. Value-based designs. Presented to the Health Care Service Corporation; May 2009; Richardson, TX.

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Change the Rules• Broker Commissions

– ARE YOU GETTING YOUR MONEY’S WORTH?

– You agent is paid by the insurance carrier. Between 5-15% of the premiums you pay.

– There is no performance evaluation by the insurance company.

– EXAMPLE: 25 Employee Company – Agent makes on average $20,000 per year that’s $1,666 per month.

Now what?

• C-Suite/Leadership Recruitment

• Complete Audit & Diagnostics: 20-25 Point thorough review of current plan, enrollment and claims (if available), profile workforce population health and total cost burden

• Health and Productivity Strategy Development: targeted to employer’s workforce characteristics

• Review of history : What was tried, Did it work or not, Why

• Value Based Health Plan Selection: Search for innovation (e.g. embedding consumer incentives in plan design, high performance provider networks, health risk assessments)

• Results: MEASURE – REVIEW – MEASURE – REVIEW - IMPROVE

Conclusion

• The renewal is not the time to solve cost issues• Know what is happening long before receive renewal• Have a plan!• Find partner that works with and for you and is

compensated in such a way.– Percentage of savings– Monthly outlined services– 3-5 year cost reduction strategy

• NO MATTER WHAT, COMMUNICATION with your employees is imperative

• More importantly is the HOW: CLEAR, CONSISTANT, CONTINUAL communication… otherwise, none of this matters…