The problem I see with most health insurance consultants is almost all pre-determine a client’s tolerance for risk before determining where the risk tolerance actually lies.
By Bill Rusteberg
Plan sponsors must recognize change brings risk and understand doing nothing brings risk too.
So what’s the difference?
Everyone wants lower health care costs and better benefits. We know it is certainly possible to achieve these goals as many of our clients have learned over the years. But breaking away from the status quo is never easy and certainly not something everyone is mentally prepared to do.
Each plan sponsor has a different propensity for risk when it comes to new methods and strategies to control health care costs. Risk tolerance is a gauge of one’s emotional or psychological willingness to take risk. It is a subjective measurement of one’s attitude toward risk and wiliness to accept loss in search of greater gain.
The problem I see with most health insurance consultants is almost all pre-determine a client’s tolerance for risk before determining where the risk tolerance actually lies. Or at best, some assume the client’s risk tolerance matches their own, or “by golly it damn well better match mine or I will make sure it does if it’s the last thing I do!”
On the other hand, there is certainly nothing wrong with promoting one’s convictions in the strongest possible terms but it requires skill and cunning to sway and convince non-believers into a shared vision of appropriate action.
Once a consultant lays the foundation without the benefit of first determining the risk tolerance of their client or prospect, there is less latitude between both parties to form a collaborative partnership in common goal seeking.
The consultant has thus painted himself into a corner while the client/prospect is either cowering in the box, in the process of exiting the box or is already searching for solutions outside the box. A pre-supposed risk tolerance profile is a roll of the dice with a 50/50 chance of winning or losing the account, either now or later.
In emotional sync, most of us are lemmings welded to the status quo, a comfortable risk zone difficult to leave. Yet most consultants will privately acknowledge a more appropriate risk zone is paramount to successful strategies to reduce health care spend while improving benefits at the same time. They know doing nothing and maintaining the status quo is not an option. Yet most remain silent.
Unfortunately, most consultants are “Me Too” consultants. “If you like it, so do I! If you don’t like it, neither do I.” This character flaw drives their motivation to continue to earn fees in the safest possible way. They become the “do nothing, maintain the status quo” team player and HR’s best friend. They parrot the narrative.
Risk capacity, on the other hand, is the ability to assume the amount of risk absolutely necessary to achieve goals. Since we know doing nothing (accepting no additional risk) will not achieve the goal of lowering health care costs and improving benefits, it is necessarily understood some degree of risk must be assumed. This has to be made clear up front as an important first step in evaluating risk tolerance. It must be the foundation, mutually agreed, to the fundamental basis of the goal setting process.
In our first and possibly last interview with a prospect we quickly determine their level of risk tolerance and style of governance. Three questions expose the truth, helping us to determine whether we share common philosophies and methods to achieve universal goals of lower heath care costs, while improving benefits and quality of care and outcomes at the same time.
Depending upon a plan sponsor’s level of risk tolerance, new methods and strategies can be designed appropriately. There are many flavors and styles to choose from. A slow “tip-toe through the tulips”approach can be contrasted to a “jump off the cliff into shark infested waters” approach. It all depends on risk tolerance and the level of reward to be achieved. Risk and reward are related.
Common sense dictates a plan sponsor should instinctively understand change is necessary in order to alter the status quo. They must recognize change brings risk and reward and understand that doing nothing brings risk too. Yet most don’t.
So what’s the difference?
In our experience the rewards gained through innovative methods and strategies have far surpassed the risks. None of our clients who have journeyed with us by venturing out seeking change, accepting risk and rewards, have gone back to the old and failed system of health care financing. They recognize our current health care delivery system is a failed system facilitated through third party intermediaries whose vested interests are cloaked in secrecy, memorialized in managed care contracts plan sponsors can’t see nor audit. Our proven risk management strategies rectifies these deficiencies.
It has been our experience plan sponsors clinging to the status quo risk more, while those who seek change risk less.
That’s the difference.