Whiteboard Session: Risk Pool Management

Strategies to lower health plan costs, improve benefits and enhance your employee's health.

Transcription:

Dave Ross (00:08):

That's a voice for radio, is it not? That's like one of the people that works at EBN. I'm like, my God, did you hire a professional vocalist for that? That was absolutely perfect. Okay. Yeah, thank you. I'm not on the stage yet, but I will be on the stage quite shortly here. I understand that everybody's just getting back from lunch right now, so we'll probably have a few people trickling in talking to many of you so far this morning. It sounds like an enormous portion of the population really found the fund last night, shall we say? I get a kick out of this as I get into my background shortly. You'll understand. I do a lot of speaking across the country and my favorite part is the audiences because it's very, very predictable and I generally don't have as much fun in front of financial audiences just because they're boring, but in front of predominantly HR and I know what happens.

(01:02)

You're with me. Here's what happens. You guys have to be so perfect in your day lives because you can't rat out all the crazy stuff that you deal with. So you get to these events and what you do is you commiserate with each other and you're like, you can't believe what I had to deal with. I had to tell Tim to stop putting his salmon in the microwave and for Bob to start, stop putting his beer in the lactation fridge and then you like shots and champagne and everything falls apart from there and everybody has fun. So my name is Dave Ross. Yes, I'm the Director of Actuarial and underwriting services at Brown and Brown. We're the fifth largest broker consulting firm that you've never heard of is what we talk about dearly because we sell on the basis of a slightly different paradigm. We sell on the basis of education and outcomes that I'll reference right here versus selling on the basis of a name.

(01:51)

Curiously being the actuarial and underwriting director, I do absolutely zero actuarial science and I do absolutely zero underwriting of any kind. What I spend about 70% of my time doing is traveling the country doing this speaking. I am on a speaking circuit all the time, so whether it's in front of financial people, I do SHRM events, HRCI, EBN does fantastic events. We've been working with them for years and so they always just do a bang up job. It's awesome. And then we host our own events. I speak to about 30,000 people annually, so that's what I do. I am speaking now, what am I asked to speak about? It's not about what Brown and Brown does. Brown and Brown, as I told you, is simply a broker consulting firm. That's what we do, but the basis of what I'm talking about has nothing to do with me, Dave Ross being a consultant for you, perhaps a client of mine in telling you what you should be doing or not doing.

(02:45)

This entire discussion and all of my speaking across the country is based off of what I used to do. So prior to Brown and Brown, I worked at Blue Cross Blue Shield as an underwriting strategist, an underwriting strategist. My job as an underwriter strategist was to make sure that your cost for healthcare went up and that your medical trend went up. And by the way, they're very bright lights, but I teach an awful lot and I already just saw the faces that I'm typically looking for. Did I hear that properly? You're trying to get our cost up and our medical trend up. Yeah. Well, obviously who are my biggest competitors at Blue Cross United Sign, Aetna? Who do they all legally report to? Anybody? I'm a consummate teacher. I'm not going to answer easy questions for you. I will stay quiet longer than any of you who do.

(03:36)

Those entities report to? Wall Street. They all report to Wall Street. They have a legal fiduciary obligation to do what's right for their shareholders, not what's right for your health plan. They have an intent, as I did to get your cost up and to get your medical trend up because your cost in healthcare is my revenue. Welcome to the basis of why I'm asked to speak to roughly 30,000 people annually and the basis of why 40 plus minutes from now. You are going to walk out of here, I hope productively pissed off, but I can guarantee you that the number one thing you're going to feel is what 30,000 people feel annually hearing the message I'm about to give you, and you are going to be quite angry with what you're about to hear. What a lot of people say I do is whistleblowing. I actually speak in front of Congress and legislative bodies periodically.

(04:28)

I haven't done it in a number of years, but it's not fair to call it whistleblowing because whistleblowing suggests something illegal was going on and I know of nothing illegal going on, but I certainly know that we were doing many things that I would argue were questionable on the morality side and ethical side because simply we're trying to raise cost and sometimes that means manufacturing sickness. Now, I'm not going to go into much deal about detail about some of the sickening things that we did, all very legal. Instead, I'm going to take my precious time that I have here today and sadly give you about, I'm seeing an hour and a half of content in only 40 plus minutes, so I hope you have seat belts in those seats there because this is going to be a very bumpy ride as we get going. Does that sound fair as the backdrop?

(05:05)

Okay, good. So as I talk to you today, again, remember I am Dave Ross, the bad guy. I am Dave Ross, the strategist, trying to increase your cost and increase your medical trend. I'm Dave Ross of yesteryear. Last piece of buildup on this is I have some visors. I normally have 13, but somehow I think people thought that they were giveaways at the table and all of a sudden we ran out of them. They all say something different. I have one of my head, it says Finance, the important other hats say recruitment, retention, corporate culture, community, politics, ownership, unions, risk, behavior, morality, ethics, philosophy. What I don't have is a hat that says right or wrong, how arrogant would it be of me to stand up here and tell you what is right or wrong for your organization? Knowing absolutely nothing about these incredibly relevant hats, I would simply argue this.

(05:49)

If you're making a decision from the perspective of any of those hats absent of really understanding what's happening from here, financial or misinformed, from here, you're simply making a misinformed decision, not a right or wrong decision. So I'm not talking to you today about right or wrong, ever, ever, ever, ever. I'm simply talking to you about cost. Is that fair? Last piece of buildup is I am a consummate educator. It's a passion of mine. I'm a lucky dude. I get to do it every day of my life. In the world of education, we know that we learn in five different ways, orally, orally, visually writing it and reciting it, and it turns out that PowerPoint presentations are widely accepted in the education community as an abysmal way to teach you anything. It's a great way to puke a bunch of information out that you're not going to remember.

(06:32)

My goal is to actually teach you something, and it turns out the best way to do that from a behavioral perspective is the oldest way in the book. Grab a piece of chalk, step up to the cave wall and start drawing some stuff out. The value of that is simply that I can be your professional note taker. Today. There is going to be a session we have to clean up right after I'm off the stage here, but we have a booth, first booth as you walk in the door back there, and we are going to wheel these things right over there. So if you have questions, which probably many of you will, you know where to find us and we're going to be there for a while so we can follow up all kinds of questions over there. So that's why I do it from a whiteboard even in front of legislative bodies.

(07:06)

I'm always doing it from a whiteboard. So I think we have the basics of everything that I need to kind of get the ball rolling. Does everybody understand the perspective that I'm coming from bad guy, the reason I have the hats so that you don't scold me for talking to you about something and you're like, what about recruitment and retention culture that matters too? I agree. I'm just not talking about it and hopefully you understand the context of why I'm going to do everything from a whiteboard. With that in mind, let's go ahead and get started on what I expect to be, again, a quite infuriating discussion perhaps for you guys. So as a strategist for Blues United, Cigna, Aetna, what I care about is your decision-making. You are the plan fiduciary for your employees. You speak on behalf of them. The fiduciary status is one of the highest statuses in the courts of this country.

(07:50)

You're speaking on behalf of people who cannot speak for themselves. You decide who you're with, how many plans, how many tiers, what kind of disease management, case management, what networks do you offer? High deductible do you not? Do you kick your spouses off because he hates spouses? Do you not? What do you dictate everything your end user is going to experience? So if I'm going to try to raise your cost and raise your medical trend, I need to impact your decision making. I could care less about your employees right now. They are way after the choices that you force upon them. I believe that you make your decisions predominantly off of three variables. If I can have an impact on those variables, I can have an impact on your decision making. The first variable is that you will ask your broker to bring in the benchmarks.

(08:32)

The benchmarks are the average of what every other employer in the marketplace is doing. So you look at that as a litmus test for sanity. As long as we're reasonably close to what the benchmarks are telling us, we can't be that far off the mark. So broker, make sure you are bringing us the benchmarks every single year so that we can check that box that we're not too far away from everybody else. If I blues united, Cigna, Aetna can have some control over the benchmark, I can have some control over your decision making. You are going to be pissed when I get to this section right number here. This one, I hope you detect the cynicism in my voice is that you'll frequently come right back to me. The industry, if I give you you and your broker a 10 or a 20% increase to your renewal, you say that, let me just pick one.

(09:19)

Let's just go with a nice 10%. If I give you a 10% renewal increase, you and your broker say, well, this sucks. That is way more than what our revenues and profits are going up. That's what we call a healthcare crisis, that we have these costs going up so severely. What will you and your broker be very inclined to do that in behavioral science? You're going to give me Blues United, something called assigned authority. You know that I have hundreds of data monkeys on staff. I am smarter than you in this thing called healthcare. So you are very likely to say, Hey, blues United, Cigna, do you have any solutions for us on this problem that we have? The problem again is 10%, but pause for a moment. To whom is that 10% a problem? Is that a problem to you and your broker or is that a problem to me?

(10:08)

I will not answer easy questions. There's almost a hundred of you in here. If I'm a Ford dealership and I have a Ford on my lot and it says $25,000, would I rather sell it to you for 25,000 or 35,000 or 40 if you're moronic enough to pay it or 50,000, I'm a business, I would much rather sell it to you at a higher number, so I'll ask my question again. To whom is that 10% increase a problem to you or to me? Blues United Sign, Aetna. It is to you and yet you're going to come back to me an entity that reports to Wall Street and say, Hey, do you have any solutions for us on how to fix this dilemma? Yes, thank you. Literally, on behalf of my former industry, God bless you. Thank you. Please continue to ask me what to do about that problem.

(11:01)

Do you detect my cynicism? I'm delighted to tell you if you don't ask me what to do about that problem, who do you typically ask your broker consultant? Did your broker consultant develop anything that the industry is giving you? Did they develop narrow networks? Did they develop the types of hospital care systems? Did they develop case management, disease management, high deductibles carve outs? Did they develop anything that you are using to mitigate the effects of trend? No, obviously not. So where does your broker first learn about the value of the products that they're schlepping on you? They learned it from me one way or the other. You are getting your information from the very entity that says that 10% increase that you call a problem is not a problem. I would much rather it be 20% or 30% or 40. Please continue to ask me or your broker what to do about that problem.

(11:51)

The one that's going to be the most infuriating about this is you will never make a decision that doesn't pass your common sense. I'm going to start by failing your common sense. 70% of my time is on the road. I already told you that doing these events, 30% of my time is actually working on some of Brown and Brown's largest, most high profile groups simply because of my background. Like our sweet spot for clients is between about 102,000 employees, but I happen to work on companies like McDonald's and Comcast and Bloomberg and Royal Bank of Canada, big, big, big, big groups. Here is a 10 year lookback of a 620,000 employee cohort that I work on. I'm emphasizing that huge number because it's statistically credible. It's statistically I didn't mention I teach statistics in e econometrics at the University of Minnesota where I'm from. Okay, so this is statistical credibility is why I'm going after that number.

(12:39)

What has that cohort been able to achieve over for trend increases over the last 10 years? Well, trend about 10 years ago is about 12 point a 5%. Today it's about 6.5% rising rapidly. 10 is about the average. It's been over the last decade, so in the face of 10% average trend, what is this cohort achieving negative 3.2% trend? That's an immediate failure of common sense to everybody I present to. That's not what you are experiencing. Just cost going down, down, down, down, down, down, down, down, down for a decade straight. You're not getting that. My employers are. Let's go the next step. If trend average is 10%, but my employers are getting negative 3.2, there's a massive divergence going on. That divergence is such to this point that this cohort's cost for healthcare is less than half your cost for healthcare. Now, when I say your less than half the benchmark, there are enough of you in this room that guess what you would collectively be if we analyzed all of your data, you would be the benchmark and my employer's price tags is less than half your price tags for healthcare.

(13:45)

Again, this is really rubbing against my common sense because we're not experiencing that, but let's really put a nail in the coffin of common sense. What is the plan design that is achieving these outcomes? The average plan design is a $10 office visit copay, it's a $100 deductible. It's free drugs of any kind. It is $0 telehealth, it is $0 mental health. It is the richest plan design that any of you have seen in decades have I failed? The common sense of effectively everybody in this room, how do you have the richest plan design you've seen in decades and have those kind of price tags that are getting smaller and smaller and smaller? That doesn't make any sense according to your entire career. Let me squelch that. Not making sense as quickly and as efficiently as I possibly can. I need to rewind effectively maybe for some of you 20 or 30 years of nonsense being thrown at you by these pieces up here.

(14:47)

If this is true and it is, what relationship is there between cost and plan design? Well, there's none. How do you offer the richest plan ever at the lowest price tag if there's actually a connection between benefits and cost? Yet you are all conditioned by these things to believe that there is a relationship between plan, design and cost. What do I mean by conditioned? If I give you a 10% renewal increase and you say that's not adequate, what do all of you know that these things are going to tell you to do to the deductible in order to get that premium down? If you raise the deductible, the underwriter will bring the premium down. Boom, case point, relationship between cost and plan. Deductibles go up, costs go down, copays go up, costs go down. Recruitment retention gets worse, culture gets worse, but at least you satisfied that problem of cost by making the deductibles copays in every one of the plan designs get worse.

(15:50)

That's what you believe. You believe plan design has something to do with cost? It absolutely does not. If you take one thing from today, I hope it's this, okay? I'm going to use a piece of information to prove this to you that you already know and then we're going to apply 30 seconds of critical thinking. By the way, as a consummate educator, what am I infuriated about? Guess what? We don't teach our kids in our schools to these days. There's no such thing as teaching critical thinking anymore. We're going to force it upon ourselves. I'm going to give you a piece of data you already know. All of you know it, and then we're going to apply 30 seconds of critical thinking and completely wipe out decades of something that is wrong that all of you believe. What we're going to talk about is the Pareto principle.

(16:29)

In my statistics course, it's taught as an 80 20 rule. Here's how we think of it. 80% of the cost of healthcare is incurred by 20% of the people. That is the pareto principle. Stop saying that if you still are, it hasn't been true in over a decade. Let me give you the new medical pharmaceutical Pareto principle. It is measured. The measurement I'm going to give you is done by the Society of Actuaries every single year. I like the Society of Actuaries because they are independent. They're not trying to screw you. You should like the society of actuaries because they're independent. Here's exactly what they are measuring and how they are measuring it. They're saying if you look at all of the membership inside of employer-sponsored health plans across this entire country, what percentage of the people belly buttons actually exceed the maximum out of pocket?

(17:21)

Exceed what? Somebody say it back to me. Okay, because I'm going to give you a test question in 30 seconds and I hope you remember 30 seconds from now the answer that I just gave you. Okay, what did they say? Exceed maximum out of pocket. Okay, so if we look at this, it's approximately 8.2% of membership exceeds the maximum out of pocket. I round it to 10. The next question they say is, of that incredibly small population, how many dollars do they account for in their respective health plans? 88% of dollars. Okay? If you want to be much more accurate in your use of the Pareto principle in this industry, stop saying 80 20 and start saying 90 10. For the majority of you out there, roughly 90% of your cost is coming from approximately 10% of the population. Now, will that be true for any of you?

(18:07)

No. None of you will be exactly 90 10, but what will 100% of you adhere to You will adhere to the principle of the Pareto principle. Every one of you knows this. You know that it is a handful of high cost claimants that are driving the vast, vast majority of your cost. You see that data it's given to you by everybody. Maybe some of you are still 80 20. Maybe some of you are 90 10. I don't know, but I know that every one of you, the majority of your cost is coming from a wincingly small population. Now, what did every single one of these people exceed inside of their plan in order to make it into that bucket?

(18:48)

Golly, you guys just did so much better than most everybody. I prepped you for the test and you nailed it. Every one of these people exceeded the maximum out of pocket, so what separates this itty bitty little insignificant bucket of cost from this gigantic bucket of cost in terms of plan design, the maximum out of pocket is what divides these two buckets from each other. I need you to use your logic, reason, deduction and common sense skills, they will not fail you. Is this a hundred dollars deductible above or below the maximum out of pocket in that plan below? Does anybody disagree with that? Okay, good. These are not trick questions. By the way. There's some trick ones coming in later, but I'm pretty good at telling when they're coming. If that was a $1,000 deductible, would that by definition be above or below the maximum out of pocket in that plan?

(19:43)

This last one is also not a trick question. If this was a $6,000 deductible health plan by definition, would that be above or below the maximum out of pocket in that plan? Is there any deductible? Is there any copay? Is there any element of co-insurance? Is there any piece of plan design whatsoever that can exceed the maximum out of pocket? If it could, we'd have to call it the nearly maximum out of pocket. Nothing can exceed it, but 90% of cost does in the teaching world. You take a pause to let a point solidify in your mind. If you take anything away from today, let it be that you have all believed for a very long period of time. That plan design has something to do with cost. How can that be true? 100% of plan design is by definition below the maximum out of pocket, but 90% of plan cost comes from above it.

(20:45)

Plan design is statistically and actuarily irrelevant. It has absolutely no basis on the relationship between what you offer and the price tag that you offer at none. You bit hook, line and sinker into a ridiculous story because clearly I've been trying to convince you of that for a very long time. Blues United, Cigna, Aetna, by the way, part of my background is I literally put one of the first high deductible health plans in this entire country, January 1st, 2001 company called Ridgeview Medical Center in Waconia, Minnesota, 15 minutes from my house. Then I spent two years helping our lobbying efforts in Washington to get HSA law signed in December of 2003. I have an awful lot of experience in terms of how and why we started shoveling you guys towards high deductible health plans. Again, try to detect my cynicism here. I have a six hour seminar on high deductible health plans.

(21:31)

There's 17 reasons why the industry started shoveling them at you. Do you guys want to guess at this point just based off of my sentiment, how many of those are to your advantage or your employees? Zero, and if you're a person that believes you're getting a tax advantage in your HSA think again, you're getting a gross tax savings. You're getting a net tax cost in that HSA for something that I can do very, very legally. Okay? Now, this is not a high deductible health plan discussion, but I do need to explain to you how we convince 300 plus million Americans to turn towards something that is objectively insane, and so high deductibles is accepting something that we just disproved. That plan design has something to do with cost. You should all raise your deductibles, sour your recruitment, retention, and corporate culture in order to reduce the cost.

(22:21)

We know that can't be true. If that's not true, then how did we convince you of it? We convinced you of it with a very good story around consumerism. Here's what the story went like. This is a broken environment that we're in a broken system. Consumers of healthcare don't evaluate the relationship between the cost and the quality of healthcare. That's the economic definition of a broken marketplace. So here's a solution coming to you from your buddy, your friend, the industry. Did you detect my sarcasm? Okay. How about we raise deductibles materially. In fact, give people some money in the form of an HRA in the early days or eventually an HSA, but forget about that. It's their money. So really what I care about is that the high deductible puts more skin into the game for the consumer. If the consumer of healthcare has more skin in the game, you should presumably expect them to be a better what of healthcare.

(23:09)

I'm looking for a word that has a UAT and L and a Z in it. Thank you. You would expect them to be a better utilizer of healthcare. Utilization is the second form of consumer behavior. It happens distinctly after the first form of consumer behavior that I haven't even identified yet. I will say it again, raise a sorry yet we'll see this. This is all around consumerism. You're going to hit on a point of consumerism that I won't identify until we get right here, so about five minutes, we'll identify the first form of consumer behavior. Let's solidify again where this story came from. Broken marketplace. Let's raise the cost or the price tag to the consumer. Let's give the consumer some tools to be a better consumer of healthcare. CDHP, consumer directed health plan and let's let that be the basis by which our consumers become better utilizers of healthcare.

(24:04)

Everybody bought into it. Everybody bought into it. By the way, what's the next thing we have to do? That's the story. It makes sense. Now, I have to substantiate the story. How do I substantiate it? I better give you some good examples. If I literally standing right here, draw five mile radius from where I'm standing, I guarantee you that there will be an MRI somewhere in that radius that's 500 bucks. Also, in that same radius will be an MRI. That's $5,000. You're the consumer of healthcare. What would you rather spend of your own money? $500 or $5,000 or 500 or 5,000? You would much rather spend 500. Boom. I just substantiated the story. Makes even more sense except for a big problem. Does that $4,500 difference in cost even come close to hitting a maximum out of pocket in any plan these days? Every example I give you to substantiate the idea of better consumerism, all of them are below the maximum out of pocket way below.

(25:06)

It doesn't matter. Instead, let's completely obliterate this notion of being effective, something that you have all bit into for 22 years now because you all have high deductibles. You believed that story. Let's apply what's already on the board plus about 30 more seconds of critical thinking to wipe out that two decade long notion that utilization has any relevance at all. 90% of cost comes from 10% of people. Who are those people? Number one is cancer. If I have cancer and I have a $4,000 maximum out of pocket and I go to Mayo, certainly the most expensive healthcare place in the world, but also one of the best, if I go to Mayo with my cancer and I have a 4,000 maximum out of of pocket, what am I guaranteed to pay out of my pocket? $4,000. If I go to a dump of a hospital, a dump that advertises on the front door, we reuse syringes and band-aids and there's blood droplets going to every room.

(26:04)

If I take my cancer to that dump of a hospital, what am I also going to pay out of my pocket? Please help me understand how you're going to get better utilization from the people that drive 90% of cost where they pay 4,000, whether they go to the best or 4,000, whether they go to the worst. This is really painfully simple stuff. Number two is hemophiliacs. People who don't clot when they bleed. Number three is pregnancies driven by premature births. That's not spaghetti sauce. Number four is hearts. Number five is transplants. Number six is ms. Number seven is congenital deformities. I can go to the 20th position. Number 15 is accidents. They subrogate against work comp auto, so eject them from this discussion. What is true about the remaining 19 high cost claimants that drive 99.7% of that bucket? What do every single one of them know?

(26:59)

They are going to pay for healthcare regardless of where they utilize, they're going to pay the maximum out of pocket. This is an absolutely ridiculous idea brought to you by us, the industry 22 years ago that 300 plus million Americans have bought into solidly. Thank you. You did wonderful things to my profits and margins in ways that take six hours to talk about. I need to identify this form of consumer behavior in order to get you there. Let's give you some baseline trend. Overall trend. Remember, we're using 10%. That's what it's been over the last decade ish. Is it 10% everywhere, office, inpatient, outpatient, lab x-ray, chiro? No. It varies. This is the weighted average across the dollars that will flow through all of that in office. It's four outpatient historically 12 inpatient 18 specialty RX 17. Do you notice that I left a hole right there. There's a location that I as a strategist care about that nobody in this industry has ever talked to you about. Does that concern you? It should because it's one of the most important locations from my perspective as a strategist and nobody has ever talked to you about it ever. You're going to think I'm cracking a joke. I promise you I am not. If I do not go to the doctor this year and I do not go to the doctor next year, if I go nowhere, what is my medical trend?

(28:16)

That is not a trick question. What is zero divided by zero? Zero. It's actually indeterminate, but we will accept zero. Okay, so absolutely. I'm not leaving you hanging well, I am. We'll get back to it. What do I have to explain in front of legislative entities all the time? If you look at trend in this country, in my statistics course, we teach about a lot of different distributions. Statistics 1 0 1 is entirely about a normal distribution, a bell curve, but that's not the only type of distribution. If you look at every single epidemiological database in this entire company, by the way, epidemiology got me 240 points on words with friends once. If you look at every healthcare database in this entire country, this is what medical trend looks like in this country. Now, that gives you an arithmetic average, so when I'm referencing 10%, yeah, it's mathematically, visually, it's right there, but in a bimodal distribution, what does that mean?

(29:08)

That means that that's what most employers don't get. What you get are two remarkably different outcomes. You get employers that get materially more, 12, 15, 20% increases unless they do what to their copays, deductibles and co-insurance, jack them up, but then you also get employers that achieve materially less year after year after year after year. I'm guessing everybody in this room is probably on this side of the equation. Yet my employers are on this side of the equation. Would you like to learn how to shift financial hat firmly on your head please? Here's you the employer, okay? Here's the industry. Me Blue Cross, the TPA, my network and the provider of healthcare, okay? Here's the two variables that I care about as a strategist. One is the size of the population that you insure and the other is the relative health of the population that you insure. Let's start with size and let's start with you the employer. I promise you this is not a trick question. What would you, the employer rather have a small or a large population if you only care about cost?

(30:07)

Let me ask the question differently. I intentionally asked the question to elicit two different responses and I got two different responses. Some of you said small, some of you said large. I need to try to teach Socratically. I can't tell you what to think. I need you to come to your own conclusions or we're going to be apart from each other, so let me ask the exact same question somewhat differently in order to see if we can all get on the same page. What would cost any of your health plans less? Zero people or anything more than zero people, so what would you rather have if you only cared about cost? Smaller or larger? Smaller would obviously cost you less. If any of you get this wrong, by the way, quit. Hey, just retire. You don't deserve to be in this industry. I mean, put on any hat now that we got high stakes. Put on any hat that you want and what would you rather have in terms of health, healthy or violently sick.

(31:01)

That was gutsy to answer. That was really high stake stuff right there, right? Obviously you would prefer to have a healthy population, obviously. Now let's move to your butt. The industry. Here's me Blue Cross. What do I want? Small, large or excruciatingly? Huge. Huge was not one of the choices. Excruciatingly huge. Yes, profit. My world is called per adjudication unit profit. Every time I adjudicated a claim, I attach a piece of profit to it. I want a very large population so I can make more money off of you. Does this doctor want more patients or no patients walking through the front door more? What does my blue card network need to prove that they can bring through the front door of that doctor in order to secure the deepest discount? More or less patients? Everybody on this side of the equation wants the exact opposite of you.

(31:45)

Move to the truly disgusting piece of this. You want healthy, what do I the TPA want? It's your risk. I don't care if it's fully insured or self-insured if it's fully insured, here's what you don't like fully insured. You have cashflow volatility. My underwriter prices you in the middle of it. If your cashflow volatility is up here, does my idiot underwriter price you down here? No. They price you as a function of whatever your risk is. I don't care if you're fully insured or self-insured. It is your risk. It is not my risk. Okay, so what do I want? Sick or healthy? Violently sick. What does the doctor make more money on these conditions or 20 year olds that don't even come through the front door sick? What does the network need to prove that they can bring through the front door of the doctor sickness?

(32:26)

Exactly what you don't want. We have a problem. I promised you this was going to become a problem when we got here. We now have a problem. 74% of employers in this country purchased a fully insured product who defines every inch of that fully insured product? The copays, the deductibles, the tier structures, the premiums, the offsets, the withholds, the rebates. Everything I do that's my fully insured products don't have ERISA preemption. They're bound by state laws and regulations. I have to ask the state of California for permission to sell the, it's called filing of my product. Am I ever going to ask for permission to sell something that I do not want to sell you? I will not do it. If you are an employer purchasing a fully insured product, you are purchasing a product that is designed to attract very large and very sick populations, and that is 74% of employers.

(33:19)

The moment that 74% of employers are purchasing something that is designed to do this, what do 74% of the benchmarks tell everybody exactly what not to do? I have 74% direct control of the benchmark. I have a hundred percent indirect control because guess what you self-insured employers use in your decision making the benchmark, you are going to gravitate to the mean that I create through the filing of my fully insured products that three quarters of employers buy. If you are benchmarked in anything regarding healthcare, all I can say is thank you. You are doing exactly what the strategist wants you to be doing. Exactly. Okay, let's keep moving forward. Let's say that you the employer, are faced with a price tag and you need to divide that cost of healthcare between your cost, you the employer and your employee and your target is that you want to pick up 60% of the price and you're going to send to the employee the remaining 40%.

(34:20)

Perfect. Now, what would you rather spend 60% of 5 million or 10 million bucks? Okay, so you just told me in your answer there that 60 40 is not what's relevant. What's relevant is that whether this is 60, 40, 70 30, whatever it is, how do I make the entire distribution off of the lowest possible number in order to do that? I can completely eject one of these buckets from the equation and never talk about it ever again. Think about it this way. By the way, when my sales team and account management team at Blue Cross comes out with that 10% renewal, they're probably going to offer you an explanation of why you got it. Does it sound like this? There's three different options I'm going to give you. Here's why you got a 10% increase, okay, Ted, he's one of your custodial people. He had knee surgery last year and had to pay a $2,000 deductible, so because Ted had to pay a deductible, your entire plan's going up 10%.

(35:08)

You've never heard that? Let's try this one. Okay? Susan, she's one of your most accomplished salespeople. She chooses family coverage on your richest plan and you take 450 bucks a month out of her paycheck in order to do that, so because Susan pays a contribution, your entire plan is going up by 10%. Have you ever heard that? Here's your final option. Does this sound more familiar? I'm sorry about this 10% increase, but the reason you're getting it is look at all the high claimants the plan had to pay for. Look at the inpatient claims. The plan has to pay for look at the drugs, the plan, the plan, the plan, the plan. Does that sound more familiar? The plan does not pay one red cent on healthcare, not a single penny until every single one of its consumers has made a boatload of pre utilization choices.

(35:47)

Choices are the only form of consumer behavior that I as a strategist care about. The only one because utilization is completely and utterly irrelevant. There are 47 different variables that impact the pre utilization choices of consumers and most of you are screwing up on all 47 of those in 10 minutes. We're going to go through three of those 47 and illustrate some of the lowest hanging fruit opportunities where the industry have been manipulating you into making decisions around your health plan that affect the pre utilization choices. I can't even see who's closest up here that I can be married to. Is it? What is your name? Yeah, Kendra. Kendra. I should know that because Kendra, you and I are married and all these people are children. Now, Kendra does not work for Brown and Brown. I do work for Brown and Brown. We're like 92% of American households where we both work, so that's the vast majority, so now all of a sudden she and I immediately have some choices.

(36:46)

We can be a family on her employer's plan. We could be a family on my employer's plan. Her employer offers a high deductible health plan with an HSA. My employer doesn't. We have a cool HMO product. Her employer doesn't. Their employer has a spousal surcharge. My employer doesn't. My employer has a wellness initiative that I like. Her employer doesn't. One of our family members is a high claimant. Her employer has a $4,000 maximum out of pocket. My employer has an $8,000 maximum out of pocket. Are you seeing some of the quandaries and how Kendra and I are going to, Kendra are going to make our decisions at the kitchen table while all of you are out on your big wheels? Yeah. Let's start looking at what those choices look like. I could care less. If you want to find out how do I spend 60% of 5 million versus 60% of 10 million, then stop looking at your plan data.

(37:31)

Your plan data is a function of the risk pool that is incurring those claims. What you want to do is to start to change and modify the risk pool incurring the claims. That means you need to change the pre utilization behaviors of these people. If I break apart their 40% cost, here is the benchmark. Did you hear the word I said? Here's what you are all doing on average, which is exactly what the strategist wants you to be doing. Roughly 70% of that 40 is what you take from their paycheck. The contribution, the remaining 30% is copays, deductibles and co-insurance. The plan design value, what is it equal to? It's equal to what do you get divided by? What does you cost you? If I give you a $300,000 Ferrari for 10,000 bucks, is that a good or a bad deal? Great deal. You didn't do any math.

(38:25)

You know it well, you did do math. If I give you a 77 Ford Fiesta that backfires three times every time you turn it off for $80,000, did I give you a good or a bad deal? Why is an after holiday sale great because it's the same stuff for less money. Welcome to how we buy houses, cars, t-shirts. I'm Lululemon, top to bottom, great value. Okay, what do we get in healthcare? We get copays, deductibles and coinsurance. We get a plan. You decide that what does it cost us a contribution. You are in charge of that and here's the benchmark. Let me be the 90% of people that are dirt cheap. If I'm a dirt cheap individual, how do I look at this benchmark That sucks. That's the word they would use. Look at how many dollars you're taking out of my paycheck for something I don't even expect to use If I have any other choice available to me, I have a propensity to choose it.

(39:18)

If I choose to leave your health plan because you are overcharging me in the only variable I care about, what would happen to your net cost? When I take no claims off of the plan but I take off all of my contribution, do you go down by 3%? When that healthy person does that, welcome to a 15-20% increase, you violently leap onto a higher cost curve. You could continue down a negative 3% trend curve except for problem number two. Where does that healthy person go to the doctor? Nowhere or anywhere but nowhere. You just kicked off 0% trend because you're following the benchmark when that 0% trend person leaves your plan. I just got both of the things I wanted. I increased your cost and I increased your medical trend. You can never get 3.2% ever again. You just ejected the only population that makes that possible.

(40:06)

Let's do a real life analysis for every single one of you in this room right now. This is an analysis that no member of the industry has ever done on your behalf and I'm going to do it for all of you right now. It is an analysis of your active versus your waiver population. Waivers are people who choose to not take your second highest form of compensation. By the way, what does that do for your recruitment and retention when they're telling you in no uncertain terms, your plan sucks so severely that I'm going to actively not take your second highest form of compensation. You got a problem with your recruitment retention. Let's evaluate that group. Here's the eligible population. Here's the active the people that make the choice to take on the plan and here's the waiver population. I am not talking about your active population because that's this bucket that has piles of data attached to it and I don't need it and I don't want it eject it.

(40:58)

I'm going to talk about this waiver population that nobody has ever talked to you about before. There's only seven places they can possibly be. Seven and only seven have you picked up on the color coding yet? Red is very expensive. Green is dirt cheap. Blue is irrelevant because of size. First place they can be is military active. Tricare retired VA system won't be many scratched out due to size. They can be permanently disabled. Therefore qualify for an elect. Medicare won't be anybody. Probably scratch it out due to size. They can make so little money that they qualify for an elect. Medicaid probably won't be many. Scratch it out due to size. I can get rid of every single color except for green. I can be number four, somebody who takes absolutely nothing. I am uninsured. What is the only variable I was looking at when I chose to be uninsured?

(41:41)

A plan that I'm not going to use or this godawful paycheck number that you stuck on me because it's the benchmark. If you have anybody that's making this choice, what is unquestionably true about your net cost? Is it higher or lower than it could be? It's higher. What's unquestionably true about your net trend when you lost that trend? It's higher. I can be at a parent's plan. What's the average risk profile of somebody less than 26 years of age? Dirt cheap. What was the only variable they were looking at when they made their choice? A plan they're not going to use or a contribution that you're sticking to them on because it's the benchmark. You see where I'm going? They can be in a public exchange, but a public exchange can legally age rate. Why would somebody choose a public exchange when you're willing to heavily subsidize your plan?

(42:23)

Very easy answer because the exchange is full premium is less than your monthly contribution. Who does that apply to? Any male in their twenties? Who do you want on your plan? Every male in their twenties. If you have anybody making this choice, you're unquestionably on a higher cost curve. Unquestionably, and the last one is spouse and I realize that most of you believe spouses suck because you have been given data. That data came from a bucket that I am not talking about, but let me show you why you think spouses suck and how I manipulated your decisions. Employees cost about 4,800 bucks a year. Spouses cost 5,200 dependent children about 1200. Perfect. There you go. Data doesn't lie. Spouses suck. Get them off your plan. Let's put in spousal surcharges. Let's put in spousal exclusions. Get those bastards off the plan. I don't care about culture, family friendly, none of that.

(43:15)

Get rid of them. I hate them. Spouses were awful. What wasn't told to you? Are these spouses married or unmarried? Are these employees married or unmarried? You don't know. You don't know because just like Kendra and I could do, we could choose single coverage and send the other parents and all the kids to that employer's plan. These employees can be either unwed or they can be wed. I need to separate those two. If the total is 4,800 bucks on this age graph, where are my unwed employees? Younger or older? Younger. Thank you. About 1800 bucks. The two of them combined are 4,800. I'm just going to skip them. Algebra and give it to you straight $6,800, so if I want to do an apples to apples comparison, a wed employee is comparable to a wed spouse. Who should the average of you be kicking off your plan long before you kick off your spouses?

(44:11)

If you truly cared about finance, you should kick off your own employees. I don't know what that would do to your culture hat over there, but it would make a lot more financial sense, but here's why. This is an utterly ridiculous notion in the first place. Please don't volunteer if you are in this situation because where can these employees be legally anywhere between, let's call 18 and retirement employees have an average age in this country. It's 37.2 years of age. Very measurably. Go out to the Bureau of Labor Statistics website and what are 98.6% of us going to be actively employed adults before we're married? What does that mean? It's true for spouses. They start later, they end in the same spot. Of course, spouses cost more. They're 45 years of age. Correct me if I'm wrong, but is age not a remarkably discriminatory classification?

(44:57)

Congratulations, those of you that bit hook, line and sinker into this ridiculousness up here. You are blatantly and overtly discriminating against the agent and you're doing it in a way that did absolutely nothing for you because where did this data come from? The active population of the waiver. What was the bucket I was talking about? Active or waiver? I don't even need any data. I don't have any data. Let's use logic, reason, deduction, common sense. If I have stage three or stage four cancer, I don't work. I don't have the choice to leave the plan. If I have hemophilia, I guess when my doctors tell me I probably shouldn't do work, I don't have the choice to leave the plan. If I have a heart condition, I'm getting a zipper in my chest. I can't leave the plan if I'm struggling on a transplant waiting list, if I have MS, if I have the conditions that drive 90% of cost, it dis allows me the choice to leave your plan when it disallows me the choice to leave your plan.

(45:46)

What does that mean logically deductively, critical thinkingly, what must be the spouse that is actively choosing to leave your plan? The very spouse that you want on your plan, an incredibly healthy spouse. What do a hundred percent of you want in your risk pool today that a hundred percent of you do not have or your entire waiver population and what is the only mechanism? What is the only variable that population was looking at when they made their choice a contribution that you were all benchmarked at and that's why they left. I'm actually at my time. I don't these people over here. I'm going to tell you how this goes. This one, we have a big break after this. We have to clear these off and then we have a booth right over here. We're going to wheel those over to the booth and we can continue on with whatever questions and we can actually continue on with more of this. This only takes about two minutes to go through. That would take about five minutes to go through, but let's open it back up to our fabulous hosts and sponsors here and what do you want to do on timing? Yeah, we can do questions right here as well if you'd like.

(46:50)

Yeah, please. Absolutely. Yeah, you bet. I know that somebody was saying that they want to be able to tidy up the stage here, but honestly it's up to you, the host. I mean, we can go five more minutes and I can certainly crush this one and really piss people off.

(47:13)

Go five more. Okay, we'll do it and then honestly guys, we got a big break here and I'm delighted to go as long as you want me to go. I have 42 hours of material and all of it will piss you off and so we'll be right around the come and I can start boozing later and then the stuff really gets fun. Okay, so let me give you this one very quickly because I said I was going to give you three variables that all of you are using that is worsening the outcomes of your plans from a risk pool perspective, the choices that people make, I've only given you one so far, that one right there, the member burden and the impact of paycheck. By you being benchmarked, 96% of you offer more than one health plan. What does that mean? Offering more than one health plan is it? Is the benchmark? Does anybody want to deduce at this point how many plan designs these employers offer?

(48:05)

One, by the way, if that's the plan design you're offering at this price tag, what's the point of offering any other plan? But I'm simply going to say it this way and then I'll backfill with the five minute explanation. There is no way for you to offer more than one health plan and win. It cannot be done. Your only opportunity in offering more than one health plan is either to lose or to lose violently. Most of you are the latter. You are losing violently by offering more than one health plan and let me illustrate why. Let's say you're offering a $3,000 deductible, HSA and you're offering a rich copay plan. In fact, that's the plan that you're offering, so you're offering an insanely rich copay plan and a godawful high deductible health plan Over here. An underwriter from Blues United Cigna is going to give you some rates.

(48:54)

Let's say that the price tag that they charge over here is $700 and the price tag they're going to charge over here is $1,000. Okay, perfect. That is a 30% disparity in cost. Now, the underwriter will know, and maybe some of you are familiar with the basis and the idea behind actuarial values. Actuarial values make all plans virtually on top of each other. Remember, they have to be. There's no actuarial difference between any plan designs whatsoever. It's incredibly insignificant, but let's pick a wild disparity and let's say that the relative richness of these benefits, that's the actuarial value of this, divided by the actuarial value of that. Let's say the underwriter actuary knows that this plan is actually worth 10% less than that plan. That would be an absurdly huge number, but let's just use it. If the underwriter knows that there's a 10% disparity, then why are they pricing it 30% less because of these?

(49:52)

Which one of these two plan designs will a hundred percent of your price less to your employees? A hundred percent of you be honest would charge which one of those plans would you charge a lower contribution on? Obviously the HSA, obviously, you desperately want to get people to move down here so that you can save money. You'll charge a lower contribution, you'll seed the HSA account. You'll give people tools and say, for the love of God people, look at how rich we're making this HSA for you. Please get down there. It's for your benefit and ours. That can't be true. You are the insurer. They are the insured. Does insurance print money or burn money? If the insured inherently wins, what must be the outcome for you? The insurer? They have to lose. Now, where is the failure of this? It's this entire system over here.

(50:53)

All of that is failing you because let's Korea tell you why the underwriter price is at at 700 and this is a thousand. Here's your risk pool generally speaking, 20 year old, 30, 40, 50, 60 year old. Here's the 10% of your population that drives 90% of your cost. Here's the 90% of your population that drives only 10% of cost. You correctly told me that you would price this less, way less. Let's in fact say that you're going to price this 50 bucks and you're going to price this at 200 bucks. According to your brokers first grade mathematics, 1000 minus 200 means $800 net cost to the employer. 700 minus 50 means a net cost is 650 to you to the employer. There you go. Numbers don't lie. Yeah, they do. That's it though. That's the numbers you've seen. That's what you and your broker and your actuaries have shown you.

(51:43)

So for the love of God, let's get people down there. You are going to win. That cannot be true. Why did the underwriter price this at 700 bucks? Because the moment that this is less, $1 less, where are your 21-year-old males going to choose their coverage? They're going to choose it. They're going to choose it. Now, if you make it even more than a dollar less, you're going to start to get these people. Make it 50 bucks. You're going to get these people, make it a hundred bucks less. You're going to divide your risk pool. Let's say that you divide it somewhere here. Why did the underwriter tell you that was 700 bucks? Because plans don't have loss ratios. You know that there is no statistical actuarial relationship between plan design and cost none. You know that because plan design is all below the maximum out of pocket, 90% of cost is from above it, and so clearly there's no difference in price tag from the plans.

(52:42)

Why is this 700? Look who's in it. Why is this 1000? Look who's in it. Are you with me? When you create an incentive for people to move from this plan to this plan, who are the first to move the most expensive? They're going to get clobbered and cost. No. The only people that will move first are the next healthiest. When this meany greeny population moves down into this plan, you have kicked yourself nine times. I will go through four of them and we will be done. Well done here. Boozing and fun over there. Okay, so here's kick number one.

(53:19)

You believe the price tag is 700. That's what the underwriter told you was it was $700 price tag, but who is it? 700 for this population, this incoming population. You just change the purchasing behavior when this population comes in. Quick question for you. Are they better or worse health than the ones that were already there? They are worse health. If this population costs 700 than what is wrong with that number? When worse health comes into that pool, it has to go up. This is massively underfunded. You're underfunded under contribution under Cobra Premium. Welcome to a 20 or 30% increase in that plan. That's kick number one. Kick number two, why was this a thousand dollars? Look who was in it. You just created a new behavior. Did that behavior send out the worst blood or the best blood when the best blood leaves? What was wrong with this number?

(54:20)

It's too low. You're underfunded. You're under contribution, you're under COBRA premiums. You're going to have a 15, 20, 30% increase in that plan. That's kick number two. Kick number three, these greenies cost nothing when they're over here incurring no claims and they move over here and continue to incur no claims. What do you save on claims? Nothing. But what did it cost you to save? Nothing. A free $150 corporate subsidy plus whatever you put into the HSA. Just flush it down the drain. You got absolutely nothing for it. And the fourth and final is that everybody in the entire system failed you by not applying third grade mathematics, third grade math, and the first of 17 reasons why we the industry shoveled high deductible health plans down your throat. If trend is 10% and I have a thousand dollars claim in 2023, that claim becomes an $1,100 claim.

(55:11)

Everybody follow my math so far? Your plan doesn't pay the claim. Your plan pays whatever's left after the employee is picked up, say their deductible. If I have a $500 deductible, what does the plan pay in 2023 five. Good. Be proud about this. These are not trick questions. 500. When you get your renewal from the underwriter, the underwriter doesn't change your plan. You might change your plan because you hate the renewal, but the renewal is always your current plan. So slide over this 500 and let's do third grade math minus. This is 600. 600 divided by that's first grade math. This divided by that is not a 10% increase. It's a 20% increase. If I'm united, Cigna Aetna, what would I rather report to Wall Street for a top line increase to my revenues without having to do a damn thing, a 10 or a 20% increase.

(55:57)

Wrong? That was a trick question. I'd rather apply a 26 or 25% increase. How do I do it? When you get a 20% increase, you and your broker believe the benchmarks, the industry in common sense, all of which say you need to raise that deductible even more. Maybe put in a third plan design. Push people to that. All on the basis of better consumerism is going to lower cost and lower trend really because third grade math disagrees with that. A thousand minus 600 is 400, 1100 minus 600 is 500. 500 divided by 400 is not 10, it's not 20. It's 25%. What would I rather report to? Wall Street 10, 20, 20 5% or I hope you see where I'm going. Make this plus $700 deductible. You are now inherently giving yourself a 33.3% increase year after year after year after year. Make that an $800 deductible, 50% increase. Third grade mathematics, third grade math. When you move people intentionally or not from rich plans to less rich plans, you always violently increase the cost in all plans. You do it on the basis of a free subsidization for which you get nothing and you do it on the basis of moving people into a higher financial lever, predisposing you towards higher and higher renewal increases.

(57:25)

That's a mic drop. It's not quite as effective as if you're not bashing a guitar or something like that. So I think we slept. If you want to do a question here, I'm happy to do questions or we'll just continue the excitement and the fun and go whatever direction you want from the booth right over there. Anybody question that they want to offer in front of, really? All right. I hope people are ready to put their drinking lips on tonight because I'm ready. I retired from it last night, but I'm going there hard tonight. No questions. Thank you so much game. I hope that you got a little something out of this. I'm guessing as predicted that you might be infuriated if I've really raised your stress level significantly and you feel like you need to unmined, you should talk to our booth neighbors unmined.

(58:11)

If it's really bad and you feel like you want to take things out on your family later, I recommend that you talk to our booth friend's, family first, who is going to have a far better way of delivering that message in a way that doesn't predispose you towards all kinds of presenteeism and productivity cost issues. But really on behalf of Brown and Brown and myself, I hope you got something valuable from it and I don't doubt that you're angry, but I hope you're productively angry and that you can do something with this. Okay, this is my LinkedIn, David Ross, Brown and Brown, consummate educator. I will always answer any questions you ask of me, and if you guys are part of organizations that needs a speaker and you think this is compelling, this is what we do. Alright folks, thanks so much. We'll see you, some of you over there if you want to continue the pain.