Just as in retirement plans, in the health benefits market there can be conflicts-of-interests between providers that drive up costs for employers and employees and result in decisions being made that are not in the best interest of participants.
Seattle-based Dave Chase, co-founder of Health Rosetta, which promotes reform for the U.S. health care system, says there are three questions employers should be asking their health benefits brokers or advisers. The firm’s website claims, “We help public & private employers and unions provide better care for 157 million Americans while reducing health benefits spending by 20-40%.”
Chase says if employers ask, “What kind of commissions and bonuses do you receive from carriers, in total?” they will learn what kind of incentives are driving broker and adviser underlying decisions. Employers will learn whether recommendations are driven heavily by those relationships. Chase says there is a lack of disclosure in the health benefits market.
“On the fully insured side, the more clients a broker gets, the more they get paid,” Chase explains. “On self-insured side, brokers will often get paid a very substantial bonus payment based on retention of a book of employers with a particular carrier. For example if broker retains 90% of clients for particular plan, he or she can get a 20% or so bonus, so the broker is not going to shop around. Who pays you determines who you work for. If a broker positions himself as a buyer’s agent but acts as a seller’s agent, this creates all kinds of problems”
According to Chase, Health Rosetta offers a disclosure form and has found up to 70% of undisclosed revenue streams plan sponsors are not aware of. The firm has also found that if the spread between regular inflation and health cost inflation had been invested in the market over the course of their careers, Baby Boomers would have $1 million more in retirement savings.
He adds that if a broker won’t answer this question, it is a massive red flag. “Why would you work with someone who won’t disclose what they get paid? If they can’t fully disclose compensation, they are likely getting paid too much,” he says.
If an employer asks, “Is more than half your compensation coming from one specific carrier?” it can find out if the broker is less likely to shop around for the best deal. Chase explains that typically the way such a relationship works is that a carrier can fire the broker with only 30-days-notice if he or she is not selling well for that carrier. Such a relationship means the broker is not acting in the best interest of the health benefits sponsor.
Finally, Chase suggests employers ask benefit brokers, “What’s your method to shop the market and find the best offer available?” He says that rather than always building off of what they did last year, good business practice for a health benefits broker is to start from the ground up and determine the proper foundational components of the plan and search on that. Brokers should not say, “We have this carrier that may be able to accommodate the right plan for your employees.”
Employers should strive for a transparent broker relationship, high performance plan design, and a good administrator of benefits. One thing Chase says needs to be addressed is primary care. “Many plans have band aids meant to address that—urgent care, nurse call lines, etc. If they offered proper primary care, those things are unnecessary,” he says.
If the broker finds a better plan for the employer, Chase suggests that the most successful way to introduce it to employees is not to take away the old underperforming plan. Add the new plan, and over a three-year period or so, as word of mouth spreads, more employees will join the good plan.
“It’s about addressing three big problems in health care: pricing failure—no correlation between what employers and employees pay and are they get—overtreatment—no value-based care—and a crazy amount of administrative burden,” Chase says. “These questions address these extremely well. Transparent, open networks tackle the pricing failure problem. In the old preferred provider organization (PPO) environment, there was a good insurance carrier and employers and employees paid for that. Now they are spending more for less.”
Concerning overtreatment, Chase says having proper primary care addresses this. “Today most plans ration choices. For example, if an employee has lower back pain, a very common problem, they are told there’s a pill that will fix that. So much care is non-evidence based. But proper primary care will say, ‘Here are the different options and here is what works best the majority of the time’” Chase explains
He adds that an open, transparent network gets rid of middle men and enhances primary care which reduces administrative burdens.“There’s a lot of talk about evidence-based medicine. We are trying to make the case for evidence-based health purchases. We scour the country for those paying less and getting more—the opposite of what most employers and employees are getting today,” Chase says.