Over the last 16 years, healthcare premiums have increased by 200%. Inevitable? Just how the system has to be? Not according to Michael Menerey, author and host of the Reconstructing Healthcare podcast. He joins us to share his take on the healthcare challenge, common myths he’s uncovered and ways employers and employees can take action. We’ll cover alternatives to the traditional approach and give you actionable ways to start changing the system for the better.
Brandon Laws: Hey. Welcome back for another episode of the HR for Small Business podcast. I am your host, as always, Brandon Laws. Thanks for those that have been connecting with me on Instagram and LinkedIn and Twitter and all those places.
It’s really fun to actually interact with the audience because we’re getting a lot of downloads on the podcast but we don’t know necessarily who’s listening to the podcast. So I always love when people reach out to me on LinkedIn from all over the world too. So that’s fun!
So feel free to keep reaching out. I love connecting with people. And thanks to those that have been suggesting topics. That’s huge because I want to know what you want to listen to and learn about.
So as you probably know, we do book drawings on a monthly basis. So go fill out that survey that we have. The link is in the show notes, so you’re welcome to do that, and also we do book drawings for those that give us reviews on Apple Podcast. So continue to do that because we love the feedback and it helps us actually grow the podcast, so other people can find us.
Today’s episode, I want to put out a disclaimer. There’s a couple of topics on this podcast where we talk about really specific things and I’m sure, as most of you know, that this is not custom, legal advice for you or for anybody else for that matter. We try to bring on very interesting people and very interesting topics. And in no way is any of the content that we provide customized advice, nor is it necessarily the opinion of me or of Xenium, whom I represent.
That said, this topic today is with Michael Menerey. He has a podcast called “Reconstructing Healthcare.” I love the title of his podcast and it’s very intuitive. You can get what it’s all about. Our discussion is basically centered around the issues that the healthcare industry faces, whether it’s insurance brokers or insurance providers or insurance companies or employers.
There are rising costs, and employers are having to get creative because they need to attract and retain people, and it’s just becoming a challenge. So Michael is an expert in this area. He has interviewed a ton of people who are very specific experts in their respective areas. So I basically just pick his brain and we have a really fun discussion on reconstructing healthcare. I think you’re going to love this discussion. But again, it’s not advice for you. It’s hopefully just going to get your wheels turning and hopefully you find it interesting. So feel free to connect with me. Let me know what you think about the podcast and we have a ton of content coming your way. I probably have seven, eight episodes recorded in advance.
So we’re pumping things out and if you want it more frequently than weekly, let me know. All right. Enjoy.
Brandon: Hey, Michael. It’s so great to have you on the podcast. Welcome.
Michael Menerey: Thanks Brandon. It’s great to be here.
Brandon: What issues are employers facing right now as it relates to healthcare?
Michael: Well, gosh, that’s a big question. I think there are a couple of challenges that I think most employers would identify with. First it’s just cost. I mean if you look at the cost of healthcare and health insurance over the last 16 years, I mean it has risen well over 200 percent. If you’re an employer, what other fixed costs in your business have risen at that rate? It’s unsustainable and what happens is employers are forced to make hard decisions.
Do we increase deductibles and copays and what our employees have to pay out of pocket? Or do we make them pay more for the insurance via payroll deduction? So I think that’s one of the big challenges for employers. Then for employees, there was a recent Kaiser Family Foundation study that basically noted that of all people who have insurance, a third of those people still have difficulty affording healthcare.
Michael: Which is absolutely crazy.
Brandon: The company I represent, Xenium, we are an HR consulting company. We’re not a brokerage firm at all. But we do get the questions a lot from a lot of our clients when they’re trying to design their plans. They don’t want to push a lot of the cost to the employees. So they end up sort of trying to either absorb or redesign their plan in a way that’s going to give them the bare minimum coverage, but not absorb all those costs. What do you see employers doing? What kind of pain are they feeling when it comes to healthcare coverage?
Michael: It’s going to depend on the company. It’s going to depend on the industry for those employers. Especially in the tech space where they’re competing for talent. You will see rich benefits and oftentimes very little cost share from employees. But in other industries where the businesses may be low margin and they’re just trying to make it, right? They will oftentimes push a lot of the cost back on to the employees because they simply can’t afford to bear it themselves.
So in those instances, it’s challenging for employers and you have to work with your broker consultant to get creative and look at alternative methodologies to lower healthcare costs, so you’re not impacting your employees that much.
Brandon: So if we back up and sort of look at the landscape of healthcare and health insurance, how did we get to where we are? Why are costs rising the way they are right now?
Michael: That’s a great question and as you know, Brandon, I have my own podcast. It’s called “Reconstructing Healthcare” and that’s one of the things we examine on the podcast is why do healthcare costs increase at two to three times the rate of inflation for other goods and services?
The answer is, the ugly answer is that everybody in the supply chain of healthcare – and we’re talking physicians, hospitals, diagnostic imaging centers, drug manufacturers, medical device manufacturers, PBMs and insurance carriers. Everybody is trying to maximize their slice of the pie to the detriment of the payers of healthcare, which are going to be employers and their employees.
It really boils down to misaligned incentives and this is the dirty little secret that nobody on Capitol Hill is ever going to utter. And that’s that our healthcare system is designed for higher costs the way that it is right now. And ultimately, if an employer wants different results, that’s kind of the first thing they have to acknowledge.
Brandon: Yeah. You made an interesting point that it’s designed to rise in cost. I don’t know what the number is now. But what percentage of our national GDP is it?
Michael: I think the last that I saw and don’t quote me on this, but around 17 percent.
Brandon: That’s a huge number.
Michael: It’s extraordinary and the problem is what healthcare has become, it’s like this insatiable beast, right? That just continues to consume more and more and it leaves less money for us as a society to spend on other things.
Michael: Like education or other basic needs like food, clothing and shelter. That’s a real challenge.
Brandon: What’s fascinating to me is the economics of healthcare, you would think the technology would drive down cost. But obviously there are a lot of labor costs involved and then, to your point, everybody along the food chain, they want their bigger piece. So there’s a lot of factors I guess is what I’m saying. Would you agree with that? There’s a lot of factors in driving up the cost of healthcare? But why are some of these innovations pushing it back down?
Michael: Well, that’s a great question, right? Like we have all this innovation and you see innovation in other industries where it actually drives cost down because it creates efficiencies. So healthcare and education are really the only two sectors where despite all the innovation that we see, costs continue to go up. The reason is it’s not a true free market.
Brandon: Yeah, I agree.
Michael: Right? There’s not price transparency and insurance has essentially become a blank check for all of those people in the supply chain of healthcare. That’s really why if an employer wants different results, they have to kind of grapple with these questions and realize that when you’re buying health insurance the traditional way, you’re really playing a game that you’re guaranteed to lose in the form of higher costs year in and year out.
Brandon: So what does it mean for employers with the current landscape, how do they partner with the employees to figure out something that they want? It’s going to give them the coverage that they need but also make it to where both sides aren’t bearing greater and greater costs every year. There have got to be some other solutions.
Michael: And there is, there is. I’m going to give you a simple example. We talked about the problem being misaligned incentives. So OK, how do we realign the incentives? One of those ways is you can make your employees partners in helping to lower the cost of healthcare.
So let me give you a simple example. Within any PPO network for insurance, there’s a huge amount of waste and a simple example is you can have a hospital charge $5000 for an MRI and down the street, half a mile away, there’s a freestanding imaging center that will charge $300 for that same MRI.
It’s a huge price variance. So one of the ways that an employer can engage their employees to help them lower cost is give them incentives to go to the low-cost place. By incentive, if you get the employee to go to the MRI that costs $300 versus getting the MRI in the hospital that costs $5000, well, you just saved a lot of money.
Michael: So why charge your employee anything, right?
Michael: Reward them for making better decisions.
Brandon: And I think a lot of this is down to education, right? I think maybe employers or brokers or whoever it may be, that there’s no education for employees to know that there are alternatives and they’re just not using them.
Michael: It’s education but it’s also employees – you know, consumers of healthcare, right? They’re generally not equipped with the right tools and so you have to give them the right tools to be able to drive the right behavior. So there are vendors in the marketplace that offer sort of a concierge service to direct people to lower cost options within their networks and also facilitate a monetary incentive when they make the right decision to go to a lower cost option.
Brandon: So besides those couple of – those ideas that you kind of tossed out there, what other creative things are you seeing?
Michael: One of the biggest problems in healthcare is how we pay providers. And basically, we rely on insurance carriers to negotiate pricing and we’ve been kind of convinced or taught over the years that insurance carriers get the best deals.
The truth of the matter is, in any insurance provider network, you’re usually paying anywhere from 200 to 300 or 400 percent of what Medicare pays. So – and you generally have no idea what the actual price is. Like if you were to call a hospital and ask them what the price is for a procedure, they wouldn’t even know what to tell you.
So we got to fix how we pay for healthcare. It needs to be transparent and it needs to be more how we purchase other goods and services. So there are companies out there that are working to establish transparent pricing with vendors that are much less than the pricing that we’re getting through insurance contracts.
So we call that value-based purchasing and employers who are self-funded can integrate value-based purchasing strategies into their health plan as a way to control cost as well.
Brandon: I agree about the transparency. I can’t tell you how many times I’ve looked at an explanation of benefits from my insurance provider and it’s not even their fault. Really it’s – every healthcare provider has to work within those rules and they’ve got codes on them and they’re astronomical numbers and you’re like, “I don’t even know what any of this means.” It’s like who do you really talk to? You can’t really negotiate it as a consumer really. I mean it just seems like that’s the price and it’s set by insurance and the provider together. How do you even build transparency in that world?
Michael: Well, it goes back to giving your employees the right tools because they can’t do it on their own. Another trend in the marketplace is what’s called “healthcare navigators”. These are companies that really provide a white-glove, concierge service to employers and their employees to make it easy.
Michael: Because you can’t expect an employee to go out and try to know what the price is for something and to shock and there’s so much complexity in the system. You just mentioned the example of an EOB. An EOB can be completely different from the five or six different bills that you get in the mail and employees can often be left wondering, “What am I supposed to pay?”
Michael: Right? And sometimes they may pay more than they should. So the purpose of a healthcare navigator is to be the advocate on behalf of the employee, to help them with finding a provider, finding the low-cost options within a network, helping with any issues that they have with bills. You know, or explaining just what the EOB actually means.
So one of the things we have to do as employers and brokers and consultants, we need to make it easier for employees because right now it’s just too complex.
Brandon: At one point – and maybe this is still the case, I’m hoping you can tell me – healthcare coverage for employees was a way to attract and retain them. Is that still the case now? If it’s not, what are some ways that you could create some sort of program that’s attractive for an employee to consume those benefits and come join you in the company?
Michael: That’s a big question and I’m going to answer a couple of different ways. One, employee benefits are still absolutely important in attracting and retaining talent and it’s going to vary by industry on how important it is. But there are certain industries that it’s very important for them to benchmark the employee benefits that they offer to their competitors because it may be the difference between them getting that employee that they want or not.
But there’s also – there has been an expansion – well, let me say this a different way. We have a multigenerational workforce now, don’t we?
Michael: Right? And so what’s important to millennials is going to be different than what’s important to boomers and Gen-Xers like myself. So benefit offerings really need to be diverse depending on your workforce and the demographic that it contains. I mean we’re seeing demand for certain employee benefits like you wouldn’t even believe. Pet insurance.
Brandon: Yeah, I’ve heard of that. It seems silly but – yeah, but I get it.
Michael: But you know what? People want it and it’s kind of a value-add. It’s part of their benefits. There are now – you have a whole generation of millennials that are saddled with a lot of debt. So now there are actual benefit programs. There are student loan repayment programs that an employer can offer. I mean these didn’t exist 10 years ago. So to answer your question, yes, I think benefits are still important in attracting and retaining employees and even if employers can’t necessarily afford to pay for all of these. A lot of these things can be offered on a voluntary basis.
Michael: To kind of sweeten the pot. So there’s lots of interesting things that employers can do.
Brandon: I think what’s interesting about the group health plan offerings is your point about the multigenerational workplace where – like I have a couple of kids. So obviously coverage for my kids and making sure a lot of those little – you know, broken bones and emergency rooms, those things are covered, whereas somebody who doesn’t have kids and is really young, maybe they just want a high-deductible plan or somebody who’s maybe in their 60s needs a – they need a different type of coverage, right?
So I think your point is everybody needs something a little different, and maybe employers should start offering that.
Michael: Yes, depending on the workforce and the demographic. I think if you have the ability to offer more than one plan and offer a choice, I think that would be – it’s going to be well-received by employees. But it really depends and I think that’s something that every employer should work on directly with their broker consultant because they can provide guidance into how to structure a benefit plan and what to include based on your demographic.
Brandon: What are some of the common myths that you’re hearing about healthcare or health insurance?
Michael: There’s a lot and I actually – I have a book called “A CEO’s Guide to Lowering Healthcare Costs by 33%”. In that book, we actually talk about 10 myths about healthcare and health insurance that are commonly accepted that really lead people to kind of accept the status quo.
One of those myths is that your insurance carrier is negotiating the best deal for you. That’s not necessarily the case. There are myths about, you know, gosh – the myth about high-deductible health plans is a pretty good one too. There’s this whole notion that if you implement a high-deductible health plan, now that employees have a high deductible – and I have one. I have a $4000 deductible for my family, which is a lot of money. That instantly, we’re all going to be great consumers of healthcare.
Brandon: Sure, yeah.
Michael: And that’s just not possible in the current system because it’s hard to get access to pricing information. It’s almost impossible to get access to quality information. So it’s really not possible for consumers to shop for goods and services in healthcare like we would on Amazon, right? For clothes or whatever you’re purchasing on Amazon.
In the current environment, unless you have the right tools – and there are better tools out there that we can help guide employers so they can facilitate more of that consumerism. But for the most part, a high-deductible health plan with a health savings account on its own, no. It’s not going to promote consumerism.
Brandon: What are a couple of ways that, if you were in charge of the whole entire healthcare system, you would do to just tweak it a little bit, to be more effective and obviously curb some of the rising costs? What would you do?
Michael: Gosh. If I had a magical wand …
Brandon: Yeah, exactly.
Michael: … that I could wave, I would make it mandatory that pricing be transparent. I think people just don’t understand how egregious the price variance is in the marketplace. I mean you can have a hospital charge $25,000 for a knee or hip replacement and you can have another hospital down the street charge $100,000, with no difference in quality, right? And maybe even the – or you can have the one that’s charging $100,000 for that procedure be poor quality, lower quality.
So if I had a magic wand, I would wave it and decree that all hospital facility pricing and quality ratings would be transparent to the public.
Brandon: Since employers right now tend to be the vehicle in which a lot of employees get their group health coverage, what can they do? Is there something that employers can do to really help employees understand the cost structure and even help mitigate some of the costs for their plan?
Michael: Yeah. I think there’s lots of things that people can do. We’re working with an employer right now where we’ve basically identified cost-efficient providers in the network and we’re giving employees a strong incentive where we waive deductible and co-insurance and copays.
Michael: If they go to the cost-efficient providers. So there are lots of things that an employer can do. But it’s hard when you’re purchasing off-the-shelf insurance products.
Michael: And really it requires an employer to work with a broker and look at what we call “alternative funding approaches,” which is insurance jargon and it really means just being able to self-insure your plan.
There are ways that small employers can do it. There are captives out there, which are made for smaller employers and allows them to pool together with other employers or associations and other purchasing coalitions that small employers can tap into.
So it’s just a matter of working with the right broker consultant and being able to explore those options.
Brandon: You brought up self-insurance. We’ve never talked about that on this podcast. We could probably have an entire episode dedicated to that because I know it’s probably nuanced. But for listeners, is that self-insurance for every type of employer? Is it for big employers only? Is it for small employers? Will you give a summary of what your thoughts are on self-insurance?
Michael: Honestly, it’s – this is another myth, right? That you have to be – you have to have like 500 employees to be able to self-insure. And that’s just not true. You know, you can be an employer with 30 employees and you can partially self-insure or self-insure your plan and purchase what we call stop-loss for catastrophic large claims and you can save a lot of money.
By self-insuring, it allows you to do more of these kinds of creative approaches that we’ve talked about where you’re giving employees incentives to choose a lower cost option. I mean you can be – it depends on certain states because there can be regulations on how small you can be. But certainly it’s not just for large employers. And small employers do have the ability to do it.
You need to have a good understanding of what the risks are in any given year of what your potential costs can be. But I’m telling you, our clients that are self-insured, they do a lot better than our clients that purchase fully-insured products.
Brandon: Michael, you have a podcast called “Reconstructing Healthcare”. I love that title by the way. You interview a lot of really smart people in that podcast, a lot of people in the healthcare industry. If you’re going to give me your top ideas you’ve learned from the podcast, what are those?
Michael: One, that there’s hope for us, that there are a ton of great entrepreneurs doing incredible things in the marketplace to help employers lower their healthcare costs.
Two, that the status quo is really a problem and there’s a lot of inertia that prevents people from looking at solutions that can actually lower cost. That’s part of the reason we have the podcast, to educate the marketplace, that there are better ways of doing things out there. It’s just like any problem, right? You can’t solve a problem until you understand the why.
Michael: And so, if anything, I’ve learned a lot by interviewing some of the folks on more of the dysfunctional elements within the healthcare system that actually lead to higher healthcare costs. It’s through that education we hope to instigate a little change in the industry.
Brandon: I love it. Michael, where can people learn more about you, your work? Where can people find the podcast too? I think that will be – that’s a really important piece.
Michael: So the website is www.ReconstructingHealthcare.com and we’ve got a special page for your listeners.
Brandon: Oh, good.
Michael: So it’s www.ReconstructingHealthcare.com/Brandon and there they can get access to our ebook, “A CEO’s Guide to Lowering Healthcare Costs by 33%” as well as a video webinar we have that really dives into why healthcare costs go up in the first place. On our website, you can also get access to all of our podcast episodes as well as iTunes or any of your favorite podcast apps.
Brandon: Michael Menerey, thank you so much for coming on the podcast. I had a lot of fun with this discussion. Honestly, I could probably talk for a couple of hours on this. It’s so much fun.
Michael: Awesome. Well, Brandon, thank you for having me and I hope our discussion was educational for your audience.