For Matt Thomas, who has worked with professional employer organizations since graduating college, consumer-driven health plans are the way of the future, becoming even more widespread as education efforts increase.
It's through that education process that brokers become more than a business partner for his company, Indianapolis-based WorkSmart Systems - they become a needed resource.
What does WorkSmart do?
We are a PEO, which stands for professional employer organization. We're basically an offsite human resources department for small to mid-size businesses. The companies we work with are high-wage, white-collar, but that's not really typical of a PEO.
When a small company hires someone essentially we become their HR department - administering their employee benefit program and dealing with employment law and workers' comp issues.
From a concept of purely benefits, what we do is a pooling concept. We take the average 20-employee company and bring them into a group of about 3,500 employees and we buy benefits for a group of 3,500 employees. We don't sell insurance; we just have a large group benefit plan.
What is your relationship with brokers? Are they receptive to it?
From their standpoint, we are a client of brokers. We buy our insurance through brokers; we are not an insurance agency. We don't sell insurance, we have to go to the broker community. We are just a very large group.
We're a client, though there are brokers out there who would see us as a competitor. There are other brokers that we indirectly have partnership agreements with. Our broker who writes our insurance policies has a partnership agreement with other brokers. So in other words, it's just another product the brokers can take to the client and obviously there's a revenue share agreement with the broker who brought the business.
Are employers hesitant to switch to offering employees consumer-driven plans?
They were four years ago, but not today. I think in the higher wage based, white-collar environment, premiums have gotten so high that if you do enough education on say a high deductible health plan or a hybrid plan, even the higher wage base - who typically want a Cadillac plan - they're going to understand that the back-end cost of a high deductible plan is going to be much less to them and going to pay an advantage rather than just paying a premium to an insurance company to just have a copay.
That's where we do a lot of work with educating our employee base.
Would you rather pay a ton of premium to have a copay and drug card copay that you may never get your money out of? Or would you rather keep your money so you can be responsible and spend it on your own health care and pay a minimal premium to the insurance company? That's just an education process.
Companies are coming around. In 2008, we had 18% of our premium base in consumer-driven plans, now we have almost 70%. It's a pretty big shift.
Does that more than 50% shift surprise you?
I expected it with the premium shift. People don't really understand the cost of health care; it's all hidden from them. And I'm not really saying that's an on-purpose thing.
What does the education process entail?
You don't see a lot of information on true consumerism, which is teaching people how to go out and shop for health care and getting out of the mindset of 'I do whatever my doctor tells me, I go wherever he tells me to go.'
You have to have tools in place that allow participants to go out and easily decipher that information - because they are never going to do it on their own, because its too confusing. There's a huge payoff.
If we teach people there can be a 250% difference in the cost of an MRI, or a 170% difference in a colonoscopy, or 90% in child birth, if enough people do that, we can drive the market down.
How do you shop pricing on medical plans?
About 70% of our plan's medical costs come from claims that are under $25,000. Those aren't the life threatening major cancer, premature babies.
All of these costs, because they're not life threatening, people can shop them. People are shocked when they see the variance.
We try to teach people if you're going to go out and buy a brand new big screen TV, most people don't just go to one place. Most people go out and research and look at two, three, four retailers and different TVs.
Nobody ever does that with health care unless you teach them how to do it and that you can do it.
Can you give us an example of how you have done such shopping in your personal life?
A year ago I needed an MRI on my back and my doctor is associated with a local hospital here and when he writes an order for an MRI, he doesn't think twice about it, he just writes the order for a lab that's affiliated with his hospital. The cost of that particular MRI is $1,200.
I said, 'No; just write a regular MRI order.' So I go to a standalone imaging clinic which has the exact same test and its $500.
That's something you need to teach people and give them tools where they could easily go in a Web-based environment and say, 'I need to have a MRI, a total knee replacement.'
They can go out and search not only by providers but also quality outcomes of those providers as well; we don't want them to get substandard quality.
What about when major life events occur?
If your child has a brain tumor, you go to the best specialist, wherever - it doesn't matter what it costs. But if you have to have a hip replacement, you probably have eight to 10 options that are viable and there could be a $10,000-$15,000 difference.
What can a broker do to further the education process?
Brokers have an overall opportunity to get educated on some of these things.
In a high-deductible plan, they talk to the client in terms of savings. Brokers never talk about educating those people on saving the plan money.
What people don't understand is if you're in a high-deductible health plan, once you get past your deductible and you're done with your out-of-pocket cost, you don't care. Whatever after that point you spend doesn't really matter.
Brokers need to teach them that every dollar that plan pays you, you as the consumer; you're ultimately going to pay for it. If you as a collective do a good job in managing those costs, no matter who's paying it, your premium will be low.
I know its sounds like a really simple concept but no one is talking about it.
Why should brokers care about promoting the benefits of a consumer-driven plan?
It behooves them do something. Most businesses are not fundamentally different. You don't want to just be a commodity; you want to be a resource.
If you look at the average insurance agent, if their clients view them as just a portal to an insurance company and nothing else, they're more likely to look at other brokers and shop them competitively on an annual basis.
If they view them as a full resource and they're doing a number of different things for them and helping to reduce their cost over the long run, if you take that approach, then you're always going to be a commodity.
All you hear about is medical trends going up year over year, well I'm seeing my medical trends go down so their must be something to it.
