Former Health Insurance Broker
Employees should be outraged and plan sponsors should feel like Madoff has been managing their money — it is time for change and the incumbents are just not getting the job done.
Benefits Brokers Going the Way of the Dodo Bird – A New Species Emerges
Published on October 14, 2016
A New Professional Certification Created to Support Next Generation Benefits Professionals
Earlier I wrote about how benefits advisors could save America. At the same time, I was stunned that a tech entrepreneur/investor who does writing on the side (me) was finding proven solutions to slay the healthcare cost beast that most benefits brokers didn’t know about. Instead there is an annual benefits Kabuki Dance that has created a middle class economic depression that is used to perpetuate under-performing health benefits strategies. A conversation I had with one of the country’s leading consultants to benefits organizations explained the disconnect.
The key word is “broker” where benefits brokers are just like financially conflicted stock brokers from a bygone era — they primarily care about the transaction happening not whether their client is getting the absolute best return. The following is his stinging commentary:
Employees should be outraged and plan sponsors should feel like Madoff has been managing their money — it is time for change and the incumbents are just not getting the job done.
Since some of these organizations are his clients, it was understandable that he asked that he not be quoted. It made me think that the fact that traditional stock brokers have gone the way of the dodo bird, there would be some lessons learned. Smart stock brokers reinvented themselves as financial/wealth advisors and grabbed marketshare from their now-extinct competitors.
As has taken place with stock brokers, there is a near total overhaul of benefits brokers with old-line benefits brokers falling behind innovative benefits consultants such asDavid Contorno, Jim Millaway and Keith Robertson. For example, the fact that Health Affairs has reported that workplace wellness programs have produced no savings and there is a $1 million reward to show wellness works makes it pretty hard to justify what many old-line brokers are peddling. Slate had an even more stinging article entitled, “Workplace Wellness Programs Are a Sham: They’re a waste of time and money, they don’t improve health outcomes, and they’re a front for shifting costs onto employees.”
While there are other reasons beyond pure finances to have a workplace program, most programs tout outlandish ROIs basic math would disprove. This is a key reason that benefits consultancies, third-party administrators and business coalitions are re-orienting their annual conferences and customer events to revolutionize their constituents’ health benefits purchasing. It’s been inspiring to speak with the leaders of these organizations eager to dramatically overhaul the status quo.
Just as LEED certification for professionals and buildings provided a marketing advantage for those in the green building industry, we are creating a certification for forward-looking benefits professionals. Early access to it is being made available through the crowdfund campaign for The Big Heist film (scroll down — on the right hand side is a perk entitled “Health Rosetta Benefits Professional Certification” that has been a popular perk — last I looked, there was one slot left for charter status). As I wrote about earlier in CFOs And HR Execs Facing Millions In Personal Liability Due To Unmanaged Health Benefits Plans, I hear of countless reports of the C-suite and Risk Management departments scrambling to get ahead of this issue. [Another crowdfund perk was created that is a “2nd opinion” on a health benefits plan that can show how a company may be able to save millions.] One Rule Clarification Could Change The Face Of Healthcare And The Middle Class — since most people receive benefits through the workplace, it would have a bigger impact than Obamacare on the workforce.
Once upon a time, CEOs didn’t face the personal liability risk from breach of fiduciary duty on health benefits as it was perceived to be the employers’ money. That was a contrast from the retirement benefits side of the ERISA equation where the fiduciary duty has been strictly enforced with cases going all the way to the Supreme Court (and companies losing). The “it’s the employers’ money” argument doesn’t hold water anymore. Why? Employer/employee dollars are co-mingled with employers, on average, picking up 70% of the health benefits tab. An even bigger tipping point is the report from earlier this month that stated more than 50% of the workforce now has a high deductible plan. In other words, it’s impossible to make the argument it’s not the employees money that is getting mismanaged. Thus, employers will be looking for the safe harbor of a trusted healthcare fiduciary — Chris Shoffner is an example of a benefits professional who reinvented himself as a healthcare fiduciary as you’ll see in his profile. His interests are clearly aligned with his clients.
The most innovative benefits advisors are just like extraordinary money managers and wealth advisors — they’re worth their weight in gold as they apply approaches such as those in the Health Rosetta blueprint. For example, I’ve written about how one has helped solve healthcare’s most vexing problem — pricing failure. Another has paradoxically proven that the best way to slash healthcare costs is to improve health benefits. The next-generation benefits professionals are thrilled to shed the conflict-of-interest in the way a large swath of benefits brokers are paid. Privately, they share that they were concerned about getting found out and that they might face personal liability themselves. Some of conflict-of-interest is easily seen if a CFO scrutinizes their health benefits spend like every other area of their business. It’s almost humorous that finance/procurement departments will scrutinize a $56 restaurant receipt and then blindly pay for hospital bills that are 6 and 7 figures — especially when commonly performed procedures don’t help at all in 90% of the cases.
There is other conflict-of-interest that is more hidden. For example, a former top-level executive of one of the big four national insurance carriers shared with me something I had no idea about — I suspect most don’t either. That is, the reason some large benefits consultancies still have their large clients stay on dramatically overpriced PPO networksis their benefits consultancy get major kickbacks from the national carriers to stay with them. This is the sort of practice that ends as soon as a CFO sharpens their pencil and the class action law firms get as active in health benefits as they are in retirement benefits — after all, most companies spend 2 1/2 times as much on health benefits as they do retirement benefits. It’s only a question of whether a company is proactive or reactive after the Labor Department enforces the fiduciary duty rule or class action suits hit. I can assure you that the class action lawyers are already smelling blood in the water on this issue.
Forward-looking benefits advisors recognize that millennials have fundamentally different requirements than their boomer parents. As that article outlined, millennials are the largest chunk of the workforce with companies such as Ernst & Young having 60% of their workforce being millennials. Millennials also aren’t afraid to question the status quo and go after large, entrenched organizations. They see that there has been a catastrophic misalignment of resources in healthcare that will cost their generation dearly — the millennials healthcare “bill” makes college debt look like chump change. As millennials awaken to the reality that they are on track to be indentured servants to the healthcare system, their voice will be heard. It shouldn’t have come as a surprise that millennials were the first backers of The Big Heist.
Wise benefits advisors are seeing a growing risk for their clients and are advising these employers to corral the risk they are increasingly exposed to in two areas :
- With companies spending 50% less on health benefits with outstanding benefits and healthcare being the second largest expense for most companies after wages, squandering money unnecessarily suggests that CEOs and CFOs are failing in their fiduciary responsibility. One Fortune 500 company that I know of achieved a 1.7% higher EBITA in their last earnings report as they had successfully moved a substantial chunk of their employees with cardio-metabolic issues into a program that has achieved great outcomes. Paradoxically, employers are demonstrating that the best way to slash healthcare costs is to improve health benefits. As the table below illustrates, there’s a unique opportunity to have sound health benefits contribute (positively) to a market cap bump. Privately, I know of a few P-E firms that are using smart health benefits approaches as a way to goose their earnings.
- Not unlike 401-k’s, ERISA plans come with fiduciary responsibilities. However, unlike 401-k plans, most companies have a much less rigorous oversight regime for their ERISA health plans though just as much money is at stake as a 401-k plan. ERISA lawyers I’ve spoken with expect that the high deductible plans that are becoming de rigueur will get the attention of employees responsible for a greater portion of their medical bills. The example one lawyer gave was how an employee can rightfully question an outrageous charge for a simple item like a $500 tooth brush or $20 gauze pad as they understand it and will recognize it is the tip of the iceberg on outrageous charges that employers aren’t policing properly. Since healthcare’s most vexing problem (pricing failure) has been solved with the help of a small manufacturer and the largest non-profit health system in the country has moved to true transparent prices, employers no longer have a valid excuse to accept healthcare’s hyperinflation when it is readily tackled if an organization takes its fiduciary responsibility seriously.
It’s a new day in health benefits. Smart benefits professionals are delivering tremendous value and advancing their careers in the process. In the process, they may just save the American middle class and end their 20-year long economic depression.
