Innovative Responses to the Push-Pull Between Inflation, Compensation and Rising Healthcare Costs

Hear how different companies are managing rising healthcare costs, inflation, and a competitive recruitment environment.

Transcription:

Alyssa Place (00:09):

Good morning everyone, and welcome to our discussion. I'm Alyssa Place, Executive Editor at EBN, and joining me today to discuss rising healthcare costs in inflation and how that plays into a competitive recruitment environment are Sach Jain Co-founder and CEO of Carrum Health, and Jay Feece, Vice President of Rewards and Talent Analytics at Grainger. I'm just going to introduce you both briefly. Sach founded Caram Health in 2014 after more than a decade as a leader in healthcare payment systems. Satch is a recognized industry expert in the value-based care space. He's also a computer scientist and engineer by training, making his technology background deep healthcare experience and passion for fixing a broken healthcare industry. The driving force behind Karen's mission to transform the way people pay for and deliver care. Under Sach's vision and leadership. Carrum has built its centers of Excellence networks, so it's accessible for 90% of the US population.

(01:11)

And as Grainger's vice president of Total Rewards and Talent Analytics, Jay is charged with helping the company achieve its objectives through designing competitive global total rewards packages that attract, engage, and retain team members in a cost-effective manner. That includes compensation, retirement, healthcare, wellbeing, and global and domestic mobility programs. Prior to joining Grainger in 2021, Jay was the head of global total rewards for several multi-billion dollar companies, including Healthcare Services Corporation, Aon, Hewitt Associates and Motorola. So thank you both for joining me and all of us today. I want to do a bit of a status check. Obviously inflation is very top of mind for everybody, rising costs. And Jay, given your background in compensation, how is that conversation going right now? What kinds of conversations are employers happening when it comes to compensation and the impact of inflation?

Jay Feece (02:09):

Sure. So it started to be a hot topic as we all know back in 2022 when inflation, I think it peaked in June at over 9%. Our CEO has regular virtual all team member calls as well as leader calls. And inevitably we were getting questions, multiple questions at every call about inflation. Are you going to give us all Cola adjustments? Are you going to take everyone's pay up? What are we doing about benefits? So what we decided to do is while the answers aren't necessarily always what people want to hear, we decided that we needed to get out in front of that and communicate more openly with our leadership team initially and talk about inflation. So what is inflation? We partnered with some of the economists on the team and talked about what is inflation? What do we look at when we're looking at rewards and and benefits?

(03:11)

We're not looking at cost of living and inflation, we're looking at cost of labor and we're looking at the competitiveness of our programs and how to support our team members. So we really wanted to focus on level setting that. We also went back and looked at inflation back to 1990 and compared inflation rates to merit budgets, just to kind of illustrate that, hey, inflation was zero for a while and we were still in 28 of 33 years. Merit budgets exceeded inflation. So just to try to educate them and prepare them to talk to their team members. And then we also reminded them of some of the things that we do every day and had done in the last one to two years to support our team members. We increased participation in our annual incentive plan, so we brought more people into the fold in that regard.

(04:05)

We had a very strong financial year in 2022 and we gave one time bonuses to folks. We were very intentional about our renewal heading into 2023, and the company took on a larger percentage of the cost sharing so that the medical impact on folks was limited to about a 3% increase in terms of what they saw out of their paycheck and highlighted some of the programs that we put in place on the benefits side to help our team members and support them. And then we did want to lean into the merit budget question head on, and I know this is a benefit conference, but a lot of what we did really did focus on some of the compensation areas and the merit budget tends to be like the number that everyone talks about around the company as you go through compensation planning. But we shared with our leaders that there's a lot of work that we've done off-Cycle to address competitiveness of our compensation and how we monitor the market and some of the actions that we had taken specifically, we have a very large population of folks in distribution centers, so we don't make anything, but we distribute a lot of products for other companies where if you haven't heard of Grainger, we're a maintenance, repair and operations.

(05:25)

So going back to that previous conversation, what I loved about it is our tagline is we keep the world working and our employees really resonate with that. So going back to the frontline workers, as you all know perhaps in your company, that's where we've seen the most pressure on wages, the most pressure on the labor market. And so instead of looking at those wages one time a year, we started looking at them twice a year and making adjustments and starting rate rate of pay for that group. So while you might focus on a three and a half or 4% merit budget, the actual year on year increases for that group was well over 10% because of the actions we had taken. So we just tried to remind our leadership and prepare them to have those discussions with their team members about, yeah, it's tough out there and this is what the company's doing to try to help you.

Alyssa Place (06:23):

Yeah, I mean I think that sense of it's tough out here, oftentimes people's first reaction is to cut things and Sach, I'm sure you've experienced this in your healthcare work, that oftentimes those prices go up and that's the first thing that lands on the employee. So how is inflation and healthcare intersecting for you for some of the challenges that employers are managing right now and what are you doing to solve for that?

Sach Jain (06:51):

Yeah, Thank you. When we think about healthcare benefits, most employers, this tend to be the second biggest cost item on the P and L, and we all know I don't need to tell anyone that that item is growing at a faster pace than any other item on that P and L, especially compared to the wages year over year. Healthcare premium continues to go up next year. We are expecting six to 8% increase in the premium for the employers. And so this is a bit of a weird economy for a lot of benefit leaders because on one side there's a huge cost pressure to bring the cost down for these healthcare benefits, but at the same time, the labor market is tight. It's not easy to hire workers at a lower wage. And we see all the discussions happening between benefit leaders and employee unions that just shows that the buffer for employers to either trim down the benefits or pass on the more cost to the employees is just not there anymore in this current climate.

(08:13)

So a lot of benefit leaders, as they're thinking about the benefit strategy, they're thinking about how I can create a win-win that works for the organization and will make employees happier and how I can get the most value from every single benefit dollar I'm spending on my employees in that context. And as employers are looking for win-win, they are looking for solutions that can help create that win-win. And what we do at caram Health, we have created a centers of excellent solution, which makes the excellent care available to the employees at the most affordable prices. So on one side you are able to bring the cost down on expensive surgical and cancer care kind of procedures while also dramatically improving member outcomes and experience. So as a result, the COE solutions have been a pretty significant tactic that you pick any survey employees are picking because just given the current climate, there are not many solutions out there that can create that kind of win-win for the employers and the employees.

Alyssa Place (09:37):

And Jay, do you feel like the work that you're doing is creating those win-wins for employees? How do you get them to understand the full scope similar to Sach of not it just being a one-time thing and really kind of incorporating that into the full employee life cycle?

Jay Feece (09:55):

Yeah, it's a challenge and it continues to be a challenge we're doing right now. We have an angel engagement survey like most companies do, and when we ask about how they feel about the competitiveness of their rewards, comp benefits, other things we score really high, generally those questions score lower relative to others because everybody always wants a little more. But relative to the benchmarking, we're above the 75th percentile in terms of how our team members feel about the reward package that we offer. Having said that there are opportunities and that high level engagement survey doesn't really give us those insights. So what we're doing, we had a meeting with the CEO several months ago and said, Hey, we'd like to drill down and do a comp and ben specific survey. And his comment was, you don't need to do a survey. You should know you should be listening to the team members on a regular basis.

(11:00)

And so we took that to heart and we've implemented kind of an ongoing approach where if our BRGs are meeting, we'll drop in and we'll ask them four or five questions about benefits, various leadership meetings, we'll say, Hey, HR business partners ask these questions and channel it back to us. So we're trying to get more on the ground feedback to help us shape the communications because in these sessions, the theme that we are hearing is people are very pleased with what we have, but they don't always know where to go and when they do go to find it, they don't understand it. What you all do and the benefits we provide it in many cases are complicated and difficult for folks to understand, particularly some of those frontline workers. So we're really trying to lean in on that. And so team member listening sessions reevaluating how we communicate.

(11:56)

I mentioned earlier we were pretty happy that we held a year on year increases for your paycheck deduction to 3%, but team members, they still compared 3% to maybe a 3% increase in their salary. And don't do the math to say, well, okay, look at it on a dollar basis. So our annual enrollment guide this year, we're not saying it's 3%, we're saying your paycheck deduction is going to go up anywhere from $1 to $8 and talk about it in a different way to really try to better articulate the real value and how we are trying to be balanced with the programs we provide. So yeah, communications though is like it's an ongoing challenge.

Alyssa Place (12:44):

And I think what you said before of people want to use the benefits but they don't always know where to go or certainly with healthcare, I think that's a pretty challenging issue. Sach, How are you working around that to make sure that people understand what benefits are available to them and really how to access that in an affordable way?

Sach Jain (13:05):

Yeah, I would say from the benefit standpoint, and I'm speaking both from waiting my head as the CEO of a company as well as a solution provider in healthcare benefits, the benefit package, the value of the benefits that the company is offering needs to be communicated a lot upfront than how it is communicated today where employees join the company and after that like, Hey, here is your benefit package. It needs to be part of the strategy when you are recruiting employees and making an offer to them and telling them why we care so much more for our employees. And if you want to highlight culture, you need to highlight what benefit package you're offering so that employees remember and as they are perhaps thinking about competing offers, they know this company has a great benefit package because they really care for the employees. But once employees are on board, I think the challenge is, and I'm sure there's no benefit leader here who will say, my communication strategy is working just fine.

(14:27)

There is a huge fatigue among employers, among employees about all the benefit communications. And at some point employees just tune out, I'm being communicated all the information that does not apply to me. So you have to meet employees where they are. Someone is having a financial wellness issue, is having a mental health issue, someone is having a surgical care or a cancer care issue. In our world, given the benefit we offer, which is focusing on surgical care and cancer care, which impact a very small percentage of the population, the broad communication strategies are just useless most of the time because someone will look at the email like, Hey, do you need help with any cancer issues you might be having with you or your own family? 99.99% people will just ignore that because just didn't apply to them. So smart communications where you are using data analytics, you're using AI to identify which members have the highest likelihood of having one of these issues and will benefit from the communication, I think is just necessary. We want to emphasize any employer that is interested in using care solution that you have to have that sort of communication infrastructure to have the right emails and have some information on the employees that could be used to create smart communications. And we actually enable that for the employers.

Jay Feece (16:15):

I would just add too, we have different audiences within the organization. We've got, we have team members who don't have access, easy access to email or a computer and you can't pull them off the line for annual enrollment meetings. It is very coordinated efforts, so you have to attack that population differently than your professionals who are sitting at the desk and you can't access them via email. So you would think in this day and age, you don't need to be printing materials anymore, but we print materials because we've got to hand it out to a lot of folks and we send things mailers to the home because the spouse is a very, or partners a very important part of the discussion in many cases. So you have to think about, and I think folks in the room probably do this and understand it. You have to think about your audience and how do you get to them in a different way Because we certainly have the typical, yeah, we've got a toll of reward site and you can go out there and you can see everything the company offers and you can see the value that we provide, but you get folks, you got to hit them where they live, so to speak.

(17:29)

And so we've been very intentional about that. And then another big audience that we're really starting to focus on is our HR business partners, because they're out in the field, they're working with business leaders, they have team members impact them. We have local HR folks, so we've got benefit 101 sessions that we do for our HR business partners, which we're doing again given the time of the year, we're doing those in the next few weeks.

Alyssa Place (17:57):

Yeah, I think it's really interesting that on the one hand you're talking about using AI and all of this technology and then you're still sending paper mailers. Is there for both of you, is there an optimal combination of what works or is it really just about knowing your employee base?

Sach Jain (18:14):

Happy to start. Yeah, as I said, you have to meet employees where they are. We provide our benefits to a few million members, and a good chunk of those members are in blue collar jobs. To Jay's point that it's easy to say they should have an email and et cetera, et cetera, but many of them don't. So in that case, you need to meet employees where they are. So in our case, when we are talking about ai, AI is not just for who is the right member for you can reach out through an email, but AI is also used for, given what I know about this employee, what kind of communication they'll respond to best. Is this a postcard? Is this a text, is this an email? And what exactly the messaging needs to be that will resonate to that employee. So in our solution, because there are many benefits for the employees, which include you have access to the best quality of care, best surgeons in the country, and you will get the care concierge service that will guide you through an episode of care.

(19:37)

So you don't have to worry about figuring out what will happen before the surgery, during the surgery, after the surgery. And there's a component around after all said and done, you will never see any medical bill in the entire episode of care. Now, among all those different benefits, if we unload all of that on one single employee, they've like, I don't even know where to start, but in our case, we serve a population like United Airlines. They have very different kind of populations. There is offices who sit in the corporate office of United Airlines, and then there is ground crew, the baggage handlers, the folks who are not as attuned to technology, they respond to very different messages. For someone in the corporate office, we will highlight the benefit of you can get the work class healthcare in the most wide glove fashion as you can, versus if we are communicating to a ground crew, we'll be highlighting the value of, Hey, your biggest fear about healthcare system is receiving these surprise bills and not knowing what is covered, what is not covered. You can actually use this benefit without having to worry about any of that because your employer is making this benefit available to you. So just again, it's a multifaceted thing. What more do you choose to communicate with these employees and what exactly is the benefit you are highlighting?

Alyssa Place (21:15):

And Jay, how are you approaching that? Is there a strategy in place that you rely on the most 70 30 split? How do you decide the best way to reach out?

Jay Feece (21:28):

Yeah, admittedly, when it comes to ai, we probably have some opportunities to figure that out. I think certainly that will help as we go forward to identify, I think you nailed it in terms of the audience and what they react to. We've got a really good partnership with our communications team. So we have internal communication resources, and we have someone that's kind of dotted line into my organization, and she's really looking at our communication strategy to kick the tires. And really, I've asked her to be more innovative and think about being more creative with how we do that videos, but not like, okay, it's a TikTok kind of generation now. So it's like, okay, the video needs to be as short as possible. And so it's targeted video that just hits one topic, HSA, for example, and it's quick and it's helpful and it's educational because people don't have time for that. So we're at our communications strategy. So we've got an internal communications team. We leverage Willis Towers Watson to do a lot of our work and kind the blocking and tackling annual enrollment guide and some of that. And we like to kick the tires with HR business partners to say, Hey, how do you think this is going to resonate with your customers?

Alyssa Place (22:55):

A couple of the things that we talked about, the surprise bill, the inflation, the uncertainty around benefits. I mean, it seems like the need to sort of be communicating frequently and in many different modes. It seems like a lot of that is to sort of put employees at ease in terms of everything that's happening in the world around them. And I'd love to know, obviously we don't know what's going to happen in the next month or even within the next year, but what are some of your pieces of advice for benefits leaders going forward to sort of prepare for some of these unknowns and help employees kind of manage all of this uncertainty that they feel in their healthcare and their compensation, all those different things.

Jay Feece (23:37):

I'll jump in real quick. I would tie it back to the last session and curiosity. We don't know sometimes what we don't know. So ask a lot of questions. Ask questions of your peers in the room, ask questions of the professionals that we engage with, whether it's the Willis Towers, Watsons of the world, ask questions of your team members. That's where really some of these team member listening sessions, I've gone out, visited our distribution center and to listen to the questions that they ask, it really grounds you in, wow, they're really coming from a really much different place. And you don't always sit in corporate. You don't always get that perspective. So I've found that's really helpful.

Sach Jain (24:23):

I'll highlight a few things here. I'm doing this for 10 years now almost, and the word of healthcare benefits was very different 10 years ago when there were a handful of solutions that were available. Now there are thousands, you name a category, and there are 50 solutions available within that category. So the role of benefit leaders is really evolving at the moment where moving away from the world of an administrator of the benefit, it is moving more to the world of a strategic fiduciary who is going to make the most of the benefit budget they have and use that budget to attract and retain the best talent. In this, the scenario I was describing earlier, which is there's a huge pressure on healthcare cost. While the labor market stays tight, every benefit leader is looking for solutions that create a win-win.

(25:39)

And there is an issue of transparency where benefit leaders and employees many times look at this as a zero sum game, but how you change that game to identify solutions that help employers as well as health employees. And other thing I'll highlight is that talking about cushions benefit, leaders need to cushion why my healthcare premium continues to go up six to 10% year over year, and I have no control over this. How I put accountability on my, whoever there is on the other side, health plan providers so that they are also responsible, they have a skin in the game for bringing the cost down, making healthcare better and more experiential. So yeah, I mean, curiosity is a great word. Why it is happening and how I can change it.

Alyssa Place (26:40):

Yeah, I mean I think despite all the uncertainty, things are not going to get any less expensive. So I am curious, Jay, are you planning to change your benefit strategy next year? You mentioned so many different things that you did to address inflation over the last year. What's your plan for moving forward?

Jay Feece (27:01):

Yeah, we feel like we have a good core foundation. And so I've been there a couple years and really it's been more kind of nibbling around the edges to find opportunities heading into this year, we changed our payer in a few different states to increase the percentage of in-network providers. As we looked at the providers that our team members were using, we got a substantial uptick there this year, as we head into next year, we're adding a second dental plan. So now we're getting into some of the tactical stuff to help folks out. But we had one dental plan, well with two, we had a DMO, if you want to really count that, it's pretty limited. And then one dental plan with orthodontics and a decent deductible. And we got feedback like, Hey, I don't need orthodontics, and I just go get my teeth cleaned every six months.

(28:00)

So we put in a second plan and we may just call it kind of like the standard plan so that for those folks who just need that, it gives them another choice. And granted, dental's not a huge expense for folks in terms of their paycheck deduction, but if you're going to the dentist regularly, root canals and crowns and all that, it adds up quick. So we improved the current PPO and with higher, with better maximum out of pockets and then put in a standard plan for those who didn't need it. So we're continuing to look at our core plan design, and then there's some of the voluntary benefits that we're looking at. We had meeting with, we used Vanguard for our retirement plan. We had a meeting with them about this student loan solution that they have called Candidly. Sounds kind of interesting. I need to double click on it. But so we're looking at other things that can help our employees. Their needs are unique as well outside of the core offering.

Alyssa Place (29:08):

And Satch, what about you? What's next for Karen looking ahead in the next year or so?

Sach Jain (29:13):

Yeah, so as I mentioned, we are focused on the surgical care and cancer care component of employers healthcare spend, which is roughly half of the total spend. And the Caram's journey is interesting that we started the company focusing just on joint replacement as our first procedure. We brought on the platform and showed that if employers use bundle payments, employer use value-based care centers of excellence arrangements, it not only help avoid unnecessary surgeries, it brings the cost down and it leads to lower readmission rate and complications rate and overall much better member experience. So over the course of last five, six years after showing the success in that model, we are now continuing to add more and more procedures in that model. So today we cover entire spectrum of musculoskeletal bariatrics and cardiovascular procedures. Year and a half ago, we made a commitment based upon what our employees were asking that they wanted to see the same solution in the case of oncology, like how you can create a model where providers are accountable for the cost and quality of care they are delivering in oncology, which has a huge implications on not only the cost, but also the survival rate of the employee that is going through an episode like that.

(30:56)

So we rolled up the sleeves and we launched an oncology offering where we made providers like memory of Sloan Kattering, University of Chicago, Johns Hopkins, et cetera, accountable for the cost and quality of care they deliver in oncology. They take up to two year risk in a model like that. So what is ahead for us for next one year is to continue to scale that model and make it almost like a one stop benefit for any oncology need for the employees. The second thing I'll highlight is a lot of our employers have also asked, they want to use a benefit, but it is also not easy to procure. They have to go through the full procurement process, which I'm sure no employer benefit leader in this room is thrilled about. And so we have started to forge partnerships that make it easy for employers to adopt a solution if they're interested. So we have forged partnerships with companies like CVS and very recently Forge a partnership with UnitedHealthcare. So any of their clients that use CVS as the PPM or UnitedHealthcare as their health plan are able to procure a benefit like this without having to go through the full procurement process.

Alyssa Place (32:24):

Well, Thank you both so much. Obviously you have so much on both of your plates and I really appreciate you sharing your strategies and offering some advice. Again, thank you both and please feel free to grab either of these gentlemen after to ask any additional questions and we will hop off the stage.

Jay Feece (32:42):

Thank you.