When Amazon, JPMorgan and Berkshire Hathaway announced in January that they had joined forces to manage the healthcare for their immense employee population, the venture was hailed as a potentially game-changing development that could give employers the upper hand in their struggle to contain healthcare costs. Shortly thereafter, Apple and Walmart followed suit with similar initiatives of their own, adding to the sense that a long-awaited shift in how U.S. healthcare is provisioned was in the wind.
But now that the industry has had a chance to digest the news, the reaction has become more measured. To better understand why and the real implications of these moves on the employee benefits landscape, Employee Benefit Adviser called on a virtual panel of four benefits experts to offer their take on these large-scale corporate initiatives.
What follows are edited excerpts of that discussion featuring Chatrane Birbal, senior adviser for the Society of Human Resource Management; John Clark, the national employee benefits practice leader for the Alera Group; James Schutzer, vice president of JDM benefits, a benefit brokerage based in White Plains, NY, and Daniel Cobb, vice president of Winston Benefits, a benefit brokerage based in Atlanta.
Presented in two parts, a continuation of this exchange will be posted next week.
Employee Benefit Adviser: Some of the country’s largest employers—including Amazon, JPMorgan Chase and Berkshire Hathaway, along with Apple and Walmart—have announced plans to self-insure and provide healthcare services directly to their employees. Are you surprised by this turn of events?
John Clark: Not surprised at all. Everybody is watching because they’re bright and big and think they will come up with the solution because other large employers have tried to do this over the years. People are anxious to see what they're going to do, how disruptive they're going to be, the approach they're going to take with technology and delivery systems, who they're going to partner with and how they're going to manage and control some of the cost.
Chatrane Birbal: No. I’m not surprised at all. At least 41% of private-sector employers reported that they self-insured at least one of their health plans in 2016, this is a 43% increase from 28.5% in 1996. As a result of increasing costs, employers, especially those in that are self-insured are exploring other health care design options, partnerships, and structures in an effort to continue to offer desirable compensation and benefits packages as a way to recruit and retain talent. Employers leading the charge here are primarily large self-insured employers who are adopting various value-based care strategies, bundled payments programs (through, for example, a “Centers of Excellence” program), reference-based pricing, employer-direct-to-provider contracting, and utilizing transparency tools as outlined by the new healthcare initiative by JPMorgan Chase, Amazon and Berkshire Hathaway.
Daniel Cobb: They are not the first! However, these are some of the largest and most recognizable names in our country’s corporate market. Those interested in a working model should research the
James Schutzer: Given that those three companies collectively represent about a million healthcare subscribers and the way that the system is working, those companies are already taking matters in their own hands in the form of self-insuring, right? It's not really actually addressing and tackling the issue of high cost of healthcare.
These industry leaders are saying “enough is enough” and we could do it better than these traditional middlemen. We can get right to the sources. We can negotiate better contracts, build systems that are going to collect data and help us put out policies to share amongst those companies on quality and effectiveness, and provide more transparency for our employees.
EBA: Will moves like this significantly shift the power dynamics between employers and insurers?
Schutzer: Hopefully they create a model that can be replicated and scaled down. Not everyone it's going to have a million people but to be able to what we would call “rob and duplicate” — to be able to take their models and figure how do you create efficiencies in the delivery system and ultimately lower costs [will be beneficial.]
Clark: It's going to be about partnerships. Can large employers partner with healthcare systems? Is there a third-party administrator or a carrier involved? Who has the willingness to recognize that they have to do something different that we have tried for the last 15 years to make people better consumers of healthcare? We have high dollar deductible plans, education and online tools and that really doesn't work. If it's an employer, an insurer, a TPW and a hospital system — as long as the incentives are aligned properly I think everybody can win. But the problem is that the incentives haven't been aligned.
Cobb: That really depends on the employer. Status Quo is a helluva competitor. Insurers, providers, and many broker/consultants have perpetuated status quo for so many years, most CEOs and CFOs have been convinced that they can’t control their healthcare and benefits operational expenses when in reality, you can. Unfortunately, too many executives don’t realize or haven’t accepted the fact that regardless of their industry, they have delegated the responsibility for managing their healthcare business unit to a non-P&L manager. Non-P&L managers lean on brokers and consultants who are content with status quo and the lifestyle it provides, so doing nothing usually wins and produces little change. It’s a vicious cycle.
Birbal: Yes, it could change the dynamics. A main goal of the partnership is to use data to negotiate prices with healthcare providers in the areas where their employees are located. This may also mean negotiating their own prescription drug prices directly with drug makers as a kind of “purchasing cooperative,” essentially cutting out pharmacy benefit managers.
EBA: Are undertakings like this the shape of things to come for the very large enterprise market? What will be the impact on smaller and mid-size businesses?
Birbal: It’s too early to tell at this point what the future holds for large enterprise market and if others will follow suit, but we know the cost of health insurance will continue to increase. As a result, employers will continue to look for innovative solutions to implement to mitigate costs. The same assumption applies to mid-size and small employers. Small employers might consider Association Health Plans, which would make it easier for small businesses — those that could purchase coverage in the small group market to band together and offer employee coverage. This option could provide small employers with an added option to offer competitive and affordable health benefits to their employees, similar to large employers. Ultimately, employers want to have the flexibility to provide benefit offerings to recruit and retain talent so this issue will continue to be a focus.
Cobb: Yes, it is for large enterprise market, and I would argue for any business and its leadership that wants to create more stability in managing the expense related to providing health and welfare benefits to its employees. What we have is a healthcare supply chain problem, and you can’t solve a supply chain problem with insurance. Most employers rely on the current healthcare delivery system, which is rife with artificial prices, lacks transparency and uses insurance products and provider networks to steer employees and exploit their employer’s bottom line. It’s impossible to manage costs, quality, and outcomes, and we have a couple of decades’ worth of data to prove it.
Clark: I think it's going to be based off of certain geographic communities where you have established and very mature healthcare systems. This means hospitals, physicians and primary care specialists that are well organized and willing to align their financial incentives with trying to control the cost. That could fit in markets with large employers but it could also fit well with small employers. We're seeing some of that take place actually in the individual market already with some very unique carriers that decided to do it in the under 65 and the Medicare market. Trying to control healthcare costs is not a large group, Fortune 100 issue — it's an issue with anybody that's insured.
EBA: What role will benefit advisers play in this new this landscape?
Cobb: I see a bright future for some advisers and a bleak one for others. Bright for those who embrace the challenge and identify ways to delivery measurable, repeatable, and predictable outcomes for employers, and bleak for those who don’t.
An adviser’s role has already changed so much from 10 years or even five years ago. But the new landscape will require an adviser to be more of a management consultant armed with solutions, strategies, technology, and systems that executives and stakeholders understand and deploy as a means for managing going forward. We’re far beyond just insurance & benefits.
Clark: They have to be part of designing, consulting and evaluating different options but they certainly need to be engaged because there's always a need for employee communication, employee engagement, use of technology, enrolling the people, and supplementing with other ancillary products. If these systems are well established I don't see employers developing these systems themselves. They'll still use a broker/ consultant/ advisor to help them with the enrollment process the education process the communication the technology and human capital aspect. That's going to separate the pack if you're not trained and skilled to do that as a broker consultant
Birbal: The role of benefit advisers will continue to be the same but slightly modernized to meet the needs of these new evolving health care modes. For example, benefit advisers in these types of partnerships might review aggregate health claims data for employees employed. Benefit advisers might analyze the data to determine health trends and patterns of spending and the amount of spending in different parts of the country and at different health care providers to provide guidance on benefit offerings in the future.
Schutzer: You're still going to need some type of administration. Somebody's still got to pay these claims and I don't see that these companies are going to actually get in the claims payment administration business, per se. There's still the whole compliance piece: You have the ACA as it exists today and who knows what happens to it in the future? Who knows what future compliance there is when it comes to employee benefits? You also have employee education so for the employees this may be seamless because they're still going to go to doctors and use services they're still going to have, but the education process is still an important part of it.
Part two of this conversation will be posted next week.
