The traditional employer benefit structure is crippling employers, workers and their dependents. Can the controversial health reform experiment offer a clue to a better way?
With the continuing focus on how to best insure Americans and the political ping-pong surrounding fixing or replacing recent healthcare reform, perhaps lurking in all of this is a creative alternative for employers that can’t be ignored any longer. The cycle of increasing health benefit costs and decreasing worker satisfaction is simply unsustainable, and is driving some new thinking about the employer sponsored health benefit dilemma. Is an alternative for workers and their employers right in front of our eyes? As the CEO of Hixme, I’m betting the farm that Hixme’s model is just that, and is where employer-sponsored health benefits is heading.
Popular quips like “empowering patients with transparency, accountability and choice” and creating a system of “patient centered healthcare for every single American” can’t become a reality until each worker and family member has control over their own health care financing choices and suppliers – something that the traditional employer centric model can’t provide. But in order to free workers from the rigid limitations of traditional employer benefit approaches, a single employer as a “pooling” mechanism may have seen its day. Its just too limiting for most companies except those with tens of thousands of workers and dependents.
Is an alternative for workers and their employers right in front of our eyes? As the CEO of Hixme, I’m betting the farm that Hixme’s model is just that, and is where employer-sponsored health benefits is heading.
What once created stable employer pools no longer works
There are several reasons for instability in the traditional models that are now too important to ignore. Just take for example, the average millennial worker whose tenure is only three years and declining, destabilizing what has historically been a very predictable employer-by-employer pool. And because employers’ obligations (under COBRA) to continue former workers’ benefits, this higher turnover increases risk and cost. Why? Because former employees who continue benefits on COBRA are generally sicker, and when costs are pooled traditionally, active workers’ costs go up more rapidly.
Finally, because workers’ family members today have many new alternatives for their health financing, we should not be surprised that employers are reducing support for dependents. But this decline in family member participation (many of whom are young and healthy) now contributes to further destabilization of the employer’s traditional pooled program.
The “new” Direct-to-Consumer market represents an unexpected, but refreshing alternative for employers, one that provides access to the largest and most stable commercial pool in the country.
It’s not the public exchange; it’s something else entirely
Most large employers confuse this with the “public exchange market” from exchanges like HealthCare.gov which covers between 10 to 12 million lower income people. Surprisingly, another 10 million professionals and affluent consumers not part of these public exchanges. Instead they are enrolled in private Direct-to-Consumer plans from dozens of Blue Cross/Blue Shield Plans, Aetna, Cigna, Anthem and many more. In fact, we count more than 150 unique insurance companies providing Direct-to-Consumer plans.
Hixme’s model facilitates the transition of employer group coverage to other actuarially equivalent coverage by bundling these Direct-to-Consumer market products into an ERISA compliant Group Health Program with other wrap-around coverages, and by means of proprietary algorithms. The transition results in a larger, younger, more sustainable market population for carriers who provide these plans. Furthermore, this population improvement to a broader age/income spectrum attracts insurers that have been discouraged by the past and current volatility.
Privacy and self-insurance: employer-sponsored care interventions unpopular with workers
According to our research, heightened sensitivity to confidentiality and privacy may find many consumers uncomfortable with the increasingly overt interventions into the very unique decisions around selecting doctors, diagnostics and medical treatments. When workers are allowed to shop and purchase in a nationally pooled system that is not limited by their employer, and where clinical interventions are instead managed elsewhere, it’s no longer an employer/worker sensitivity.
Market reforms improve coverage
Today insurance companies are required to cover pre-existing conditions. Plans can’t put annual or lifetime limits on any coverages either. And many other types of services must be covered as well. Meanwhile, increasingly smaller employers are moving to self-insured structures, taking very significant volatility risks while hoping to reduce the exposures to these increased coverages that workers depend on. That is a dangerous bet for employers with less than many thousand workers and dependents. The Hixme Direct-to-Consumer Workplace Market™ provides a far better alternative.
Employers and the Direct-to-Consumer market – can this really work?
It will take vision and leadership to change the benefits industry to better serve both employers and workers. And allowing workers the power of personal ownership only available in the Direct-to-Consumer healthcare market is the first step in the right direction. Hixme’s model does just that, and is proving to be a viable option.
Because new companies like Hixme that have emerged over the last couple years with models that leverage the new Direct-to-Consumer market, employers may wonder if their workers are equipped to navigate such open markets.
Consider the introduction of the 401(k) as an example of a successful marketplace shift. Before the 401(k), employers created pension funds that workers benefited from but had no control over. Now, pensions are a rarity, and most employers give their workers the ability to pick from a wide range of retirement funds or to invest in an individual brokerage product. More recently, nearly 75% of employers have shifted retiree health from a traditional group structure to a Direct-to-Consumer alternative with great results.
What did it take for both? It took the workforce investing in education, and trusting that the smart people hired to run the business are just as smart when it comes to making decisions about their own future. A health benefit transition to a new individual model can learn a lot from this previous experience.
Perhaps lurking in all of this is a creative alternative for employers that can’t be ignored any longer.
Companies have to determine their appetite for change and risk, and find the right time to make the transition if it makes sense for their employee base. But if they do decide to make this change, they will be a part of disrupting an industry that has been playing by the same (no-longer-relevant) rules for nearly a 100 years.
As we continue to observe the marketplace, we see that employers are finding alternatives to the traditional group structure more enticing as they seek to attract and retain the best people.
ABOUT THE HIXME THINK BLOG: Authored by one of the gurus of health insurance, Denny Weinberg, postings reflect market trends and the powerful emerging movements toward true portability and personal ownership by workers and their families. Postings follow these emerging trends, driven by consumer ownership of retirement benefits, consolidations by health care institutions, and the stated pro-consumerism goals and actions of the administration, federal agencies and Congress.