Health Care for Your Benefit
When business owners aren’t talking about the economy, they’re probably chatting about the rising costs of health care. With headlines about “Obamacare” and the Utah Health Exchange, even employees are talking health care around the water cooler. This hot topic made for an intense — and intelligent — conversation among five industry experts at the Bennett Communications offices in August. And if this banter is too high-level for you (at times it was for us), we’ve included a handy glossary of terms.

Jeanette Bennett, Editor of BusinessQ: What trends are you seeing with regards to small business benefits packages?

Keith Williams, Employer Solutions Group: Basic programs that include health insurance, dental and vision have in some cases been eliminated or the deductibles are going higher — or they are charging higher premiums to employees. To offset that and still maintain a good work environment, we’ve seen companies offer different benefits such as memberships to fitness centers and allowances toward lunch.

Scott Miller, MillerWade Group: We spend a lot of our time in the small group market. It’s alarming to us the number of businesses not taking proactive approaches in regards to health care reform. Small companies qualify for a tax credit based on certain criteria and can get a credit for the premium they are paying on behalf of the employees. It’s amazing how many don’t want to go to that next level to learn about it. We are approaching this as an opportunity to become a trusted adviser to them. We’ve seen a trend in the past three or four years toward more consumer-directed health care — HSAs, HRAs.

Keith Tintle, MountainStar: The lack of public education is phenomenal. We have an arm through our hospital where we can provide information and connect people with opportunities like the Utah Health Exchange, benefit packages and tax credits. We find more and more people accessing that information, but unfortunately it’s when they get into the hospital. Education needs to happen before that.

Don Garlitz, FirstWest Benefits: We conduct a market-wide study every year of employee benefit offerings. In the last couple of years, we expected to see a reduction of the values of offerings. What we’ve seen is that the quality of benefits has held steady. Companies are not cutting their benefits. What we are seeing in the marketplace is a decrease in the size of employee groups due to layoffs and reductions in force. We’re not seeing companies eliminate benefit programs across the board.

Tintle, MountainStar: Employers are trying to maintain a benefit level. In addition, they oftentimes incentivize employees with higher co-pays and deductibles to think twice before they access health care. As a hospital, we have seen an increase in bad debt because we are collecting from the public and not from the insurance companies due to high deductibles.

Miller, MillerWade: We insure several physician clinics as well. Their receivables are much higher than what they used to be.

Tintle, MountainStar: Candidly, a part that speaks well to people using the health care system judiciously and appropriately. You want people to access health care when they need it. But at the same time, there’s a bit of a mentality where people expect first-dollar coverage, where health insurance starts looking like an entitlement or a right. Then they look at the employer and say, “Why don’t you give me that benefit?”

Ron Nielsen, UBIC: Companies have eliminated excess waste because the economy was different at the time they started their business. Benefits are still being offered to those people who continue to be key in the workforce. Business owners are just working a little smarter, a little harder, a little more efficiently.

Tintle, MountainStar: We are becoming a more productive country in terms of gross national product, but that doesn’t address unemployment.

Miller, MillerWade Group: For so many years there was the entitlement mentality — minimal premium out of pocket. But people didn’t know what the employer was paying to support that. Employers are having to squeeze to still offer a decent benefit package. Consumerism has been forced upon us as a society so we can see what insurance is truly costing us. It’s forcing us to take a more proactive approach to how we spend our health care dollars. It will be an evolutionary process to move people from traditional plans to HSAs and HRAs. It’s a paradigm shift about what the purpose of insurance is.

Tintle, MountainStar: It’s all evolutionary. We’ve been in a business-driven model until now. It’s becoming much more consumer-driven. What scares me is that if the business-driven model to consumer-driven model stops circling back around, people will look to the government as an entitlement.

Williams, Employer Solutions Group: Most companies are having to offer a dual option because the transition away from traditional insurance for the employee is difficult. They go from having a $10 co-pay to being charged $100-plus for an office visit. In the event of a hospital stay, it’s much higher depending on deductibles. One thing that’s difficult in a consumer-driven plan is that a patient will want to know what a treatment will cost. In my experience, a physician can’t always tell you. There’s a disconnect that makes it difficult for the consumer to use their dollars wisely.

Garlitz, FirstWest Benefits: I agree, but fortunately the legislature is tuned into that problem. With the creation of the Utah Health Exchange, the legislature wants consumers to be able to find information about cost and quality. But it’s a little difficult to get at because of contractual privacy between insurance companies and providers. We already have some laws that require providers to publish their rates to some degree. They don’t have to publish their allowed amounts, but we are taking steps in the right direction.

Nielsen, UBIC: If consumers realized that insurance companies are actually for-profit companies, and if they treated the way they went to the hospital or doctor as money that comes out of their pocket, we’d all be better off.

Tintle, MountainStar: One problem is that small-business owners don’t know what to anticipate in terms of health care costs. An insurance company could drop a company if actuarially, the rates are higher. You can make yourself uninsurable. That’s why the Exchange makes sense. It’s what I like to call a defined contribution model. With defined contribution, small-business owners can predict their health care costs more effectively.

Garlitz, FirstWest Benefits: The intent of the Exchange is to take consumerism to the next level. What we wanted to see was consumers having more choice over the product, who they buy it from, what design they wanted to buy. We wanted to create a system where employees could have a great choice in the product offerings they have and yet not go all the way over to disbanding group insurance and going to an every-man-for-himself system.

Tintle, MountainStar: The Exchange only applies to companies that have from two to 50 employees, however.

Garlitz, FirstWest Benefits: There is a large employer pilot starting Jan. 1. Time will tell whether those medium-sized companies like the system. There’s a great opportunity for them to embrace the Exchange.

Tintle, MountainStar: It’s comforting that the Exchange isn’t meant to replace group insurance. It’s meant to augment it and be compatible with it. It allows existing insurance companies to exist in this market without the government stepping in.

Miller, MillerWade Group: In beta tests for the Exchange this past year, we didn’t get quite the response we were expecting: 133 registered and 13 jumped into the system. There were two or three groups that dropped throughout the year for various reasons, maybe because it wasn’t as user-friendly as it needed to be. With open enrollment in January of this year, hopefully we’ll see more success. I’m a big promoter of the Exchange. It creates flexibility for the employer to avoid the double digit increases they would have to absorb. Can the Exchange work long term? No question. Will it bring coverage to the uninsured? We’re not sure yet. In Utah, we’re being recognized as one of the more proactive states with regards to the Exchange. Outside of Massachusetts, I’m not aware of any other states that have an operable exchange.

Garlitz, FirstWest Benefits: The Massachusetts Commonwealth Connector was really built around the individual market. They’ve accomplished some good. They’ve reduced the number of uninsured. The question is whether or not these subsidies are sustainable.

Miller, MillerWade Group: Basically, if you make less than $88,000 a year, you’re going to qualify for some form of subsidy based on the current model.

Garlitz, FirstWest Benefits: I have five children, and as a family of seven, under the 2010 federal limits, I’ll be able to qualify in 2014 for an insurance subsidy making less than $133,000 a year. And that number is going to be bigger in 2014 than it is now. I think the intent of the administration was to create a system that was going to embrace the middle class. The subsidies they are providing are not necessarily for low-income people.

Williams, Employer Solutions Group: One of the sources of the hesitation you see from insurance brokers as well as employers is in the fact that it’s so new. I don’t know if there’s been a lot of education on the Exchange yet. Long term, it’ll be a good option. The transparency of costs is a big draw.

Tintle, MountainStar: The operative word here is transparency, not just with cost, but in terms of quality and outcomes. Even though we know what the cost of a McDonald’s burger is, we have to make a decision in our mind, “Is that low price worth the quality or do I get a more expensive burger at Five Guys?”

Miller, MillerWade Group: You hope that by insuring more people, you insure more healthy people — those who might have been on the outside looking in because they didn’t feel they needed insurance before. Obviously they contribute in a real positive way to the overall claims experience and loss ratios. So if you can accomplish that through mandating that everyone gets insurance, that could help. Again the question is going to be cost. When insurance companies are forced to insure everybody, what impact will that have on the whole? We saw some of that in 1997. HIPAA passed in 1996, and in 1997 we started seeing double digit growth. It was a direct correlation of insurance companies having to bring on all of these uninsurable people.

Garlitz, FirstWest Benefits: The biggest challenge the Exchange experienced in the beta test was that it was charging companies more to buy the same product under a different piece of paper. That had to be corrected. Now when you go to the exchange, you’ll see parity in pricing.

Williams, Employer Solutions Group: When we tried to set groups up on the Exchange, we found higher prices as well. Now that the price is being addressed, that will help with participation.

Nielsen, UBIC: You have to remember that insurance companies have to be profitable to survive. If you have to insure everybody, you have to look at things actuarially and make sure you price risk accordingly. If the government says you have to price things at a certain place, there’s going to be fallout.

Garlitz, FirstWest Benefits: Those who were part of the Exchange were already guaranteed issue under law. It wasn’t a move from a guaranteed-issue environment to a non-guaranteed-issue environment.

Bennett, Editor of BusinessQ: Obviously you are all experts in this industry. But what advice do you have for business owners who are experts in their own industry and don’t have the time or interest to digest all of this information about health care?

Garlitz, FirstWest Benefits: It depends on the size of the company, whether they are large or small firms. In my opinion, not to be self-serving, but they are wise to find others who deal with this industry. There is so much information to digest. Larger companies can have a member of their HR staff who are about as knowledgeable as a broker. They can afford to pay a person to do just that. But most companies just can’t pay employees to know this stuff. It’s wise to rely on an adviser.

Bennett, Editor of BusinessQ: What are some of the common mistakes business owners make regarding insurance?

Miller, MillerWade Group: Not knowing the basic, fundamental requirements — eligibility requirements, participation requirements, contributions requirements. They need to make sure they are meeting guidelines.

Tintle, MountainStar: I’m not going to say this is the responsibility of the employer, because I think it’s really the responsibility of the individual consumer — but understanding appropriate use of health care is vital. These new developments give our employees incentives to take care of themselves and develop relationships with primary care physicians and prevent paying huge amounts for an ER visit with something that could have been taken care of with an $80 doctor visit.

Nielsen, UBIC: I agree with you on the primary care physicians, but I would take it a step further. I think not getting in a relationship with an agency or broker is the biggest mistake because the agency or broker can understand that risk. They have seen what they’ve done in the past and can assist that business owner in making the right decisions.

Miller, MillerWade Group: As an agency we add as much value to our relationship with clients as possible. It’s not just about health insurance anymore; it’s about all the things you can bring to the table. The new health care bill is 2,000 pages long. People studying it deeply are saying that for every one page of the bill, there are 10 or 15 pages to define and clarify what that one page contained. We’re looking at a final bill that’s 20,000 or 30,000 pages long. How does the average employer understand what that’s going to mean to them? That’s going to fall back on us as consultants to understand what they need to understand and explain it to them.

Williams, Employer Solutions Group: That’s exactly right. For the employers, it’s not only nearly impossible to know what they need to know to make a good decision, but for the most part, they don’t really want to know. That’s not what they went into business for. They’ve got other things on their plate. Does this have a financial impact for them? Certainly. But they need someone to steer them through it.

Bennett, Editor of BusinessQ: What final advice do you have for business owners in regards to insurance and employee benefits?

Nielsen, UBIC: The employers need to focus on their loss ratio. What are they doing to lower their loss ratio for the insurance carrier? In the end it is going to help them if they have a lower-cost ratio. It will save their company money, making their bottom line look better.

Miller, MillerWade Group: We try to get our clients to look at the benefits they are offering through the eyes of the employees. If they were an employee, would they see it as an attractive and user-friendly package? It can be complicated. If we as the agency broker can give them resources to turn to if they are having problems and issues, the relationship works. They want to know they are going to get taken care of. That’s what we can bring to the table from a consultant standpoint.

Garlitz, FirstWest Benefits: It occurs to me that some employers may offer benefits because paternalistically they want to take care of their people. More commonly business owners pay for them because they have to competitively. As we study the marketplace annually, we’ve learned those are the two main priorities companies have. They want to bring in good people and keep them there. That’s why they are offering benefits. What an employer needs to do is understand their market, not just the overall market. They need to understand what they specifically have to offer to be competitive in the market they’re in.

Williams, Employer Solutions Group: I agree. Employers need to get a good sense of what the market is doing, but they also need to be creative and offer non-traditional benefits with little to no cost to give them an edge over the competition. Employers can get a good feel from the employees of what they would value.

Tintle, MountainStar: The trend of our whole discussion seems to be transparency. It puts a lot of responsibility on all of us to be accountable for what we do, to be more transparent in outcomes and expectations. A big piece of that is that as a society we need to come to a recognition of what our responsibility is to the uninsured.

Bennett, Editor of BusinessQ: Thank you for your thoughts today.

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