Fully funded group insurance products made sense for many employers for a long period of time. The concept was simple: Buy health insurance from a carrier and pool the risks.
This way, when one company had a bad year, the other companies in the pool would absorb the blow. This kept costs relatively flat, give or take some points for inflation.
But then the pool quickly got “dirty” as employees who made up that pool collectively became less and less healthy. Combine that with more expensive health care and a rise in prescription drug costs, and you have a perfect storm that left few unaffected.
So why has the pool become so unhealthy to swim in? There are no simple answers. What there are, however, are countless studies that rehash, at great length, the downward spiral regarding the overall health of the American people. Obesity is a reason that’s often cited, as rates are out of control — and still climbing. The fact that current and retired military leadership have called obesity a serious national security threat, one that warrants immediate action, reflects the gravity of the issue. This is not to imply that soldiers should be posted outside Burger King, but it does give gravity to what may very well be considered a national epidemic. And one that directly impacts health care costs. We can get technical on why we are seeing a disturbing rise in the tide, but it’s really pretty simple: We eat more bad things and exercise less due to an increasingly sedentary lifestyle.
So, what can we do to clean up the pool water?
Large companies have been utilizing risk-sharing alternatives like self insurance to wade out into the deep end, no longer relying on fully funded products as life preservers. These companies have great incentive to promote wellness in the workforce, as the savings comes right back to the bottom line. They are often progressive and understand the value of a healthy employee far beyond just the cost of health care. These companies focus a great deal of attention on disease management in order to reduce the various health risk factors associated with chronic conditions affecting employees, with the end game being to eliminate them. To make a long story short, the companies that understand how it works get the needed results.
This used to be a game strictly for large employers — but that’s no longer the case. Health care reform has greatly altered the distribution model for health insurance for both large and small companies. This is great news for those brokers who focus only on health care cost savings to justify wellness. These brokers might argue, “wellness doesn’t work for the 25 to 100 employer crowd as the savings don’t stay with them—it just stays with the carrier,” all the while ignoring the numerous other benefits to a successful wellness program, such as increased productivity and reduced workers’ comp costs.
But the times, they are a-changing. Health care reform has disrupted the traditional distribution model for employer benefits, for better or worse. There are now numerous risk-sharing alternatives that have been designed for this market segment, and many of them make perfect sense for those employers willing to manage their company’s health risks just as any other part of their business. Because those who don’t will continue to pay for it and remain part of the dirty pool.
Smaller companies who embrace risk-sharing models can now once and for all throw those carriers who hide behind trend and refuse to share claim data into the deep-end. These small employers feel, and rightfully so, that just because an employer has fewer employees than Ford or Intel, doesn’t mean they don’t deserve the same level of information so they can make the same smart decisions for their company.
As the rush to health care reform compliance comes to a close, employers are going to sit back and start asking themselves, “OK … now what?” Fortunately, there are alternative products available and these products can help you manage your risks.
The pool is dirty but not beyond hope. The question is: Do you have the tools you need to clean it up, to stay financially afloat when it comes to health care costs? If not, you may find your competitor is the only one wearing a life jacket.