Health Care Reform – Now What?

We recently sat down with Steve Saucier, President of Cambria Benefits Group in Tampa.  He is a 25 year veteran of the employee benefits industry.  We asked him his thoughts about the current state of the medical insurance industry and the national health care reform package.

Question:  What is your perspective on health care reform?

Answer:  The health care reform bill will continue to roll out over the next few years.  As we speak, the interim regulations are still being finalized for the near-term changes that will take place.  It’s important that employers stay on top of these interim regulations as they will provide insight into what they must do to comply with the new requirements.  Plans will need to decide whether they want to retain “grandfather” status, meaning they won’t have to comply with all of the changes, or lose their grandfather status and opt in to all the changes.  This is a case by case evaluation and decision.

We would have liked to have seen more effort put forth on cost containment strategies than what we ended up with.  Medical plan costs continue to spiral out of control for many employer groups.  Double digit medical trends still pervade our system.  There are many moving parts and there is no one right magic solution.

There are beneficial components to the health care bill.   But if I look back on what I learned in my economics classes in college, I never remember a professor telling us that if demand went up and supply went down, that prices would go down.  We should have worked on the supply (of medical providers) and the cost of services first before we rushed to improve access.  That would have made better sense.  Then, we could have offered people better value for their money.

Question: What are you advising your clients to do in light of these increases?

Answer:  For the last 25 years, we have been through the advent of managed care, disease management, wellness efforts and torrential cost shifting back to employees and their families.  While all these strategies have been necessary to create a manageable plan, most CFO’s we speak with want to see Return on Investment scenarios for these programs.  Sometimes, particularly with wellness programs, the ROI calculations can be very nebulous, especially if high employee turnover is present.  By the time you start to get an employee indoctrinated in the “wellness culture” you are trying to create, they are out the door and on to another workplace.

We aren’t saying these programs don’t deserve merit.  We implement wellness programs with employers all the time.  If there is a commitment from the senior management group, they can be very effective.  What we are saying is that if you are counting on wellness programs alone to solve your health care dilemma, you are probably going to be disappointed.

Question:  What else can employers do to continue to offer competitive benefit programs while still keeping an eye on the costs?

Good question.  It’s one that we, along with our clients, have struggled with for many years.  We believe that a wholesale change needs to take place in the way we educate our client’s employees and their families on how medical services should be consumed.   In this society, for most big ticket items, people will do research on quality and cost before they pull the trigger and lay their hard earned money down.  For some reason, our society has never really managed to get this buying behavior transferred over to the purchase of medical services.   A lot of it has to do with the fact that historically, at least for the last 30 years or so, we went to a system of small co-payments for medical services.  Employees did not have to worry about anything other than whether they could afford the co-payment.   Now, with employers having to increase deductibles, coinsurance and out of pockets to extreme levels, the employees are more cognizant of the effect on their pocket books.  So that part is working.  No better way to get people to pay attention to what their spending that when you have them putting some skin in the game. But the problem as we see it is that employers have no way of insuring that their employees will get to the best medical providers, let alone at a competitive price.

It would be great if health care were affordable and we could continue to offer low co-payment type plans to employees.  That would make our jobs at open enrollment a lot easier.   But the simple fact is that employers agonize over how to deal with relentless double digit rate increases year after year.  They really haven’t had a choice.

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