Managing Healthcare Costs: Preserving Benefits Without Pricing Out Employees

With rising healthcare costs putting pressure on both employers and employees, the challenge is clear: how can organizations maintain high-quality, competitive benefits without passing the financial burden onto their workforce? This session will explore actionable strategies for controlling healthcare spend while prioritizing employee well-being. Learn how employers are gaining greater visibility and control by moving away from traditional BUCA models and adopting self-funded approaches, direct primary care models, and other innovative solutions. Panelists will share how they've used data analytics, alternative funding models, and smart vendor negotiations to drive sustainable savings. You'll hear real-world examples of organizations that have successfully reduced or maintained costs while enhancing benefits—and how they're reinvesting those savings into programs that support employee health, retention, and long-term growth.


Transcription:

Bruce Shutan (00:09):

Thank you so much. My name is Bruce Shutan. I am a Contributing Editor to Employee Benefit News and have been doing that, believe it or not, for 37 years. So I may be the record holder in this room in terms of longevity, seniority, I don't know. But anyway, as he mentioned, given the title of this session, I think in my opinion this is where the rubber meets the road throughout this whole conference. We're all really trying, or you all are really trying, to do just that to offer robust benefits in a way that's not going to break the bank. So we have an incredible panel here of experts. I'm going to ask them to each introduce themselves. I've got tons of questions to ask them and would love to open it up for questions at the end as well because I'm sure you all probably have questions. So I'm going to go from my right to left with Krystle.

Krystle Lee (01:09):

Hi everybody, my name is Krystle Lee and I'm a Total Rewards Lead at Apache Industrial. We're a soft craft services company that is US-based across the US. I've been in the HR and total rewards space going on a little over 15 years, and I'm about to graduate from LSU with my master's in Human Resources and Leadership Development. So go Tigers.

Harrison Newman (01:32):

Harrison Newman. I am a Vice President, Employee Benefits Consultant with Corporate Synergies. We are a national benefits brokerage. My main focus is looking at benefits as a way to build culture within the organization. I also host the New York City SHRM Podcast, Talk HR. So a little bit of a different point from that standpoint as well.

Stephanie Koch (01:53):

Good afternoon. I'm Stephanie Koch. I was moderating the panel earlier, so I'm a repeat visitor up on stage. I am the Director of Human Resources for Hendry Marine Industries based out of Tampa, Florida, and we are a shipyard. I think I said that earlier when I spoke and have been working in human resources over 30 years, so I'm very happy to be up on stage with these colleagues of mine.

Brad Kopcha (02:18):

Good afternoon. I am Brad Kopcha. I am an Actuary and I've been working in the healthcare space for about 30 years, for an insurance carrier and the last 18 years at a company called Nikon, where we run self-funded consortiums on a nationwide level, but talking about these issues, cost attainment, very happy to see it. And I will add, I went to Penn State, not LSU, but I did win $10 betting on LSU Saturday night against Clemson.

Krystle Lee (02:41):

That was a good game.

Bruce Shutan (02:43):

So I'm going to start off with two of your peers, Stephanie and Krystle. This first question, I'll start with Stephanie and then Krystle, you can answer. To what extent does affordable healthcare coverage with robust benefits, as we heard earlier with the title, serve as a recruitment and retention tool in your respective organizations? We have long known that it has served in that way, in that capacity. How about now and moving forward?

Stephanie Koch (03:16):

Yeah, so it's not a simple answer per se because we all want to provide a comprehensive healthcare plan that's affordable, that does provide quality. So certainly there's a measure tied to that when you're bringing people on board. But the company also has to continue being engaged as a fiduciary, being engaged in the process of reevaluating the benefit plan year after year and seeing if there's any tie to any people that are coming into your organization because you might be offering something that's different than the competitors may not be. So for example, we have an onsite primary care clinic and it's open twice a week. So anyone who is working for a competing shipyard is going to look at us and say, wow, they're offering that as a free benefit to the employees and their family members. So we know we have an edge with that and it is showing in some of our recruitment data. So it is very important to make it a continuum and not just keeping it status quo.

Bruce Shutan (04:25):

Krystle, how about you?

Krystle Lee (04:26):

Yeah, I agree. It isn't a simple answer, but we all know when we have a great benefits package, how hard it is to leave a company like that. If the culture's good and the benefits are good, leaving isn't because of that. It's for some extenuating circumstance that we in here can't necessarily control. So where I really see it is in the recruitment. When people call and they ask me, or when our recruiters ask me, to talk to one of our candidates about our benefits program, Apache rolled out an ability to have no copays, no deductibles, and no out-of-pocket maximums this year to our employees if they just go through our direct primary care model. We did that and reduced our premiums by 20% this year. That is not happening in our industry; that is not happening in most of our companies, regardless of what industry you're in. So people hear that and they say, "Wait, what?" and they want to hear more, and they want to hear how easy it is to use. They want to know if they really can use it. Is it going to be available to them out in North Dakota the same way it's available to me in Houston? And our answer is yes. And that has been a very powerful recruitment tool.

Bruce Shutan (05:28):

Just a quick follow up question for both of you. Has anyone asked about GLP ones? Because that now is a recruitment and retention tool that's come up in conversations I've had in interviewing people for articles.

Krystle Lee (05:42):

We hear about GLP one questions a lot. It is not something that we cover across the board. We only cover it for very specific diagnosed medical conditions, and unfortunately, weight management is just not one of those at this time. The spend is too high. It doesn't make sense for our company and doesn't make sense for us to be able to offer it and still keep our margins and keep our costs down. But it is a big question. It is something people want.

Bruce Shutan (06:08):

Stephanie, you're nodding.

Stephanie Koch (06:10):

I am nodding because everything Krystle said I agree with. So we also offer GLP one strictly for people that are diagnosed with diabetes. However, what we learned this year, because we did switch to a new PBM, and it's interesting because that PBM is covering GLP ones on the international program, so it's zero cost to the member and less of a cost to the company. So we're going to continue looking at it to cover it for weight loss, but for now it's strictly for diabetes.

Bruce Shutan (06:43):

So I want to switch gears for a moment and ask Harrison to tap into his knowledge as a benefits advisor. Why is self-insurance becoming an increasingly popular way to fund employee health benefits? And tell us about the Moneyball approach to benefits, which I know came up in our pre-conference call a couple of weeks ago.

Harrison Newman (07:06):

So it's basically piggybacking on what was just said beforehand. Employee benefits, right now, the only reason companies are offering employee benefits is to attract or retain top talent. So I'll start with the backwards. I'll start with the Moneyball approach. The Moneyball approach to employee benefits is taking a look at what employee benefits attract or retain top talent. So you mentioned GLP ones. A lot of companies are very hesitant to offer the GLP ones, but GLP ones, as an insurance nerd, has been one of the coolest things that I've been following. And I think every one of my conversations over the past year and a half has been about GLP ones. This is one of the first times where HR is beating finance in a discussion. HR is saying, we want to offer this because it's going to help us attract and retain top talent.

(07:49):

Finance is saying it's costing us too much, and we're seeing many organizations, not all, but many organizations take the HR approach, take the approach that we are offering them because it is going to boost morale. Me and Stephanie were on a panel probably six months ago for a different one about the GLP ones, and part of the conversation was, should you offer them because of the impact it's going to have on the work? So it might cost more on a financial standpoint, but if people are healthier, there are less sick days at work, better health conditions at work, better morale at work, people feel more comfortable, they're not going to leave. So that's part of what the Moneyball approach is. The Moneyball approach is knowing your people, knowing your data, knowing your options. Knowing who your people are, what do they value, what's going to help attract and retain the top talent in the organization.

(08:34):

Also, how do you communicate with your employees the exact same benefits? A high deductible health plan with an HSA tied to it could be very valuable for a Gen Zer and a baby boomer, but the messaging and the story is going to be very different. So know who your people are, know the products you're offering, but also know the story. Also, understand your data. What is the data telling you? What's driving costs? What is being overutilized? What's being underutilized? And where can you get the most bank for your buck? Sometimes, honestly, it's something as simple as everybody's focused on the major medical. Sometimes the major medical is not the best bank for your buck. Sometimes it's something as simple as pet insurance, a lifestyle account, something small that doesn't cost very much, but can make your employees feel valued, make them feel like they're part of the company, investing in stuff that they value more than something else.

(09:21):

Help attract or retain the talent. Once again, we talk about the primary care and the 100% copays. That's understanding what your employees value and focusing on those. And then know your options. And that's where it ties into the self-insured marketplace, because the reason companies are going self-insured is because the BUCAs are broken. The BUCAs, the Blue Cross, United, Cignas, Aetna, the fully insured marketplace is broken. The definition of insanity is doing the same thing time after time and expecting different results. You have, on a good year, a double-digit increase. On a really good year, maybe you have high single digits. This year, I can honestly say I've released 30% increases in the fully insured marketplace across the board because of trend and where the industry is going right now. And the funny thing is, you're not even expecting different results. People are accepting those 15%, and how long is that viable?

(10:08):

So when you go self-insured, you have control or you have more leverage to pull. You can focus on the Moneyball approach. You can focus on, alright, we're going to look at the prescription aspect. We're going to make these formulary. What's very funny is you can take prescriptions and exclude them from your RX plan, and it's cheaper for the and the employees can get them cheaper. So there are certain high-cost prescriptions that when they are excluded from your plan, you're eligible for manufacturer rebates and manufacturer discounts. Get them directly from the manufacturer at no cost, but if they're covered by your insurance, you can't get them. You are denied because you have to get them through your insurance. Sometimes it's as simple as looking at your fully insured RX benefit plans and saying, hey, we're going to exclude these seven drugs that are being overutilized because you can get them from the manufacturer directly and we will set up navigation tools to help you get them.

(10:57):

But it's lowering the cost of your benefit plans. It's stuff like internationally sourcing your prescriptions. It's stuff like deciding how you cover GLP ones. In the fully insured marketplace, you don't have options whether you cover them; it's based on the carrier and their mandates in the state you're in. On the self-insured marketplace, you can decide, do I want to cover them? Do I want to focus on the compound medications that we were talking about? The compound drugs is a possibility if you're not offering those. So the reason why the self-insured marketplace is going where it is and people are focusing on it is because fully insured's broken. Self-insured is not much better, but at least it gives you more leverage to pull and more options, more transparency, and you can see the data and you could make decisions as opposed to just taking the double-digit increase and having this as your strategy.

Bruce Shutan (11:42):

Brad, from an actuarial standpoint, how does an employer know whether it's a good candidate for adopting level funding or self-insurance?

Brad Kopcha (11:51):

Sure. So the majority of the employees in the country today on an employer plan are on a self-funded plan, and there are inherent advantages to being self-funded. There's admin savings. Your admin is about half in a self-funded plan of what it is in a fully insured plan. Tax benefits when you are self-funded, paying for claims, you're not purchasing anything, you're just reimbursing the providers. There's no premium tax on that. So that's about 2% a year on all your spend. There is premium tax on your stop-loss policy. Underwriting gains healthcare is expensive enough as it is, but the fully insured marketplace—and I worked for a decade as an actuary for a carrier—when you're fully insured and you go to the insurance carrier and they are going to project your claims and charge you a premium, they're doing that to make money off your risk. They're making money off your plan.

(12:40):

Healthcare is expensive enough as it is without an insurance company trying to profit off your risk and off your plan. We want to take that back as employers. So underwriting gains come back to you. Transparency you get to see your data and act upon the data. And really the top thing is the playbook is wide open. So when you are self-funded, everything you're going to hear about, everything that they're doing in their companies, everything that Harrison's talking about, it's all open to you as an employer. If I want to go direct primary care, if I want to put HSAs in, I want to handle my GLP one drugs differently, I want to look at my data and drive individuals to have a reference-based pricing plan or direct contracting or whatever you're doing. It's now a wide-open ball game. You have more control as a plan and you have more control in containing your costs because everything you're doing is going to hit your bottom line.

(13:30):

On average, it's about 10 points a year if you're self-funded versus fully insured just on admin and taxes alone. Year over year, no matter what happens with your claims, admin and taxes is about 10% less to be self-funded. It's why the majority of the employees are in a self-funded plan today. As far as evaluating, should you be self-funded, the odds are in your favor to be self-funded. It's still a group-by-group decision. In a fully insured pool, if you're in a fully insured pool right now, whether it's community-rated under 100 or experience-rated over 100, if you're fully insured, essentially in a fully insured pool, when an insurance carrier calculates your price, about 70% of the groups in that pool are subsidizing 30%. So if you work with a viable agency, a viable actuary, a viable consultant, they will be able to look at your data, look at your renewal from the insurance carrier, and essentially say very quickly, you're subsidizing other employers in your market. Let's put that money back in your pocket. Let's take that 10 points a year on admin and tax savings. Let's go to the self-funded marketplace. The only thing you have to then evaluate is high claimants on the plan, what those high claimants are, what drugs they're taking. There are certain drugs that would be a little prohibitive to recommend self-funding perhaps, but it's really just an evaluation. The majority of the groups out there would benefit from being on it.

Harrison Newman (14:52):

Companies always come up to me when we're talking about self-insurance. They're like, "Oh, we just had a really bad year. We had bad claims. This is not the year." I actually believe, and correct me if you disagree, that's probably the best year to go.

Brad Kopcha (15:01):

Yeah, I have it all the time.

Harrison Newman (15:03):

The best year is a year afterwards because if you're fully insured, the carrier's recouping, they're basing it off the prior year. So you have no chance of winning. You're going to get a high increase. You're paying the money either way. At least from a self-insured standpoint, if you're coming off the worst year you've ever had, chances are it's not going to happen again. One of every five years is going to be a bad year. If you had your bad year, the next year is going to be better. But even put that aside, you're paying the same anyway. Here, you have a chance of recouping those losses because the fully insured marketplace isn't going to let you recoup them, where self-insured is. So one of the biggest misconceptions I hear all the time is we had a bad year this past year. We have some high claimants. Now's not the year to do it. I would disagree and say that's probably the best year to do it. Yeah.

Brad Kopcha (15:43):

I would just say it's an employer-by-employer decision. I have that all the time. Some will bring me a group for pricing and say, "This group is young and healthy, they're a great candidate for self-funding." And I'll look at their data, and I'm like, "Actually, every insurance carrier in the country wants them. They are low priced." And it's really just relative can you save money by being self-funded versus where you're in the fully insured pool? But often, just what you said, I have groups all the time that had a bad claim year. The fully insured carrier prices them high. There's going to be a regression. A lot of those claim issues have rectified themselves. There's going to be lower claims the following year, and if they stayed fully insured because they're thinking, "I'm a bad group, I had a bad claim year, I have high claims." The expression, the claims are the claims, but in reality, it's just an evaluation of what's the fully insured market pricing at? What are your claims going to come in next year? Can you save money by going to the self-funded marketplace? And often, from that claim regression, groups that have bad years moving to self-funded the following year is a fantastic financial plan.

Bruce Shutan (16:38):

Brad, you mentioned reference-based pricing earlier, and I want to toss a question over to Krystle. How is your company using RBP, and please describe to those who are unfamiliar with what exactly it is, what results you've seen.

Krystle Lee (16:53):

Sure. So I want to ask you to identify if you do or don't know what reference-based pricing or RBP is. I was somebody in the boat that before I came to where I'm at now, I had never heard of reference-based pricing, but I had been doing self-insured plans for a very long time at that point, as well as some fully insured. So reference-based pricing is just going to be an alternate to your traditional PPO network where instead of agreeing to a set amount of charges or bill charges, you're actually going to be anchoring your payments for providers based off of a benchmark. So for us, that is a benchmark off of Medicare prices. We have a range; it's usually 1.2 to 1.8% of Medicare or times Medicare prices. Providers like that. They will usually take that payment because they are already taking less for those services because they're taking Medicare prices.

(17:42):

So they're happy to get 1.2 or 1.8 and close it out. There are times where people still get bills, and instead of it going back to us as the people paying it, it goes back to the employee and it says, "Hey, your insurance company only paid this. We expect this much more." And then there are some fail safes in place. So we have where they can go back for balance billing, and they can look at ELAP services and really see, negotiate back and forth, and still it comes back to us as a plan, not back to the member. So it has helped our company save millions of dollars in the five years that we've had it. I mean, year after year, we continue to see that savings and we've just improved upon that with an additional several million dollars in savings moving to our direct primary care, first reference-based pricing on the backend model this year.

Bruce Shutan (18:31):

So Stephanie, I want to ask you a question really that's rooted in healthcare consumerism because as we had heard in previous sessions, it's really kind of a partnership approach between employees taking responsibility and having skin in the game and employers offering the benefits. How has your organization promoted HSAs in conjunction with HDHPs and FSAs, HRA, or IRAs as part of this consumerism approach?

Stephanie Koch (19:03):

So I might be the outlier here, but we had an HSA and we had very low participation unfortunately, and one of the things we also realized is because of the HSA being embedded in our core healthcare plan, the plan could not pay first dollar for the employee to go to our onsite primary care clinic. So for those reasons, we actually removed the HSA from the plan in order to allow access because, and again, I have a very different opinion about high deductible healthcare plans. Just in my opinion alone, I believe that HDHP plans really prevent access because people can't afford the deductibles, and they typically will avoid care, and that would then potentially cause more catastrophic claims down the road. So in 2025, we actually changed our plan design, even though it's a higher deductible. We actually put copayments in for primary and specialty care and then also for our pharmacy spend because primary and specialty care is not what's driving the main costs of your claim spend, it's facility costs.

(20:22):

And we also are on a reference-based pricing plan with Imagine 360. And what we have seen, and I believe you've seen similar results, Krystle, we have saved over $24 million since 2019 in billed charges. And that is a direct reflection and goes directly to mitigating those costs and also putting more money to the bottom line of the company. So one of the things that I'm really a huge advocate on is making sure, and I'm getting a little off track, I'm sorry, but I'm very passionate about HR being considered part of the profitability of the organization and not always thought of as a cost center. And we do that by making these strategic changes.

Krystle Lee (21:07):

Agree. It's a way that we find money. And to just piggyback on that, yeah, we also, we are not eligible for HSAs because we don't have a high deductible health plan because we have entry for no-cost care. We didn't want people to feel like we were taking away from our plan. So we put the match that we were doing in our HSA over to an FSA, which is still eligible. So people still felt, "Okay, yes, you took something away, but you actually gave us a path for zero-cost care and you're still giving us this match." So we didn't lose everything that we thought we did.

Harrison Newman (21:41):

So I just want to, because I think HSA has got a bad rap over this, I do want to take the other standpoint as a broker and give them the other standpoint here. High deductible health plans are a very valuable tool. They work well when your employees are educated on them well. 100%. If you're offering 100% benefits, you're offering those benefit plans, then you're not eligible for those. Many companies are not able to offer 100% benefit plans just because it's not affordable, and you need to have different guardrails in place. But from the high deductible health plan standpoint, I don't think they're if educated properly, I'm not sure they're necessarily the roadblock because most of my clients who are implementing the HSA plans or the high deductible health plans, you have employer contribution to the HSA, you have a difference in copayments, you have a difference in employee contributions between your PPO plan and that.

(22:26):

So if you take the money that the employer is contributing, you take the money that you would save by taking the cheaper plan instead of the more expensive plan, and you educate your employees on the triple tax benefit of an HSA plan of a high deductible health plan, the fact that it's tax-free going in, tax-free going out, and you could use it for retirement. The fact that you could actually invest that money, anything over a thousand dollars on most of these, you could invest that money and have it grow over time. You use it to pay for COBRA. If you ever need COBRA benefits, use it to pay for when you're retired, to pay for your supplemental benefits as you get older. There are so many values out there that for the most part, if educated properly, employees value those. I always use myself. Once again, I work for a brokerage.

(23:09):

We have four benefit plans. One of them is a high deductible health plan. Most of my company, most of the foundation partners, corporate synergies, are on the high deductible health plan. Presumably, we do this for a living; we know what we're doing and we are on the right plan, presumably. I think that's because the education goes into that. So I think when your HSAs aren't working, it's not necessarily the product, it's the education behind it and all the benefits. If you're going to teach them like, "Hey, your prescription's now no longer a $40 copay, it's a $300 cost for this prescription," or the GLP ones where you're paying the full $1,200 for the GLP one, yeah, nobody's going to jump on that plan. They're not going to be happy with it. But if you educate them on, "Hey, look at the amount of money you could save on this, look at the tax ramifications for it. Look at the money we're giving you upfront." And as we said before, one of every five years is going to be a bad year. If you're saving money for all those years, you technically have a 100% benefit plan year because you're saving that money, you're investing that money. When you truly need it, it's just a little bit of a different education behind that.

Bruce Shutan (24:04):

So Brad, as the saying goes, if you can't measure it, you can't manage it. So how important is data analytics in conjunction with AI and other technologies to price stop-loss insurance with greater accuracy and raising the bar on health plan management?

Brad Kopcha (24:22):

Yes. I mean, it's a new tool for us, and I saw the questions, Bruce showed me the questions. I saw the question. I thought that was a really good question and I was nervous how to...

Bruce Shutan (24:29):

I only ask good questions, by the way.

Brad Kopcha (24:32):

I put it in Chat GPT and here's what Chat... I'm just kidding. Alright, so no, AI has to be used. From a consultant viewpoint, from an employer viewpoint, what we're doing right now at Benon with our employer groups, our October renewals, we dropped their data into an AI tool. It gave out an idea of, hey, better plan design. These are the providers that you're going to. Some of the things you've heard already, if you're in an RBP, reference-based pricing RBP plan, if you're doing direct contracting with providers, you could build your plan design if you're self-funded to have some steroids, drive your population to the best quality care. All those things are at your fingertips with analytics. And having your data and that transparency when you're self-funding, it's a huge part, getting that actionable piece of information and trying to drive cost containment from that.

(25:25):

The other aspect of AI and things that are coming from a pricing standpoint, AI is now being used by insurance carriers to price stop loss. Carriers to price... no stop loss carriers or insurance companies, I would say, are fully relying on AI. They're just running it as a data point. It's still very early in using it for pricing. They're just calibrating their models that they're using to price. But as we move forward with this technology, carriers are going to be able to look at your data as well and assess your risk with amazing precision. Likewise, providers, hospitals, I think there'll be an increase of utilization by analyzing claim data. So I don't think overall we'll see a reduction of costs from AI, unfortunately. I do think there are things in the marketplace, we might see better healthcare outcomes, but it will come with an increased price, unfortunately.

Bruce Shutan (26:11):

Krystle, you're a big proponent of direct primary care, which received a shot in the arm over the summer when the one big beautiful bill included a provision allowing employees to use their HSA to pay for DPC visits. How has this emerging monthly subscription-based model of care worked for your company and to what extent do you believe the legislative change will increase adoption?

Krystle Lee (26:40):

So I do think companies are going to have to look at it and say, "Does this make sense for us? And are we willing to make changes like we did at Apache in terms of, okay, it's not HSA eligible, we're going to actually make a pathway for reduced cost care for these members." So Apache pays the membership and then since it's a subscription service, we're not paying by visit to the primary care provider that they have. They're just going as many times as they want. It's their telemedicine provider. Mine texts me today with an update on my A test I have coming, and it's a very living, breathing relationship. So I do think the adoption is going to be in terms of people looking and re-looking at how they expect it to work. And if you do have the ability to pass those savings onto your employees and you say, "Hey, it makes sense to get rid of the HSA, for example, because it's not eligible, it doesn't work for the system," then what can you do and how can you educate your employees to show them that there is value in this and there is benefit in this?

(27:42):

So I think the potential for adoption is out there. I think, like Harrison said earlier, the BUCAs are broken. And so we wanted, and I think my CHRO's exact terminology when we were talking to our DPC and talking to our CEO is, "I want on that train because it feels like it is trying to fix what is broken." And it also helps really give our employees that concierge service and navigation and drive them to wellness.

Bruce Shutan (28:11):

If you're able to save on healthcare costs, you can really leverage those savings in so many ways. Stephanie, how has your organization been reinvesting health plan savings into programs that support employee health, retention, and long-term growth?

Stephanie Koch (28:31):

So I know I've talked about this a lot, but it really is my favorite project of my 30-year career, which is our onsite clinic that we use to serve our employees and their family members. But the reason that we decided to adopt that as a practice for our employees is because of being self-funded and having the data, and it was showing that we only had 15% utilization of the preventative wellness benefit and with our employees, 80% of them being men, it was an "oh crap" moment. Something is going to happen and it's going to be very catastrophic. So at the end of '21, we actually had a million dollars of surplus in our accrued account for healthcare expenses. So we reinvested that money, or a part of it, to open the primary care clinic to serve our employees and their family members. And we did not initially have great adoption of it because the employees were a little skittish or skeptical "What does the company want to know about my healthcare information?" And through some smart programming and other decisions we made, we ended up getting great utilization and it's been really successful. So that's one of the ways. And then we also invested in a whole-person program for the employees.

Bruce Shutan (29:54):

When you talk about onsite health, it makes me think of what Rosen Hotels and Resorts did and how game-changing that was for the industry. And there are other organizations out there that want to tear a page from that playbook. Harrison, I've got a question for you just to change gears for a moment. As an advisor, we know that the heat is on as far as government oversight as it relates to fiduciary responsibilities. The CAA has forced the hand of health and welfare plan sponsors finally in a way that we saw 20 years ago with ERISA on the retirement plan side to become better stewards of their benefits. This is happening in the face of class action lawsuits alleging a breach in fiduciary duties, and the common denominator seems to be overpriced prescription drugs. So advisors like yourself, TPAs, and others also are on notice and must disclose all compensation. How will compliance with this 2021 legislation help reshape the marketplace and whether a rising tide will lift all boats?

Harrison Newman (31:20):

So the CAA had several impacts. I'll start off with the transparency aspect. On the employer standpoint, employee benefits for 90% of the businesses is the number two or three line item on their budget. I always find it the funniest thing. I talk to CFOs, I talk to HR people on a daily basis, and I talk to the HR person and they said, "We got a 30% increase last year. Our broker negotiated it to a 15% and they did a really good job. They called in a favor and they got it down to a low single digit." I'm like, "That's BS," and pardon my French. It's a game that brokers play to make them look valuable. It's meaningless, it's data, it's numbers. I'm like, "You know what? I find the funniest thing in the world. If you go to your CFO and you ask your CFO what the depreciation value of that chair is, he'll know it to the penny. You say, what's the square footage of this office place?

(32:08):

He'll know it to the penny of what you're paying per square foot on rent, on ownership, or everything. But you say, what's my medical spend? Or why is my medical spend? Why is 11 the right number? Why is two the right number?" They have no clue. They're like, "Because the broker said that and the broker, we started at a 25 and the broker got to a two. Obviously it's the right number." I've never played that game. I don't like playing the game. It's a mathematical equation. We have the actuarial standpoint as a company. What we do is we do midyear projections six months out. We don't look at the carrier's underwriting numbers. We take our own underwriting numbers. We project what the renewal is going to be. So I think part of what the CAA is doing from that standpoint is A, they're holding the broker's feet accountable because the brokers need to show what they're charging. Most are standards specific in the fully insured, but some aren't. I've taken over policies where the broker's ripping them off and charging a lot of money for very little work. Fiduciarily speaking, look, HR has a hard job. HR's job is not to be a benefits expert, but it's being knowledgeable enough and trust people. I have come into enough situations where you've had the same broker for 25 years. That broker has gotten lazy, and you're renewing because you like the person

(33:14):

because they're answering. I talk to people like, "How's your broker doing?" "Oh, they're great. They get us a good renewal every year. They answer the phone when I call them and they get back to me within two minutes." I'm like, "Great. That's basics. That's like saying your cleaning lady washed the floors. That's not anything special." "What's his strategy?" "I don't know." This is a number two line item on your budget. If you don't have a benefit strategy, you're doing your organization a disservice. And I hate to throw anybody under the bus here who's doing that, but I will tell you point blank, if there's not a long-term three- to five-year benefits strategy, you're not being fiduciarily responsible towards your organization because all you're doing is accepting what the broker is telling you and saying, "This is what it is." This is what the CAA is doing.

(34:02):

It's having that aspect, but it's also adding transparency to the entire marketplace. It's giving transparency into prescription. It's giving transparency to medical spend. We're talking about self-insurance. Part of the reason you like self-insurance is transparency. That's the key word of probably this entire presentation. Transparency. Anybody from New York who knows old Sims department store is getting really old. But I've loved their slogan. Their slogan used to be, "An educated consumer is an educated customer is our best consumer." "An educated consumer is our best customer." That's the same with the medical. We want you to be educated. What's driving your cost? What's the numbers telling you? But also what's amazing that the CAA is doing is with all this information available, going back to the AI question, they're actually using AI to analyze the doctors and analyze the prescriptions. Which doctors are high-performance doctors? What are the major trends we're seeing is steerage, and UHC came out with their assurance product and others are coming out soon, where there are high-performance networks where you have access to the full network, but if you go to a high performing provider, you get discounted or that's the way you get a 100% benefit.

(35:02):

But you have to go to a specific high-performance provider. What's the high-performance provider? They're taking information that's now being released because of all this transparency and saying, "Hey, this doctor, he has the least amount of complications." But more importantly than that, when he's prescribing you to go to an MRI, he's prescribing you not to the one in the hospital where he gets the biggest kickback from, but to the freestanding facility on the block. When he's doing a prescription, he's automatically doing the generic, not the name brand prescription, which is exactly the same because the pharmaceutical rep walked into his office a couple of days ago and told him to start prescribing this one. So they're taking this data and they're analyzing doctor usages and they're using AI to track these doctors and steer people towards those doctors. I think that's probably going to have the biggest impact the CAA is going to have because it's allowing us to steer people to high-performing doctors. And by high-performing, we not necessarily mean the cheapest. Sometimes they're the most expensive doctors, but they're the most expensive doctors who have the best outcome. But more importantly, they're actually taking things like what they prescribe, where they send you for second opinions, where they send you for MRIs, and taking those into effect and making sure that they're going to the right place. And you're asking those questions and there's transparency in those processes.

Bruce Shutan (36:13):

So we've got about four and a half minutes left, and I want to open it up to questions. I mean, I have some other questions prepared too, but I think it's important for the audience, and you probably have plenty of questions. I see a hand right up here, and we've got a mic right behind you to help amplify that.

Audience Member 1 (36:33):

Hi. I was wondering if anybody in the panel had a number in mind of what's the minimum number of employees that an employer would need to have where it becomes feasible to transition from fully insured to self-insured? And the reason I was asking is I had a conversation with a broker that told me they transitioned an employer that had 72 lives covered. They transitioned from fully insured to self-insured, and they've been averaging 1% increase per year in cost, whereas the insurance market maybe has been seven or 8% per year. And so I was wondering if you find that feasible, if such a small employer could, or what's the minimum number you have in mind?

Harrison Newman (37:16):

It depends on the state. So I'll start off and you can add on, but the biggest factor is it depends on the state. Certain states you need to have stop loss. You can't without stop loss insurance. In New York, for example, in order to get stop loss, you need to have a hundred employees on plan. In other states, there are states where you could buy down to five, to 15, or 16 employees, five or six, even certain states on the Oxford's All Savers plan, which is self-insured level funded. So the first question is, can you purchase stop-loss based on your state? So state by state, that's going to differ. Besides that, it's math.

Brad Kopcha (37:51):

Yeah, it's all that. We run a, and essentially we all believe in self-funding. You've heard of that, but when you go self-funded as an employer, there's risk involved. And just like Harrison said, you need a stop-loss policy. The stop-loss policy is a different purchase. You should be working with a broker who is experienced in the self-funded space. The program I'm affiliated with, the Varis program, we have employers as low as 25 contracts to as high as 9,000 contracts all on the Varis program. And essentially it's a matter of is it right for the group and are they being priced appropriately for the risk that they're bringing to the table? So 72 is a normal number. The average. We have over a thousand employers in Varis. The average group size is 109 contracts. And that's really the idea of taking employers together to the self-funded marketplace and twisting the purchasing dynamic in their favor.

(38:45):

So if you go to self-funded and you're by yourself with 72 contracts, the stop-loss market is not going to look at your plan with a lot of respect, and you're probably not going to get a good policy both on cost, but more importantly than cost is the risk that the stop-loss carriers are going to embed in that policy that you as an employer may not realize is in there. So that's why you really need to join, whether it's a captive or a consortium with other employers, turn it in your favor where you're getting a wholesale price on the stop-loss. The stop-loss policy that you're getting is best in class. All those risk protections are provided for you. So 72 is definitely where you can consider self-funding. Absolutely. However, you got to do it the right way.

Stephanie Koch (39:26):

I just wanted to make a comment so this goes back, we're...

Bruce Shutan (39:29):

We're running out of time too, so we'll make it quick.

Stephanie Koch (39:31):

Alright, so it's really about the broker relationship, the advisor broker you're working with. Make sure you're working with someone that actually understands the transition and they're looking out for your company's best interest, not what's in the best interest of their pocket and their profitability. The employer should come first.

Harrison Newman (39:48):

Just adding onto that. I know we are over time, but I'll talk very fast anyway. I do. Yeah, I'm from New York. That's how we do it. But when you're looking at that specifically to smaller groups, a lot of brokers sell self-insurance the same way they sell a fully insured policy. They're not. You have to understand what you're buying. Self-insurance is not an alternative to fully funded. You would talk about different contracts, stuff like no new laser, stuff like your runout claims, 12/15, 12/18, 12/24. Understand what you're purchasing. The smaller employers, I see a lot of times buy self-insured products. And then a lot of the smaller brokers sell self-insured products as opposed to self-insured concepts. When you're going self-insured, buy into the concept, and you need to make sure that you understand what you're buying. It is not a fully insured contract that just has more transparency and more options like some brokers like to sell it. You have to understand what you're purchasing, and that's going to be key, specifically as a smaller employer, because that can affect you more.

Bruce Shutan (40:42):

Let's put our hands together and thank the panel. They've been great. Hope you got a lot out of this.