[S2E22] HR & CFO’s: Before Benefits Decision Season Begins, Start Here.

Benefits Decision Season is officially here! And if your broker is bringing you a renewal right now, the real question is: are you ready to make an informed decision, or are you about to press the easy button again?

In this Hot Health Take, Vincent Catalano cuts straight to what HR leaders and CFOs need to do before they agree to anything this season. Three moves, in order. No fluff.

First: assess your broker's compensation. If you are on a commission model, you may be handing your broker a raise every single year without realizing it. Vincent explains why moving to a flat fee structure is the most important thing you can do before any renewal conversation goes further.

Second: know what is happening under the hood of your own plan. Most mid-market employers are flying blind. Are your employees using the ER when they do not need to? What drugs are being prescribed? Where are the costs actually coming from? If you cannot answer those questions, your renewal decisions are guesses.

Third: audit your point solutions. Chances are you are paying for tools your employees have never heard of. Vincent calls it what it is: buying portals nobody uses, vendor promises nobody can prove, and EAP programs collecting dust until the next crisis hits.

And then there is employee communication. You are spending $10,000 to $12,000 per employee per year on health benefits. If they do not know how to use what you are giving them, you are wasting it.

Before you sign anything this renewal season, get an independent set of eyes on it. Reach out to Vincent directly for a no-strings review of your current plan. And if you found this useful, subscribe so you don't miss the next one. Visit www.clearhcs.com for more information.

About Vincent Catalano

Vincent Catalano is the founder of CLEAR Healthcare Solutions and host of the CLEARly Beneficial Podcast, Where We Rip Off the Band-Aid and Explore What's Next. With more than 23 years in employee benefits, Vincent consults independently with no carrier relationships and no book of business. He works exclusively on the employer side, helping HR leaders and CFOs make better, more informed benefits decisions. He holds an MBA from UC Davis Graduate School of Management and a BA from Skidmore College. Vincent is based in Sacramento, California.

Disclaimer: This podcast reflects the personal views of the host and guests, not their employers or sponsors.

Transcript

SPEAKER_00 0:02

Welcome to the Clearly Beneficial Podcast, the show where we rip off the band-aid and explore the future of healthcare, benefits, and the people driving innovation in the industry.

SPEAKER_01 0:15

Hey everybody, welcome to this episode of the Clearly Beneficial Podcast. It's uh the end of June, and uh smell that? Uh that means it is benefits decision-making season. And the larger the organization you are, the uh more in the throes of uh looking at options and making decisions you are right now. Uh I always love that time of year uh where you engage with clients, talk about uh what's going on, uh, bring the renewal, and and sometimes have very hard conversations about what this next year looks like. Because here we are, June, end of June, you're starting to make decisions. Your broker might be bringing your renewal to you right now, uh, if you're lucky. And uh hence the that difficult decision-making period starts where you're trying to balance the difficulties of rate increases with the empathy you have for your employees. And that's always the tough balance, right? I I always joke that uh CFOs are from Mars and C HROs are from Venus, and it's very true. Um these are two people that think about their organizations in in vastly different ways. And unfortunately, in many cases, they don't share a common language about dealing with employees. And the larger organizations, when I say larger, I mean 5,000 to 10,000 or more employees, those folks, you know, they generally are more sophisticated about their benefits decision-making processes. They're self-funded, they understand the risk, they know how to mitigate it, uh, they understand cash flow. Um, but when you start to get into the mid-market, which is generally defined as that 500 to 5,000 size employee, uh employer, um, you know, it's a it's not really as as sophisticated a process as you want. And in many cases, both the CFO and the HR team defer to the broker to make decisions for them. And um, and so here we are. First, you know, let's not let's stop this process of, you know, if if the increases are, you know, 5% or less, you're pop in bottles and everybody wins. Um, if there are five to ten percent, you're not happy, but you've kind of budgeted for that, even though budgeting a 10% renewal um is now, I think it's lunacy because you know, a 10% increase on a thousand dollar a month premium is now a hundred dollar increase for the next year. So um that 10% ain't great. And then you know, 15% is when everybody goes into a tailspin and starts to look at what we should be changing uh this next year, and they start getting aggressive and they're they increase deductibles, they increase employee contributions to health plans. Um and uh usually it's the employee that ends up, you know, taking the brunt of those type of decisions and hence the push-pull between CFO and CHRO on those type of topics. But the first thing I would have you do this year, um, before you do anything else, is try to assess your broker's objectivity and assess how they are paid. Um if they're a group, you're a group over 100 lives, you're filing a 5,500 form. And that means that broker has to have their commissions reported on that form. Uh many times now the broker are the ones that are collating the information and doing the filing on your behalf. So you've probably, even though you've signed it or the CHRO or CFO has signed it, you've never really understood that form. And you get these schedule A's from the insurance carriers, which would show how much commission has been paid to that broker, and then that broker takes that Schedule A and the other schedule A is from all the carriers that represent you for all the lines of coverage, and then they send it to a third-party service that collates it and does the filing on your behalf, even though you do an electronic signature. But guess what? You've done an electronic skip signature, you haven't really delved into that. So the first thing I would have you do this year in this renewal conversation is if you are on a commission-based model, have a negotiation with your broker about moving it to a flat fee. And there's a number of reasons for this. First of all, the flat fee model is more sane. It works to your benefit, um, not the broker's benefit. Um, you also start to get an assessment of what that broker is really doing for that money. Are they just handling the day-to-day for you, which makes you feel comfortable, so you'll pay them anything to do it? Or do you have a set budget that you'd like to spend? Because keep in mind, um, if it's a commission-based arrangement, every one of those lines of coverage, unless you're a small group under 100 in California or under 50 anywhere else, um, if you're a small group, those commissions are baked in. You know, you can't change them for health insurance. But for any other line of coverage, um, especially dental vision, all those things, commissions are completely negotiable. And then when you're in a large group health arrangement, all those commissions are negotiable. So why pay commission at all? Right? Have the broker net out the commission from your rates, and then you pay them a flat fee for the work they do for you. And why is this beneficial to you as an employer? Well, the key is that next year when you get a 5% increase, 10% increase, that broker doesn't come back to you and say, hey, you know, we're gonna lower our commissions commiserately with that increase. No, they get a 10% raise. And so think about that. That's something they probably never disclosed to you. Nor have they really ever properly done a commission review with you. Um, you know, I remember a specific case with a client where I knew we were being paid um way more than we probably deserve to be paid for the work we were doing. And it was a significant amount of money. And it was a new VP of HR in the role, and um I you know progressively went to them and I said, Hey, we're getting paid too much. And I have a number in my head, which I think is a fair number, and he goes, I agree. Um, I have a number in my head that's a fair number. And I went first, he went second, and his number was actually higher than my number. And he said, Well, because you were honest and straightforward, we'll go with my number. So it was the right thing to do, and not only the right thing to do for the client by netting out all the commissions and going flat fee, it was also right just to do the right thing. Now, did that affect me personally? Absolutely. It it tinged it dinged my bonus that year in the worst of ways because of the way that was calculated with the brokerage I was with. But that said, you know, it still made me feel good that I retained the client, they were happy with it with the outcome, and it was a good decision. So, you know, I I kind of view this notion of of commissions almost like going um to a nice fine restaurant and they give you a wine list that's you know that thick, and you don't know anything about wine, you don't know what's on the list, you don't want to appear to be a cheapskate to your date or whoever. But when I look at that at a wine list in a fancy restaurant, the first thing I do is talk to the Somalier and I say, Hey, you know, this is my budget, this is the kind of wine I like to drink. Um, can you propose some wines that meet my budget from the region I want to drink wine from? And it's an honest conversation and they appreciate it. That is way better than you looking at that big binder and going to some region of France in the book that you don't understand the wine, and you picking a bottle of wine that costs five times more than you want to spend. Same thing goes for brokering. Okay, have the honest conversation with your broker, talk about what they're being paid, ask them to lay it all out honestly and transparently, and then say, So, do you think that's fair? And let them justify what they're being paid. And then no matter what you do, even if you choose to a number which is maybe higher than you want, make sure it's on a fee basis, not a commission basis. So as you enter into this renewal season, I think that's one of the main things to focus on. The second thing to focus on, especially as it comes to health and health care costs, is how do you know what's going on under the hood of your own organization? Right? Do you see the data? Do you understand what trends are happening? Do you understand the drugs that are being prescribed to your employees? Do you understand who the frequent flyers are? Do you understand, you know, where the the costs and who are generating the costs mostly are people using the ER, you know, um unacceptably low, you know, in a large amount? You know, how is it that your people are using the tool you're giving them? And I think that is that is an important part of it, is getting to the data. And the best way to get to the data is by you know considering a pivot from fully insured type contracts to self-insured or or uh level-funded type contracts where you can see the data and understand what's going on under the hood more effectively. And then you can engage with any number of good point solutions to help you rein in those trends and costs. Um speaking of point solutions, so you know, the preponderance of these things has been out in the marketplace. So this would be number three. The preponderance of point solutions that have been out in the marketplace has been very high for the last, you know, five to ten years. Um, and I would say many of them have an absolutely nebulous ROI. You know, is the money you're spending worth what you're gonna get back? Have they proven that they can save you money? Have they proven they can improve the health of they can they can improve the health of your employees? And you know, I I think the answer is that a lot of them really don't do that. Or even worse, you've been sold two, three, four, five-point solutions, you've been sold a portal, everything's on the portal, blah, blah, blah. You send your employees there. Nobody ever uses these tools. Don't even know they're there. I mean, this is the same problem we've had with EAPs for many, many years. The EAP was a great tool, it's been around a long time. The only time they came back in favor was during COVID, where utilization went from 2% of the employee population to 25% of the employee population, but now they're back down. So, so unless people know those tools are there. So that leads to the next potential thing you really start to think about is employee communication. Um, benefits, especially healthcare, especially to train your employees how you want them to behave using your health plan, is probably one of the most important things you could do. Education is key. It should be mandated, it should be tied to a performance review, it should be something that employees take seriously so they understand how to use this very, very expensive tool that you're giving them. The typical employee now, especially if you're covering 100% of the premium, you're now spending between $10,000 to $12,000 per year for one employee to be insured. Think about that. Now you add their family, of which you're probably contributing something to their family, and the employees also contributing. So the deep dive here is what are you doing to truly help mitigate the costs of your plan? Okay. What are the things you are willing to, you know, to lean into? What are the changes you are willing to make? What is your truly your emotional fortitude to make the changes you need to do? Because this is truly has morphed in the last couple of years into a business decision. It's a people decision, but it's a business decision. And so, how do you make the best decisions possible? So these are just a few things you should be thinking about as you go into this, you know, interesting season of uh renewal. Um, and let's you know, think about that word for a second, renewal. What are we renewing? Okay, we're taking a policy, we're taking a look at it. And are we gonna take the same thing and just take the increase and keep moving on, press the easy button? Sure, that's one thing. But let's think about that word renew. Okay, we want to renew ourselves, we want to renew what we're doing. Sometimes it takes a clean piece of paper and some good conversation and difficult conversation to take a look at really what you're doing and why. And what are the sacred cows that you have that you don't want to change? And so um, it's that time of year, folks. I hope it works out for you. Um at our company, Clear Healthcare Solutions, uh, what we do aside from produce this podcast and bring great guests to the table, of which guest I have coming up in a few weeks is one of the powerhouses in health insurance in the United States. So I'm not gonna name names right now, but um, this will be one of one of the best episodes we've ever had. Um, but at Clear Healthcare Solutions, aside from producing the podcast, you know, we're here to have those conversations with you, to um be strategic, to listen to you, to help you frame what you want to do next for your employees and your organization so you can make better decisions, save money in the long run. And I'm not, you know, we're not here to replace a brokerage relationship. We don't want to be a broker. Okay, let's just say that out front. But we want to make sure you've got the tools to keep your broker in check, to keep your process in check, and to help you build new processes that make sense to help you put your company on the right strategic track for a long-term benefit stability for you and your employees. So thank you for participating in this conversation and listening to this. And uh, we'll see you next time. Thank you. This podcast reflects the personal views of the host and guests, not their employers or sponsors. See you next time.