Brokers debate their role in a new employee benefits landscape—Part 2
In the first part of this virtual roundtable, we asked four benefit brokers and industry experts to discuss the ramifications of moves by leading employers like Amazon and Walmart to directly manage the healthcare for their vast workforces.
During the second and final part of the conversation, the roundtable participants reflected on how the actions of these employers will rebound on the traditional employee benefit broker model, the changes afoot for prescription drugs pricing and what all of this means for the U.S. healthcare system.
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.
Employee Benefit Adviser: What do these moves by Amazon and these other companies say about the older, traditional broker models versus today’s newer, more consultative models?
Dan Cobb: If this were college football — I’m in the south so pardon the analogy — and an offensive coordinator went “3 & Out” every single possession and punted in every single game, he’d be fired. Folks don’t accept failure in college football or in athletics. But when it comes to calling the right plays in the corporate stadium of healthcare/benefits spending, far too many brokers/consultants/advisers are pointing to failing a little less than last year as a win for their clients. Failure is not an option anymore. It is simply unsustainable.
John Clark: There's been over the years a real separation of someone who says “let me go to market and shop your medical plan and get a lower quote.” If that's still your play, I'd be surprised that you're in business [because] you probably have lost a lot of clients. If the approach is more “let me be your trusted advisor, look at your culture of your workplace, how your employees are engaged, how they're effectively using your benefits plan” that is a better strategy. We should take a look at the whole human capital engagement like how your payroll is integrated with your retirement plan and your benefit plan, the other plans that you're offering, what kind of technology that you're using to integrate all those different coverages and human capital services.
EBA: What about the pharmaceutical industry? Does this up the pressure to reasses its pricing models? Do you think that will happen over the next two-to-three years?
James Schutzer: The carriers are certainly sending a strong message that they're very well aware that the prescription drug issue is in the [legislators’ and clients’] crosshairs. Some of it’s through these PBMs and how they tier prescriptions or how they can with a closed formulary exclude certain drugs. I think they definitely know changes are coming. I'm sure they're going to do whatever they can to limit that change but I'd be shocked if they didn’t hear the warning bell in the past several months.
Cobb: It has to change, but it won’t change on its own. Creating, maintaining, and growing shareholder value for many of these drug makers is their business and their responsibility. Layering in the PBMs as middle men between employers and manufacturers has created an intentional opaque pricing and distribution model. It’s caught the attention of the president, members of congress, the media, and so on. The pressure will continue to mount and I do believe we will see change. I’m hesitant to say two to three years, but I believe the next five years there will be a move by lawmakers to legislate the transparency problem we face today.
Clark: What’s interesting to watch is some of the carriers are partnering with pharmacies or developing their own pharmacy benefit managers. That pharmacy area is such a difficult market to understand what with the cost of the delivery. It's amazing. There are new drugs being developed all the time and that's a wonderful thing but knowing and understanding the research and development cost that goes in there is important but the price of some of the new drugs that are being introduced … it's not affordable. It can have a real huge impact on consumers’ health plans so I think the pharmacy industry is going to be under a lot of pressure.
Chatrane Birbal: I believe that healthcare efforts by large employers will spur action by the pharmaceutical company to remain competitive. Related to the partnership among JPMorgan, Amazon, and Berkshire Hathaway, it is also being reported that Amazon is interested in selling prescription drugs direct-to-the-consumer. Amazon will have the buying power with its millions of employees who will now be a part of the same large customer pool on account of this three-company partnership.
EBA: Do these corporate initiatives make you more optimistic that the way healthcare is provided in this country can be rationalized? And if not, what will it take to make that happen?
Birbal: The corporate partnerships and initiatives do make me more optimistic — in the employer-sponsored system. It’s proven once again that employers, who provide more than 178 million Americans healthcare coverage, are at the forefront and are implementing innovative initiatives to benefit both employers and their employees, alike. These efforts continue to underscore the importance of employer-sponsored health benefits. That’s why SHRM advocates Congress to support and encourage the employer-sponsored system.
Cobb: These initiatives are shedding light on a series of problems that Americans already see every single day — whether you work in this industry or not. Employers, employees, and physicians have been leveraged for far too long by a system created by payers and providers riddled with profit-making incentives and lacking transparency. Advisers and executives hear about the impact this has on a companies’ ability to sustain or grow. Friends and family sharing how more comes out of their paycheck for benefits, the deductibles go up, and the plans are always changing. And when’s the last time your doctor spent more the 10 minutes with you? It’s no wonder there is a shortage of physicians and we’re seeing the steady increase in a Direct Primary Care model.
Clark: I think it’s optimistic whether it's large employers, healthcare systems, and carriers trying to align themselves to control costs and deliver quality of health care. So yes, I'm optimistic. I've seen a lot of things come and go but I think it's a good time to be optimistic. You got to be on your game, got to be a consultant, got to be current on what's going on in the market both on the changes in the delivery but also there's the constant legislative challenge and making sure your clients are staying in compliance. There are a lot of things happening in Washington DC on the compliance side and the legislative slide that's also going to impact healthcare.
Schutzer: This is not sustainable. Yesterday, my partner and I were going through some numbers for a particular client and we say their rates go up 8% every year and over the next 10 years, the family coverage was about $22,000 a year. We said if it goes up eight percent over the next 10 years, that was going to be $44,000. The single rate was going to be over $3,000 and it's not sustainable.
The biggest threat is that the more dysfunctional this system is and the more outrageously priced accessing health care becomes, it just plays write into the hand of one of two things: On a state level a single-payer or on a federal level a Medicare-for-all model.
I go to bed knowing that I'm doing the best possible job for my clients. That I am day-in and day-out trying to deliver great service and help make their benefits package as cost-effective and competitive as possible. But the thing that keeps me up at night is that if change doesn't happen—and the drumbeat for single-payer Medicare-for-all grows louder—then that's a significant threat to the benefits advisor. That would change the landscape forever.