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“Get Your Own Health Insurance Then! I’m Done!”

Employers are just plain worn-out by the annual renewal process.  And you might be surprised to know that health insurance carriers are too.

Unless an employer gets a dream renewal, it takes a significant investment of time, effort and emotional energy to renew a healthplan.  And the carriers have to invest similarly in negotiations, rating alternative plan designs, assessing competitive quotes or, on the other side of the table, quoting against incumbents for new business.

It’s a huge time waster.

Worst of all, the outcome is rarely good news for employees – so the employer looks like the bad guy nearly every year.  Here they put all this effort into negotiating the best outcome for employees only to be met with disdain (and sometimes hostility) when they present employees with their options.

So why continue engaging in such a thankless activity?  (I’d really like your opinion on this.)

Increasingly, employers and carriers (but mainly employers) are getting frustrated with the futility of this process and want out.  Give each employee a few thousand dollars a year and let them see what they can get on their own – then they’ll only have themselves to blame when costs go up and benefits get reduced…

Enter health insurance exchanges fueled by “defined contribution” plans (giving employees a set amount of money and letting them buy the health insurance plan that best suits their needs.  Remember, we went through this a few years back when defined benefit pension plans moved to 401(k) plans…).

Sounds good on the surface.  But behind the virtuous justifications of “flexibility”, “options” and “employee choice”, the real motivation for employers will be, “Get me out of this mess!”

Early on, enrollment in exchanges will take off.  But problems will begin to surface as exchanges fail to be competitive.  Costs will inevitably go up (and I predict dramatically) because groups with the worst health risks (those experiencing the most headaches today) will move into the exchanges first and nothing will be done to effectively stem the tide of increased healthcare utilization and costs.  A few years after these exchanges report record new enrollments, the wave of claims will catch-up (thanks to healthcare claims lag, new enrollment revenue will cloud actual medical loss ratios until enrollment levels off) and the exchanges will be back to the same old options:  Reduce benefits, increase costs, switch insurance carrier or some combination of the these.

But employers who understand that they are the only entity with their own long-term best interests at heart and who realize that the only way to reduce health insurance costs is to reduce their population’s demand for healthcare services (through disease/case management, wellness, patient advocacy, coaching, deployment of predictive analytics, etc.) will outperform and outlast the exchanges.

And in the end, by refusing to pass the buck, these employers will realize a strong competitive advantage in profitability, hiring, retention, productivity, employee morale and all the other intangibles that define great companies.

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