Oh the Times, They are Exchangin’…

By Vito Morgese, Senior Vice President, Employee Benefits
USI Northeast

New Year Fresh StartSaid a long-time friend of mine after having a little too much New Year’s Eve, “My New Year’s resolution is to get rid of my health care cost increases with one of these private exchanges.”

“Happy New Year!!” I replied with a pat on the back, “I’ll speak to you next week…”

Happy New Year, indeed. The Patient Protection and Affordable Care Act (PPACA), and its market impacts are now taking effect and as we continue through 2014 and more focus will be put upon private health care exchanges as the next health care approach for employers looking to cut costs.
Rather than the approach, let’s look at the source. Health care costs are just the tip of the iceberg. Over 75% of health care costs are driven by modifiable behaviors and associated chronic unmanaged conditions.

According to a Rutgers University study, employee health problems cost employers over $226 billion a year. Over 70% of which is lost productivity in the form of absenteeism and presenteeism (present at work, but ill or unfocused). For every dollar an employer spends on health care and pharmacy benefits associated with behavior, they lose $3 in productivity.

As those of us “old timers” are well aware, the concept of defined contribution for health care coverage is nothing new. It is merely a funding alternative. It is not void of a continued fiduciary responsibility to manage risk, rather than insurance cost. So it is important to note that an exchange without underlying population cost controls is a toothless solution. However, a private exchange that is organized to also influence behavior and drive lower trend allows employees to “have their cake and eat it too!”

So when I speak to my friend, I’ll continue, “Yes, you may be able to shift your health care costs to someone else. However, in doing so, you lose any control over your ability to boost productivity. Which one of those choices actually makes you money?”

A well thought-out, results-based, population health management program, supported by Wellness Consultants, Analytical, and Legal resources, is a necessary tool to decrease your medical trend and increase your employee productivity. Without it, you’re enjoying your New Year just a bit too much and I’ll need to take your keys.

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