Source | LinkedIn : By Dave Chase
As companies ready themselves for their next plan year, there is good news and bad news facing CEOs seeking to maximize shareholder value while simultaneously delivering the best benefits to their employees. The good news is that there are companies demonstrating that they can do what sounds impossible–provide superior benefits packages to employees while spending 20-55% less per capita than typical employers. The bad news is there is the specter of personal liability from poorly managed health benefits programs while the healthcare industry is deft at extracting more value from shareholders and employees than the atrocious results from the healthcare industry warrant.
As I’ve spoken with the most forward-looking benefits experts around the country, they all make basically the same point. That is, the most important question a CEO should ask their HR leadership is who wrote the health plan document that their company operates under. It was captured in a tweet directed at me recently by risk management expert and health benefits fiduciary Chris Shofffer.
The point these benefits experts make is that employers have abdicated far too much responsibility to the health plans they work with. This has imperiled their finances and put them in potential legal jeopardy. A very common scenario is that significant parts of the health plan document that self-insured employers must submit to the government are boilerplate language from a health plan that they are using to manage portions of their health benefits program. With high-deductible plans becoming the norm, there’s no longer legal air cover that the health benefits spend is the employer’s money instead of the employee’s money. That seemingly subtle distinction can have a devastating legal consequence that has already hit with a vengeance in the retirement benefits arena. It’s just begun on the health benefits side of the equation.
In the past, most of the workforce didn’t pay close attention to what their employer was doing and just accepted their fate. The abdication to traditional health plans is rapidly becoming a thing of the past. There are many drivers but the following are two of the biggest:
- CEOs are hard-pressed to find areas that can deliver a significant EBITA impact. Healthcare represents fertile ground. A simple example is a large manufacturer found that implementing a modern musculoskeletal disorder management program could deliver a 5% EBITA bump (1/3 of it was realized in the first year). That was just one potential program of many that can deliver shareholder value while providing more effective care for their employees.
- Amazingly, despite healthcare being the second-biggest cost for most companies, employers have signed agreements that prevent them from reviewing claims administered by health plans even though the employer is self-insured. Suppression of one’s own data on spending may have been acceptable for the profligate Boomer generation. However, the largest generation in history, the Millennials, are waking up to the fact that their healthcare “debt” absolutely dwarfs their college debt. Wise CEOs and HR leaders are getting ahead of this predictable blowback by changing their ways.