Last week, I read an article in which a local business owner lamented that maybe we would be better off with “Medicare for All” based on his conclusion that “businesses are picking up the tab for a fractured system for insurance provided by for- profit insurance corporations.”
I share his frustration and I agree with his facts; however, I believe there are actions we can take before we wait for the “Medicare for All” solution.
A recent poll showed 80 percent of business owners believe there is nothing they can do to lower health care costs. I was in that category three years ago. I want to share some facts and thoughts as to why I now have less frustration, 25 percent lower health care costs, a better plan and an action plan to continue to control our future health care costs.
The Affordable Care Act resulted in higher deductible/higher premium plans that employees can’t afford, and neither can employers. In fact, if you asked most employees what they thought of their health care plan they would say it stinks. Out of pure frustration and to do my own analysis, I had to learn the facts since, quite frankly, neither I nor my broker understood what was driving our health care costs.
I was conditioned by the market to believe there is nothing we can do and that health care costs will only go up. Well, I’m here to tell you that’s not the case. We managed and understood every other aspect of my business down to the dollar. Now we can manage the cost stack of one our largest spending items for the first time.
One of the key things we learned is that health insurers add on a fixed amount for their administration and profits (as set by the state insurance commissioner). As a result, insurers have no incentive to reduce costs, convincing me that premiums will continue to increase unless I found ways myself to lower the costs and to add programs that were not subject to administrative and profit markups.
I spent the next three years learning about the health care industry and finding the right firms that will partner with us. We have reduced our costs so dramatically that last year that we were able to eliminate all deductibles for our employees and their dependents – and still reduce the premiums paid by the company, without changing our plan, doctors or network. We did not increase the contribution or copays paid by employees either.
The result was a reduction of more than 25 percent in our costs and a tremendous savings for our employees. We were able to “keep our insurance” by understanding the costs and risks – finding partners who align their goals with our goals of affordable care for employees and employers. Our employees now have a great plan that they can afford
to use. It has helped our recruiting and retention. Our annual renewal meetings are now a celebration.
We realized that we use expert consultants to reduce every other expense in our business, but we didn’t in health care. To be honest we didn’t know that consultants existed. Working with an expert consultant versus a broker will dramatically change the outcome for most employers. I encourage you to start managing this expense like every other expense in your business and you will start to see results.
We have a group of local business execs who share best practices and meet monthly and we have similar success stories regardless of the number of employees. Our group, The CFO Forum, has had several meetings on health care. We continue to introduce new practices to help firms reduce the cost of health care without reducing quality. We are introducing two great optional offerings that bolt on to medium or large plans with programs that reduce costs for all parties. These are programs not generally available to brokers and not offered by the major insurance providers (because they lower costs, which affects a broker’s commissions and earnings).
Gary Bender is a co-owner of an engineering firm, founder and CEO of peer group The CFO Solution and based in the Lehigh Valley. He can be reached through www.thecfosolution.org.