Why Brokers Need to Manage Their Clients’ Healthcare Supply Chain

By Cory Friedman, Vice President, Benefits Consulting, GCG Financial

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As business leaders, our clients know that procurement of goods and services is at the heart of good business practice, and most manage their supply chain with diligence to ensure suppliers meet standards for quality and affordability. Yet, most employers don’t view healthcare services in the same light, and with healthcare as one of their highest costs, they really should be.

In fact, most employers have outsourced the design and management of healthcare services to a broker, consultant or health insurers that have little incentive to improve quality or affordability. In doing so, employers lose control and expose themselves (and their employees) to the wasteful business practices embedded in healthcare and provider contracts. Why are so many employers disconnected from managing one of the most important and costly expenditures for their organizations?

Employers have delegated accountability for healthcare services to human resources, seeing it as a “benefit” rather than a service to be procured in an effort to maintain the health, well-being and satisfaction of their workforce. The end result is predictable: immense and costly variations in access, quality and safety.

The response to the rising cost of healthcare is often reactive (and misguided), passing a portion of costs to employees or shifting the burden of purchasing healthcare services to them through high deductible heatlh plans or health savings accounts.

Employers are in the healthcare business, whether they like it or not.
According to the National Business Group on Health (NBGH), which represents 420 large employers on health policy issues, employers project the total cost of providing medical and pharmacy benefits to rise by 5% for the fifth consecutive year in 2018, bringing the total cost to $14,156 per employee. If an employer has 100 employees, that means they’re managing a $1.4 million healthcare business. At 1,000 employees, their healthcare business is valued at over $14,000,000.

So, what are you doing to manage your clients’ multi-million dollar healthcare businesses?
In today’s ever-evolving employee benefits landscape, we, as brokers and consultants, have an opportunity (maybe even an obligation), to change the game and see ourselves as healthcare supply chain managers willing to challenge our clients to think differently. We have to change our mindset and work to disrupt the status quo.

Successful brokers are not helping employers hold down cost increases by raising employee costs, deductibles, copayments and coinsurance. Instead, they’re applying supply chain methods to healthcare purchasing.

Starting with a self-funded health plan, which gives employers the advantage of examining their data, the best performing companies are building plan designs that work best for their company, identifying targets of opportunity and creating incentives for employees.

When you examine the data, you’ll find wide variations in charges by hospitals. Reimbursements by private insurers can be as much as ten times higher than Medicare reimbursements for hospitals within the same geographic area. To address this, employers are designing health plans and creating incentives designed to encourage employees to use more cost-effective providers. For example, start with high-cost elective surgeries that have a wide variation in price and quality among providers: total joint replacement, spine surgery, cardiac surgery and bariatric surgery, to name a few.

You can put the brakes on rising healthcare costs, without compromising access to quality healthcare for your clients’ employees, with help from the right partners. Partnering with a solution provider that offers an innovative and personalized health plan management approach is key to helping your clients fight skyrocketing premiums.  Ask yourself, “Are you skilled in defending the status quo, or leading performance improvement to give your clients the ability to compete and win?”

Recently I spoke on a webinar, where we took a deeper dive on how some brokers are advising their clients to drive down costs. Click here to download, “Change the game: How employers are winning against skyrocketing premiums.”

Cory provides guidance and objective analysis of group insurance benefits and is currently responsible for the health insurance and employee benefit programs of more than 200 privately held organizations across the country. In 2016, he was selected as a Young Gun Award recipient by Insurance Business America, which recognizes young professionals making a significant impact in the insurance industry. Cory was also named a “Rising Star” in 2017 and 2018 by Employee Benefit Adviser, earning recognition as one of 20 advisers nationally age 35 and younger who exhibit quick thinking, openness to change, and the ability to navigate the ever-changing employee benefit landscape.