Insanity Or A Winning Strategy? What’s Your Game Plan?

Navigating the changing landscape of health care with new ACA rules and regulations can be overwhelming for benefit decision makers, but inaction or repeating the same actions is ineffective or maybe even insane.

Albert Einstein famously defined “insanity” as “doing the same thing over and over again and expecting different results.”

For some employers, health and benefits are considered “necessary evils,” and their health care strategy is often a reactive, repetitive and last minute process that involves:

• Reviewing their health care renewal 90 days or less from their renewal date
• Getting competitive bids to use for leverage in negotiating their health care renewal
• Changing carriers every year or two to save money
• Reducing benefits to reduce cost
• Increasing employee contributions to reduce the impact of increases
• Dabbling in wellness programs and hoping employees participate and get healthier
• Rolling out changes during open enrollment and making the best of a bad situation

The cycle repeats itself nine months later. We call this a “Groundhog Day Strategy” in honor of the Bill Murray movie where every day is a repeat of the prior day, and it doesn’t work.

While the rules of the game are changing, the way we keep score has not. Employers and employees alike still just want the same five basic things from their health and benefits plan:

1. Lower costs
2. Better benefits
3. Healthy people
4. Help navigating compliance and ACA
5. No administrative headaches

Winners will be determined by their proactive ability to pursue a strategic path to meet the new challenges and opportunities, while losers will be determined largely by their decisions to adopt a passive, reactive approach to managing health and benefit plans.

ACA has prompted a new sense of urgency, and the market has been disrupted by new fees, taxes, regulations and mandates adding both complexity and new costs. There are new underwriting regulations, employer mandates, taxes and penalties for noncompliance. There is cost shifting from carriers, providers and employers. Ignoring these changes can make employers vulnerable to short and long-term instability marked by cost fluctuations, benefit changes, tax liabilities and enrollment surges.

More importantly, we are already beginning to see a form of “Health Care Darwinism” in which more proactive, aggressive employers in the market gain substantial cost advantages at the expense of more passive employers.

Employers who take action and proactively implement a health and benefits strategy specifically designed to succeed in the rapidly changing, post-ACA market will substantially improve their chances to establish a cost benefit and operational advantage over their more passive competitors.

And it is not just about mitigating the potential impact of the many new taxes, fees and inflationary changes. Proactive employers have the opportunity to leverage a number of potentially powerful new opportunities driven by ACA and related changes in market conditions:

• New alternate financing/funding options
• New public exchange and subsidy options
• Increased health and wellness incentives/penalties
• New health co-ops
• New lower cost carrier products and services

The basis for a winning strategy has to be to both mitigate the negative and leverage the positive. There are four potential winning strategies available to employers:

1. PAY: Enabling the Public Exchange

Employers “get out of the benefits business” by no longer offering benefit plans and provide support structure to drive employees to public exchange. Larger employers incur a penalty as a result. In order for this to be a viable strategy, a large number of employees must be able to access federal premium subsidies based on income levels.

Strategy:

• Drop employer sponsored plan and drive employees to public exchange
• Transfer responsibility to individuals, with employer level support

Market Potential:

• Less than 10 percent of employers

Target Employers:

• Low wage, high turnover, non-profit

Business Benefits:

• Replaces employer paid premium with (partial) increase in taxable compensation
• Employees receive premium subsidies, if eligible
• Allows employer to focus on core business/service strategy

2. EMPOWER: Empowering the Consumer through a Private Marketplace

Employers create custom “benefit stores” where employees shop for benefits with an employer allowance. Plans delegate more control and choice to allow employees to custom design plan offerings to better meet personal needs. Employers and employees share in cost in disciplined, structured approach.

Strategy:

• Defined contribution, private marketplace model
• Create “win/win” scenario for employer and employees
• Cost predictability, flattened rates for employers
• Greater choice, flexibility in plans and cost transparency for employees

Market Potential:

• Up to 70 percent of employers

Target Employers:

• 50+ employees, all industry sectors and income ranges

Business Benefits:

• Greater employee choice with five or more medical options
• Includes multiple ancillary and voluntary benefits programs
• Index to inflation or scale to market increases
• Transparent pricing model and hands-on decision support to drive consumer engagement and choice
• Robust communication and benefits administration and customer support platform
• Burden for inflation gets shifted from employer to employees
• Can be administered with or without self-insurance/high performing strategy

3. PERFORM: High Performance through Incentive-driven Plan Design and Health Improvement

Employers invest in the health and productivity of employees in a hands-on manner using an integrated strategy driven by strong incentives for individuals to improve health and consumer behavior. Financed through self-insurance or alternative funding program such as minimum premium of level funded.

Strategy:

• Self-insurance and/or performance based financing model with high deductible plan options
• Maximize personal accountability for health behavior and status

Market Potential:

• Estimated 20 percent of employers

Target Employers:

• Experience rated, 50+ employees, strong culture, leadership and hands-on operating style

Business Benefits:

• Lower costs through health improvement and risk management
• Increased employer control through active risk management, wellness and health improvement
• Leverage strong wellness incentives
• Requires year-round leadership

4. ACCELERATE: High Performance in a Private Marketplace

Integrating the key features in Strategies #2 and #3 to drive lower costs through improvements in health and consumer behavior while allowing employees the ability to create custom plans to meet their personal needs. Self-insured or alternative funded with hands-on health improvement/risk management culture.

Strategy:

• Defined contribution, private marketplace model
• Self-insurance and/or performance based financing model with high deductible plan options

Market Potential:

• Estimated 10 to 15 percent of employers (included in above)

Target Employers:

• 200+ employees with a strong culture, leadership and hands-on operating style
• Demonstrated ability to “own” the cost problem with history of successful self-insurance
• History of multi-choice, consumer driven plan structure
• Strong connection between management and employees with effective ongoing communication relating to business initiatives and performance

Business Benefits:

• Lower costs through health improvement and risk management
• Index to inflation or scale to market increases
• Greater employee choice with five or more medical options
• Effective benefits administration

These are challenging times, with a lot of uncertainty and volatility in the market for employers and employees. Even employers with a proactive strategy already in place may be vulnerable. The changing dynamics of the marketplace require a re-calibration of the plan and pace of implementation to ensure employers can remain ahead of the market and can capture the cost advantages of an offensive, rather than defensive, posture.

Talk to your benefits advisor to develop the best game plan for a winning strategy for your employees and business. After all, doing the same thing and expecting a different result is just plain insane.