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Do You Know The Real Price Tag For Your Benefit Plan

The list of goods and services that businesses purchase daily is endless. Vehicles, furniture, equipment, office supplies, phones, technology and accounting services are just a very small sampling. All those goods and services come with a price tag.

There exists clear transparency of what an item costs and a level of negotiation or discount, depending upon how aggressive you are in negotiating. Now, shift the focus to healthcare, which for most businesses has become their second largest expense behind payroll.

With this item, there exists little to no transparency and the perceived “negotiation” that takes place involves you making negative plan design changes or switching carriers and getting your 15% increase down to 8%.

I do not profess to be a master negotiator (I leave that up to my wife!), but that sounds like a completely one-sided negotiation that favors insurance carriers and leaves you stuck holding the bag and again having to explain to your employees why you couldn’t keep costs flat this year.

The fact of the matter is that healthcare exists on its own little island, defying all the principles of fee market enterprise.

Your healthcare plan, consisting of several components, has a price tag. That price tag is not the bundled lump sum premium you are paying on an annual basis (although you are led to believe that). Each of the components has its own individual price tag or cost which leads to the total overall cost.

Carriers and brokers for years have conditioned buyers that it is very difficult to control the price tag and offer as little information as possible in terms of how the price tag is arrived at. Essentially, there are five key components to a healthcare plan:

  • Medical Claims
  • Pharmacy Claims
  • Administration / Claims Adjudication
  • Advisor Commissions & Fees

Every single one of these components has its own price tag or cost and there should exist complete transparency with how the cost was arrived at. Also, with several of the components, you can exert far greater control and negotiating power over purchasing than you may think.

It is very frustrating to us at Andus when we see companies accepting increases every year. In any given year a healthcare plan, with claims as the key cost driver, can run normal, above average, or below average.

How is it that the cost goes up every year?

That would mean you’ve never had a good year (low claims) which is statistically impossible (see our blog last month on Regression to the Mean).

I want to scream when I hear an HR Director or CFO say to me: “This year wasn’t so bad, we only got 5%! “My reply would be:”

Show me the data they provided you to justify the 5%”, to which they reply:

“Oh they don’t give us that.” If you had access to that data you would see that claims were minimal, and there would be reserves left based upon total premiums paid to the carrier less claims and all other expenses paid out.

To combat the strategies and tactics that carriers use to keep you in the dark and have you continued to pay more every year, benefit managers must change their approach when purchasing healthcare.

The key components can all be unbundled, total transparency and a price tag can and should exist and data should be provided to you so that you can make educated decisions on what your members need and what your key cost drivers are.

If you don’t know how many of your members are taking a brand name drug that has a generic equivalent, then at some level you are getting bad advice.

At Andus, we are leading the charge to change the way employers purchase healthcare.

We put you in the driver’s seat by not letting carriers control the process and sell packaged products with one-sided negotiation terms. The results are often substantial cost savings over time and far more customizable benefits.

To learn more about our process, please contact me below.

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