3 trends that are starting the benefits revolution
There is a genuine revolution in benefits underway, led by the next generation of employee benefits advisers, who are changing the way that employers purchase healthcare — and in the process lowering their cost of benefits by 20% to 40% in a single year.
These next-gen advisers are transforming the industry by:
· Working with the C-suite to develop financial strategies for the employer’s benefits spend;
· Guaranteeing results — usually a lower benefits spend — and putting a portion of their compensation at risk to demonstrate skin in the game and back this up;
· Managing their clients’ healthcare supply chain to exercise greater control over and lower healthcare costs.
With these strategies, next-gen advisers are delivering real results — and not merely less punishing renewal increases — for their employer clients, including reduced out-of-pocket expenses for their employees. They’re helping employers reclaim EBITDA from the health plan and restore it to their bottom line. How much are the cost savings? These advisers have case studies demonstrating 20%, 40% to as much as 60% reductions in a client’s year-over-year benefits spend in the first year alone.
One critical prerequisite for delivering these results is a full disintermediation of health insurance companies. Whenever possible, next-gen advisers are removing the carriers — their fully-insured plans and their ASOs — from the health plan. Since carrier profits are a percentage of employer premiums, carriers have no incentive to reduce them by reducing healthcare costs. By eliminating the carrier middleman, these advisers are putting their employer clients back in control of their benefit spend.
All this flies in the face of hoary old lie oft repeated by the insurance carriers and brokers beholden to the status quo that the best an employer can hope for is a less-egregious renewal increase. By working with a client’s executive team and managing its healthcare supply chain, next-gen advisers are consistently reducing its healthcare costs year after year. For these advisers, this is called “competitive advantage.”
While next-gen advisers use much the same terminology as the carriers and traditional brokers, when they use them the terms often carry different shades of meaning. Here’s a brief glossary to help you follow along:
U.S. Healthcare Crisis: A readily resolved case of misaligned incentives.
Payer: The employer or employee; NOT the insurance carrier or TPA. (It's not their damn money!)
Insurance: A risk-shifting strategy to protect against catastrophic medical costs. (Note: Insurance is not the same as healthcare; doctors and hospitals provide healthcare — not insurance companies.)
Insurance Carrier: A costly and mostly unnecessary healthcare industry middleman engaged in largely obsolete business practices. (“The end of insurance companies — the way we’ve run the business in the past — is here.” – Mark Bertolini, CEO, Aetn)
Carrier cost containment strategies: Brochureware (The actual formula is this: lower healthcare costs = lower premiums = lower profits = not something an insurance carrier will actively pursue).
Employer’s (Payers's) checkbook: The only meaningful leverage available to control and influence the cost of healthcare (See Healthcare supply chain management).
Healthcare supply chain management: By leveraging the employer’s checkbook, the process used by next-gen benefits advisers to control and reduce healthcare costs.
Performance-based fees: A guarantee by next-gen benefits advisers that they will either lower their clients’ healthcare costs or surrender a portion of their fees.
EBITDA (earnings before interest, taxes, depreciation and amortization): Profits that next-gen advisers recover from the employer's health plan and restore to the company’s bottom line.
In the words of Boston’s Axial Benefits Group’s Mick Rodgers, a next-gen adviser and Employee Benefit News’ 2017 Benefits Adviser of the Year: “This is a revolution. This is real.”