Tired of the Kabuki Dance
It started with a cold call, which is weird, given that many say cold calling is dead. After fumbling through the initial call like a 7th grader asking someone out on a date, we got to brass tacks, setting the meeting to discuss their situation and whether there might be a better option for them.
This employer has about 36 employees. They are in the highly competitive market for skilled labor. They treated and viewed their benefits how they have been taught to view them; annually reviewing options on a spreadsheet. As such, they were pretty ambivalent, making the best of a what is a throw-your-hands-up, “is what it is” situation.
They did take advantage of some innovation in the market. A year earlier, they moved to a “Level funded” plan, which is great in theory. You see, if a level funded plan, or any self-insured arrangement, is proposed and implemented with the sole reason that it is less expensive than a traditional fully funded plan, disaster awaits. In this case, the plan was offered without full medical underwriting. The risk of the group was based on prescription drug utilization review only. The sugar-high of rate relief was realized until the annual renewal was sent to them. The increase was 70%. The chickens of adopting a plan without fully understanding the risk in the group had come home to roost. This is when I was invited in. See when 70% increases are assessed, groups will open their doors to any bozo, including me.
The title of this blog post is “Kabuki Dance.” Here’s why: Kabuki is defined as an activity or drama carried out in real life in a predictable or stylized fashion. Where is that more prevalent than in the annual benefits review by companies? It usually plays out with a marginally high health plan increase, then the broker promises to negotiate it down, they hit the budgeted number for cost increase for benefits, and the plan renews for another year. Only when the increase is egregious do companies typically seek out something better.
Perhaps the problems actually lies in the process by which companies go about this annual charade. It is in refuting that decades-old process that we began an 18-month relationship to execute on a health plan that ultimately will save $200,000 in company expenses while simultaneously improving the benefits for the employees. It would have been easy to win their business by simply asking for a census and plan design and an opportunity to quote their insurance. Assuming we presented an option at 30% higher than renewal, it still would have been 40% less than proposed by the current carrier. That play on rate negotiation is typical of the annual kabuki dance.
Instead, we discussed the following topics:
- Employee Communication
- Benefits Administration
We had an intense focus on the company’s future goals and how we could achieve them for the fewest dollars spent. We also discussed how benefits played into the company’s strategic vision. At the end of that conversation, there was…silence. The Human Resources person just looked down at the table. My initial reaction was to say to myself, “Crap, this didn’t go well.” But then, she looked up and simply stated, “No one has EVER talked to me this way before.”
As is par for the kabuki dance, we were up against the renewal, and the group wanted to put it to bed and move forward. I did win the business. During our discussion on everything but insurance rates, we agreed that major changes were necessary, and the employer’s family-oriented culture was conducive to major change. We discussed group medical cost sharing as a solution. But they were just not quite ready for that transition at that time. They needed more time to evaluate what that meant for them financially and operationally. So, we made some plan tweaks, adding a Health Reimbursement Arrangement administered by an independent third party, and to the employer’s credit, they agreed to increase their employee premium subsidy from 60% to 75% with one caveat, which was that the increase in subsidy only going to be for one year.
The Amish have it figured out. They believe in paying their bills in full, with cash. When a member of that community requires medical care, the community pools funds and pays off the debt owed by that one member. In most, if not all cases, it works beautifully. No networks, no plan documents, pre-authorization, PPO discounts, or policy limitations. What we implemented was a program that borrowed from that fundamental concept – a community sharing funds for the needs of other members in the community. Sedera Health operates in such a manner and was the program that we chose to implement and utilize.
After absorbing a 70% increase on their health insurance with the caveat being that drastic changes were to be made in 2019 and due to some of the plan tweaks we made, the 2019 renewal came back at 2.99%. Nevertheless, the die was cast, and the plan we outlined was to be executed. In the year leading up to this change, the employer opened up to employees. They engaged them in the process, letting them know what had happened with their current plan and what they were planning to do about it.
There was an open-door policy with the General Manager, whereby any employee with a question or concern was encouraged to bring it to management. Few took him up on it, but at least the option was there. There was never one big meeting or communication, but the prospect of moving to a group medical cost sharing program was discussed in passing at various times throughout the year. So, when we approached the renewal discussion, it wasn’t a shock or any grand revelation to the group.
Knowing the destination, my role was to keep an eye on the market and keep the employer up to speed on any changes or answer any questions or concerns they voiced. There were a lot of e-mails starting with “Hey, what if…?” which led me on a path investigating each specific question. Mainly, it was an exercise in uncovering the actual costs of medical services and prescription drugs. The advantage we had was that this group was on a self-insured contact, so there was already some level of transparency in what claims were being incurred by the group.
When a question came up, and it was discovered that Simvastatin was $0 at the local Harris Teeter, this was shared with the employer so they could just put out a soft notification to all employees of this. The hope was that whoever might be taking this drug would recognize it and file it away for future use. (Side note: group was self-insured, so this is good practice in general, not just for future planning.)
A big inflection point came about mid-plan year. Around March of 2019, a local physician had decided to go off and form his own practice. He was scheduled to open his doors late summer. He and a partner formed a Direct Primary Care practice in which they do not accept any form of reimbursement from insurance carriers, but rather they charge employers and patients a flat monthly fee for their services. I introduced Dr. Reinhardt to the employer, and that alleviated a lot of the guess work on how the plan would work.
Due to its simplicity and the fundamental fact that it is not insurance, the gross savings for the year in fixed monthly costs was approximately $200,000. Through that savings, the employer agreed to reimburse, as needed, individual costs incurred by employees up to half of the maximum limit imposed upon them by the Sedera program. Combining that with the membership with a Direct Primary Care physician, the employees now receive basic primary and routine care at no cost, lower payroll deductions for their medical plan, and the support and comfort of knowing that their employer has their back, so to speak, in a time of financial need that could be caused by a medical event.
Where are we now and where are we going?
The annual Kabuki Dance for this employer who had had enough with the traditional group health plan model was quite different in the 2019 cycle. Rather than having a big reveal, because of the preparation and communication with employees that occurred through the year, this was more of an opening day, after previewing the plan for several months. There were no surprises or news of higher costs for less benefits. Having a physician attend the enrollment meeting was a huge benefit. I mean, how often do you have physician at your annual benefits meeting?
There were satisfying moments when those who have not been to the doctor in years now, not only met a physician who would take care of them if they wanted, but accessing that physician wouldn’t cost them anything.
The employer employed a third-party administrator to help execute on the reimbursement strategy. If they were going to reimburse out of pocket expenses, it might as well be tax advantaged for both the employer and the employee. The group now has three layers of customer service between me, Sedera Health and the third-party administrator who’s managing the potential expenses.
Roll out was not perfect, of course. There were some individuals who simply were not comfortable with the concept. They were more comfortable in the traditional insurance world. So, we simply enrolled those individuals in an individual plan, citing loss of qualified coverage as the reason for the special enrollment.
As of now, one quarter into the plan year, all is well. The active management of the plan is ongoing, and due diligence on finding open transparent pricing for services that might benefit the employees is constant. We’ve identified employees who have not been to the doctor in years, who now have a no cost no wait access to see one.
There are no guarantees on monthly costs remaining what they are currently. But looking back there have only been two price changes with Sedera since 2014. So even if there was a change, the percentage increase would be off of a smaller number than what they had in the insurance world, so the savings realized would mitigate the impact.
This solution was right for this group. It was the right mindset, employee population, and right set of circumstances. Every employer situation is different and in no way are we saying medical cost sharing is the end all be all for every employer group, what we are saying is whatever your solution is, the process and the “how” it is executed is as important as the solution itself. It may take a year or so of empirical creativity, fanatical discipline, and productive paranoia, but success only comes before work in the dictionary. Define what success looks like and don’t ignore the process of how to get there.