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September 17, 2014

Healthcare at the Tipping Point

Summary:

Everything is changing, so companies, too, must change their strategies for employees.

Photo Courtesy of Thomson Data

The Affordable Care Act, or the ACA, (aka Obamacare) is a catalyst for accelerating change brought about by the crushing cost of healthcare.  We have reached the tipping point where all the players in a $3 trillion industry are desperate to find new footing, while their usual way of doing business is crumbling underneath them.

Don’t get caught up in the rhetoric of politics. Obamacare is just a symptom of the problem; it’s not the cause!

Everything in healthcare is undergoing change. Companies must also change — they must change the strategy, tactics and people involved in their decision-making process. The C-suite understands this better than anyone. They know that in today’s economy taking measured risk is essential for profitable growth. Yet many of them have assigned the responsibility of healthcare business strategy to managers who keep their feet on the brakes, repeating why change is risky every year. That’s why today, in a post-Affordable Care Act world, the strongest C-suites are advocating change for better healthcare strategies, not just safe ones.

Taking Your Foot Off the Brake

One way to do this is to get the C-suite more involved in setting the business strategy direction for corporate healthcare. They need to evaluate the risks associated with the many healthcare opportunities they are facing. One of the first steps in doing so is distinguishing between healthcare risks that can be managed and risks that should be avoided. Avoiding unnecessary costs – like healthcare claims – is where value is created. Here’s why:

The new law under the ACA started as a 2,800-page question mark and now exceeds 28,000 pages. The administration is literally creating and adapting the law as it goes forward. The revisions and updates have been numerous, and they will continue. That’s because the medical treatment industrial complex, also known as the healthcare industry, is one of the largest components in our economy — with a system built on illness and sickness as the revenue model.

But we know beyond a shadow of a doubt that our sickness care model is totally unsustainable. Yet shifting hospitals and physicians practices away from a fee-for-service model, where they receive payments based on the volume of care delivered, will take years to become the norm.

The incentives in our current system are so perverse that hospitals and physicians receive even greater compensation when preventable infections and injuries are allowed to take place. Lest you think this is a harsh criticism, these facts are validated by government studies that indicate medical errors rank as one of the top five leading causes of death in America. Yet we rarely hear anything about these facts.

Healthcare exists on a continuum. On one end, we have buyers who want health insurance only so that a third party will pay their claims when they want or need treatment — like a buffet. On the other end, are people who are looking for an emergency backstop in the event of an unforeseen illness or accident. It should be obvious; there is no one-size-fits-all solution!

Businesses need to take steps to reduce, control and eliminate claims from their healthcare budgets. It all starts with corporate culture and the realization that employers must change the parent-child healthcare dynamic. The parent-child relationship exists where businesses still decide on what benefits, designs and choices there will be for the next 12 months and then tell all employees that this is what the company has selected for them.

It’s time to consider a benefits partnership where the company facilitates the framework for the offering, but the employees choose what fits best for them. The communication resembles something more like “we are partners in healthcare, and each of us will be rewarded for the good health of our team members.” Contrast that against the usual legacy approach where employees are told “here is the new insurance coverage, go and consume because a third party pays the bill and good luck if you get sick — hope you catch it early!’

Three Ways for Organizations to Use the Affordable Care Act

1.  Challenge the status quo legacy thinking of your benefit managers. The easiest way is to put a question mark at the end of their statements.

Ask them to explain the what, why and how of the latest rate increase. Be honest, benefits is not their only job responsibility, and you can’t afford the learning curve after Obamacare. Top line revenue challenges, increasing operational expenses, shrinking margins and profits are the norm today. Reacting every 12 months to the supply chain’s rate increase is not how to manage healthcare after the ACA.

Pop quiz: Do you think the benefits manager hires a broker/consultant that challenges her fear of change, or supports the status quo?

Ask managers to explain why you have prepaid premiums versus a pay-as-you-go strategy. Ask them to explain the  carrier’s rationale for another rate increase. Ask them how the broker/consultant proposed to reduce claims by 20% to 40% in the renewal meeting.

2. How are you identifying, measuring and managing the modifiable risk factors in your employee population

You can’t manage what you can’t measure. The ACA allows employers to create plan differentials where employees can qualify for different levels of benefits based on the outcomes of their biometric screen. For example, smokers who have high glucose, HBP and high cholesterol may pay higher out-of-pocket costs compared with the employee whose measurements qualify for a higher level of benefits. Think of it as finally being able to receive better health insurance because you receive the equivalent of a “good driver discount.”

Additionally, health promotion and preventive care is emphasized under Obamacare, whereby employees can become eligible for incentives based on their participation, activities or outcomes in specified programs.

The ACA provides incentives for promoting health — and not insurance!

3. Define for yourself why you invest in health insurance. Are you only concerned with managing a budget and trying to keep a lid on costs? Is health insurance just a financing cost so employees can access care and a third party will pay most of the bills for them?

Or, do you invest in health insurance so employees will have quality healthcare at a fair price where they can become good healthcare consumers armed with cost and quality resources. Employees can accumulate their own prefunded healthcare accounts through HSAs instead of paying health dividends to insurance companies. For too many employers, insurance companies profit off the  good health of the employees and then charge the company another rate increase every year.

The business of healthcare will never be the same after Obamacare. There is no way to avoid change; you’re either moving forward or going backward. Companies must look for new directions with new eyes and a new map because the old map was so 28,000 pages ago.

The new law provides many tools for controlling healthcare costs by promoting prevention, transferring risk where appropriate and avoiding risk entirely by eliminating adverse selection. Focus the conversation on how to reduce the demand for healthcare claims because that represents 85%-90% of the money invested in healthcare.

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About the Author

Craig Lack is “the most effective consultant you’ve never heard of,” according to Inc. magazine. He consults nationwide with C-suites and independent healthcare broker consultants to eliminate employee out-of-pocket expenses, predictably lower healthcare claims and drive substantial revenue.

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