Chris Hamilton - Redefining Employee Benefit Strategy

Are Your Benefits Training Top Talent to Leave?

Healthcare costs continue to rise, and many employers feel trapped in a system that gets more expensive every year.

In this episode of the People/AI Strategy Forum, Sam Reeve speaks with Chris Hamilton, Employee Benefits Practice Leader at Hotchkiss Insurance, about how organizations can rethink their benefits strategies to improve employee retention, create more value, and regain control over healthcare spending. 

Chris explains why traditional insurance models often create misaligned incentives and shares practical strategies that leading employers are using to design more effective and differentiated benefits programs.

In This Episode:

• Why healthcare costs keep rising
 • The hidden economics of health insurance
 • How benefits impact retention and recruitment
 • The advantages of customized and self-funded plans
 • Questions every employer should ask their broker
 • Strategies for creating more valuable employee benefits
 • How benefits can become a competitive advantage

Key Takeaway

Benefits should not simply be viewed as an expense.

When designed strategically, they can become one of the most powerful tools organizations have to attract, retain, and support great people.

Guest:
Chris Hamilton
Employee Benefits Practice Leader, Hotchkiss Insurance

Learn more:
 https://www.itschrishamilton.com/

Learn more about CompTeam:
 https://compteam.net/

Watch the full video episode:
 https://www.youtube.com/@PeopleStrategyForumPoweredByCompTeam

If you enjoyed this episode, follow the People/AI Strategy Forum on your preferred podcast platform and join the conversation! 

About the People/AI Strategy Forum
The People/AI Strategy Forum explores how leaders navigate the intersection of people strategy, leadership, and artificial intelligence. Hosted by Sam Reeve, Founder & CEO of CompTeam, the Forum features conversations with executives, practitioners, and experts shaping the future of work.

Learn more about CompTeam and the People/AI Strategy Forum at compteam.net.

Transcript

Sam 0:00

What if your benefit strategy is quietly training your best people to leave, not because it's cheap, but because it feels ordinary? A lot of companies right now are dealing with a higher cost of, of health insurance as well, and so we're gonna talk about strategies about that today. I'm Sam Reeve, CEO of CompTeam and host of the People Strategy Forum. This show is for founders, executives, and senior HR leaders that want practical ways to attract, retain, and motivate great people. We focus on real levers behind performance, such as rewards, leadership, culture, and in this case, we're gonna be talking about benefits as part of the workforce experience that experts use every day, and Chris is gonna take us through that journey. So Chris Hamilton is an employee benefits practice lead at Hotchkiss Insurance. Uh, Chris brings nearly 20 years of corporate finance and insurance background, and he's focused on helping employers improve performance and profitability through smarter benefits design. Chris believes that too many employers assume that they need to compete head to head with big company benefits when a better strategy is to design something more valuable, more distinctive, and something that employees cannot easily get elsewhere. So let's welcome Chris. Hi, Chris.

Chris Hamilton 1:23

Sam, thanks for having me. Looking forward to the conversation. Thank you

Sam 1:27

Sure. So, so Chris, I mean, I would just love to, uh, just first dive into your backstory a bit, how you got into the, the benefits business, helping employers select the right benefits insurance for their people. I know that you have some, uh, some roots in, in finance, so how did that, uh, your experience in corporate finance really set you up for this role?

Chris Hamilton 1:49

Yeah, it's an interesting story. If you'd have told me 20 years ago this is what I'd be doing for a living, I would've thought you were crazy. I... Yeah, so I, I started my career in finance, uh, working with mid-size, and ultimately towards the end of my finance career was working with, uh, large regional, national, and even multinational companies. was h- at, at that point I was helping companies, um, f-fund, uh, acquisitions, mergers and acquisitions. And w- uh, it turned out, as, uh, one of my clients was a large national broker, who is somebody that I actually compete against now in this business. But they were a client of mine, and we were helping raise debt and equity to help them continue their acquisition strategy around the country. And this was around the time that the Affordable Care Act, AKA, uh, ACA or the, uh, Obamacare, a lot of the institutional investors were worried that the changes in the healthcare law were going to hurt their earnings, their cash flow, and ultimately their ability to pay dividends and repay debt and pay out, you know, um, cr-create a return on that investment. And so, uh, I sat through a couple of presentations, uh, um, with th-these executives, and ultimately there was an evening at dinner where the CFO was explaining how they monetize clients and how the, how money is made inside of brokerages. I thought to myself, wow, I, I, I understood the, the, the metrics, the economics of the business, but I didn't really understand what it meant when they're meeting with clients. And I'm not gonna paint everybody with a broad brush. Not every advisor out there, th- they're, they're not bad people. But when you work inside of a large national organization, the, the, the mandates are set at the executive level of the types of programming that we'll do and the types of programming that we won't, and how we're gonna monetize. And so the way people get paid is important. And for big firms, they try to aggregate business with large national carriers because not only can they earn commission and fees directly on that client's business, but they earn massive, massive bonuses at the end of the year. And that, in my opinion, just in this conversation with these executives, I clearly saw there was a conflict of interest where they were catering to the insurance company, not what the client individually needs. so as I thought about that, and, and mind you, at this point, you know, I've got a degree in finance and economics. I have an MBA. But at that point in time, I was the person that it came time for open enrollment, I would take my booklet and I would go to friends of mine that were in the industry to say, "Help me understand how this benefits stuff works It's complicated. My, wait, uh, what's the difference between a deductible and an out-of-pocket? And how do I find a doctor in-network? But wait, some of these costs go to deductible, but some of these costs go to out-of-pocket. Why doesn't it all make sense to me? And this, I laugh about that now because of where I'm at now, I'm actually teaching people how to use their benefits, how to design the benefits properly, how to fund the benefits properly. it's been a complete 180 for me. Uh, but what I realized very quickly, and people always ask, "What's the cost? Uh, what's the root cause of rising health insurance costs?" the cost of healthcare.

Sam 5:00

Yeah

Chris Hamilton 5:01

is a mechanism that we use to pay for healthcare. If you look at how everybody that participates in the system today, nobody wants healthcare and insurance costs to go down, because that means they make less money. The entire system is designed for costs to go up and everybody pay more so that everybody makes more. And I realized that in that d- at that dinner table, I realized this system is just completely misaligned. And what got me into this business was I thought to myself, if somebody could solve for the root cause of the problem, they'd be able to create a really good business would allow, uh, that would do something really good for their clients, which would allow those clients to do something really good for their employees, which is lower costs, better benefits, access to more care. And to me, at that point, I thought, "This is a really big, uh, economic issue. It's a societal issue."

Sam 5:58

Yeah

Chris Hamilton 5:59

if we could solve this company by company by company, we could actually create economic stimulus. Because if you think about the average American, or the median wage in America right now is, what, 63, $64,000? And if you look at a lot of mid-sized companies, they, their deductibles are three, four, five, maybe even $6,000 with- once you factor in out-of-pockets. That's 10% of somebody's earnings, plus what they pay for premiums.

Sam 6:23

Yeah

Chris Hamilton 6:23

what I mean by this, if we design this properly, we can reduce their out-of-pocket costs, we can reduce their monthly premiums. This is now money that if you put $6,000 back into somebody's pocket, they're probably gonna do what? Spend it, right?

Sam 6:36

Right

Chris Hamilton 6:37

They're, they're gonna buy cars, houses, clothing, uh, patronize local restaurants and retailers. I

Sam 6:43

Mm-hmm.

Chris Hamilton 6:44

real money at scale that can be put to work inside of our economy. And I, I had that thought, and I thought, "Okay, this is..." I, I... For the first time, I had a passion about something that I was gonna have the opportunity to go build, and that's ultimately, that's a long way around the barn, but that's how I got into this business.

Sam 7:05

No, that's fascinating. I mean, right now you're, you're right. I mean, you're just looking at, uh, healthcare in the United States. I mean, it's a, it's basically a transfer of wealth from employees and employers to the pockets of big insurance companies and, and medical professionals. And, and I think that, of course, um, um, you know, there is a better way of doing that of... And, and people have been working on this forever. But so what, what have you discovered, Chris? What is the better, better way forward?

Chris Hamilton 7:31

Yeah, so I think it's important to talk about what's, what's happened really quick. So to the

Sam 7:35

Okay

Chris Hamilton 7:35

listener, I, I meet with executives every day all around the country, and when I start explaining what's happened in our ec- our healthcare economy and insurance economy really over the last 20 to 30 years, nine times out of 10 people are shocked. They're like, "Oh, I had no idea that's how this worked." I think it's important just for the average listener to, to kind of break down in a summary format what's taken place, because it'll make a lot of sense to especially anybody that's in, that understands business strategy. So, i- if you think back 25, pre-ACA, pre-Affordable Care Act, uh, uh, early 2000s, we had 12 to 15 different health insurance companies. Post-ACA to today, right, we're June of 2026, we've got four major commercial health insurance companies that offer health insurance to employers. You can name them, right? Just we call them the BUCAs or the Cubas, Cigna, United, Blue, uh, Aetna, right? The, not much competition,

Sam 8:36

Right

Chris Hamilton 8:37

right? and I wanna talk, I'll, uh, let's talk about why that's happened, right? The, the Affordable Care Act was really complex. There were, it shook out a lot of the weaker players, the smaller players. There was consolidation that happened, so each of these big companies was able to go out and buy up other insurance companies for market share. But there's a provision in the Affordable Care Act that limits how much profit an insurance company can actually make on the premiums. It makes sense. don't want insurance companies taking all of our premium, denying all of our claims, and making all of our premium as profit. of makes sense, right?

Sam 9:10

Mm-hmm

Chris Hamilton 9:11

but if you're a publicly traded company, which most of these are, they report to shareholders, they've got to show growth and earnings. You're looking at each other around the table. Do you wanna make 15%, which is, for large companies, that's all they can make, is 15% of the premium in total. So if they're taking in a million or a billion dollars of premium, they've got to spend 85 cents of those dollars, 85%, on our healthcare. Do you want that number, Sam, to be 15% of a million dollars or 15% of a trillion?

Sam 9:41

Yeah, you want it to be higher, right? Mm-hmm

Chris Hamilton 9:43

Immediately, this initial domino that's kicked over is this, uh, spiraling up of premiums, but they've gotta have some place to spend the money. So what do these insurance companies do? They vertically integrated. So they went out and bought healthcare companies that they could use to excessively bill themselves to show that they're spending the money, capture those profits in subsidiaries, and have justification to raise premiums for employers.

Sam 10:07

Mm-hmm.

Chris Hamilton 10:08

you a few examples of where insurance companies are doing that today, and some of that's gonna change, but everybody's familiar with pharmacy benefit managers. So what is a pharmacy benefit manager? What do they do? It used to be an independent organization that would go out and negotiate drugs, drug pricing at pharmacies in between manufacturers and pharmacies to make sure the insurance company and their members got a benefit, the best price It's be- it's, it's done the opposite now, where these have become pr- middlemen that capture profit in the form of excessive pricing for medications and rebates from drug manufacturers. So it's a profit center for the insurance companies. they've also vertically integrated into pharmacies, and some of them own retail pharmacies that we walk into every day. The, the, the... But they also own, um, specialty pharmacies. So the most expensive medications aren't being distributed at your local pharmacy. They're coming from a mail order pharmacy that the insurance company owns, and they can mark the price up and capture massive rebates on many of these medications. That's the leading driver of cost inside of a health insurance plan are these specialty drugs. But s- many of these insurance companies have gone even a step further to clinics, facilities, even owning physician practices. So you might go see a doctor that's owned by your insurance company who prescribes a drug that the insurance company prefers because they can make a bunch of money on it that's being filled at a pharmacy that the insurance company also owns. of it's being pushed back to the insurance company at inflated costs, at your renewal, your broker shows up and says, "Well, your, uh, your claims ratio is high. The amount of money that the insurance company has spent on your claims is, is, is elevated, therefore, we have to increase your premiums because of your, because of this." Meanwhile, they don't break out how much money was captured in transfer pricing and profits being captured into each of these subsidiaries. And we know this to be true because when you partially self-fund a group, a, an employer, get claims level detailed access to what's being purchased, what price is being purchased, and you can benchmark that. But if you're a mid-size or a smaller employer listening to this, you don't get that level of detail, so you just have to take as truth of gospel from the insurance company that, yep, they spent a bunch of money, and yep, they're gonna increase my premiums and no visibility. Now name something in your, in a business, Sam, you're a businessman, where it might be your second or third largest expense in a given year you don't have visibility into what you're buying, what you're paying, or the ability to determine is it a fair price

Sam 12:43

Yeah, that's crazy. I mean, it's, you have no, no control. It's hard to, to, uh, run a business when you can't forecast effectively, and it's just, yeah

Chris Hamilton 12:53

Yeah. So, uh, that's the... what we're seeing going on inside of the health insurance model. Something similar is happening inside of healthcare, which is pre-Affordable Care Act. If you go back to the late '90s, early 2000s, I'm just thinking about my home market here, I'm in Dallas-Fort Worth, but you could take this, uh, and, and the, the model, uh, is the same in just about every major city in the United States. There used to be three, four, five hospital systems that would operate, and now you've... in most markets you have one to two. Some markets you, you only have one hospital. Uh, I was meeting with an employer yesterday in Florida, and in their city they have one single hospital, and their rates continue to go up, and it's because that hospital... This is where health insurance and healthcare tie together. hospital systems have gotten so big, the insurance companies can't afford to not have them in the network or they lose employers.

Sam 13:48

Makes sense. Yeah

Chris Hamilton 13:49

if, if you think about this, the really popular hospital,

Sam 13:52

Mm-hmm.

Chris Hamilton 13:53

the, that hospital drops out of network, all the employees are gonna tell the employer, "Change to a different insurance company because our hospital is not in-network." Well, the hospitals know this, and not only have they consolidated to create these massive hospital systems, but they've also vertically integrated. They've purchased physician practices, primary care, specialty practices, oncology, um, OBGYNs, uh, f- uh, imaging facilities, surgical centers. They... th- the goal for hospitals is that no matter where you enter their hospital facility, whether through primary care or a specialist, they're gonna be able to take care of you 360 degrees. "Whatever you need, we can take care of you here." Uh, if... once you enter the system, they'll never refer you to another hospital or another group. They wanna own the patient experience, and that allows them to do two things: monetize it at every step, but two, they're that much more important to the insurance companies to not let drop out of network. And so they're partic- they're, they're actually contributing... And I'm not saying hospitals are bad. I wanna be... ma- make this point very clear. Hospitals are stuck between a rock and a hard place. And I may be getting a little too deep, but this is really important for people to understand,

Sam 15:03

Mm-hmm.

Chris Hamilton 15:03

in this political environment where healthcare has become highly politicized. I think all of us would agree we want the same things. We want access to affordable healthcare, we want access to doctors, we want access to medications. Uh, these are important things that it's a bipartisan issue. Now, the solution is, is different. But anybody that's talking about single-payer Medicare for All, you need to understand Medicare and Medicaid is why commercial employers and commercial insurers, uh, insureds are paying exponentially more every single year. Because what the g- what hospitals... If you look at some hospitals and, and some hospital financials are, are public, y- many of them are 50, 60, 70% government paid. That means si- 50, 60, 70% of their patients are on Medicare Medicare, Medicaid, military insurance like TRICARE, right? The government doesn't negotiate. The government dictates the pricing. If you're a nonprofit, not, or, or not-for-profit, you're a research institute, you take Medicare or Medicaid. so you're, they're forced to take these patients at a, at a, at a, a, a pr- a fixed price from the government. There's no negotiation. Well, there's been a lot of talk about cuts to Medicaid. Uh, Medicare only grows anywhere from flat to 1 to 3% a year. Meanwhile, operating costs of these businesses for hospitals are going up 8 to 10% a year. Doesn't take a mathematician to figure out that at some point the profitability inverts. And so if you can't negotiate with the government, and they make up 50 to 70% of your payer mix or your patient mix, can you negotiate with? It's Blue Cross United,

Sam 16:41

Yep

Chris Hamilton 16:41

Aetna who is providing the insurance to employers. And so we're basically all as employers and employees paying a hidden tax by the government based on the way they pay, and I think that's important to understand because if we wanna flip to a completely Medicare-paid system, and this isn't the topic of conversation, but I think it's important to insert it here because what I'm telling you right now, p- the, the first switch is people say, "Well, we should just go to Medicare for all. That'll solve the problem." No, no, no, no, it's gonna make the problem way worse

Sam 17:09

Yeah

Chris Hamilton 17:10

because you're gonna have limits of care, and that...

Sam 17:13

Right

Chris Hamilton 17:14

that that's, that's, uh, that's, uh, that's fear-mongering. It's not

Sam 17:17

That's not... I, I hear that from, uh, foreign, uh, employers a l- all the time, and their, and their employees complain that, you know, they have to wait six, six months to get in to see a doctor. And some of them in, in Canada get frustrated and then just c- cross the border here to U- and pay out of pocket, uh, just so they can get a, uh, an appointment before they die.

Chris Hamilton 17:37

Yeah. Well, actually, I was on a show, uh, another show like this one. Uh, a business owner told me the story of his dad who had been diagnosed with cancer in Canada, they said it was gonna take seven to nine months for him to be able to start his treatment because they just didn't have either the budget or the capacity to treat him, so he came to the United States. He came into California and got treated, and l- miraculously, you know, because he was able to get in in time, uh, w- was, was cured. So it's, it's not an easy problem to solve,

Sam 18:08

Right

Chris Hamilton 18:09

it's important to just let people know, as I start explaining these things, it is a natural tendency for people to say, "Well, screw this system. Let's just go to single-payer." I think it's important... There, there is some validity to having maybe a larger government role or, or, or an optionality, but it's not gonna be the solution unless there's a complete reform and overhaul of the way the government pays for

Sam 18:31

Well, you just took us through a journey where the, the, uh, the government tried to fix it. The ACA plan actually created new problems, right? So, so what do we, where...

Chris Hamilton 18:41

been

Sam 18:42

What's that?

Chris Hamilton 18:42

It might have... There's, uh, I'm not a conspiracy theorist, but a lot of people have a, an opinion that maybe that was by design

Sam 18:50

Yeah. It's unfortunate. Yeah, the, the, uh, uh, I mean, we're paying with, uh, playing with people's lives here, so, so hopefully that's not the case, but it wouldn't surprise me if there's some of that, uh, going on. But, uh, let's, let's switch the conversation back to, uh, what you provide a- and to help employers actually figure this out in a way that's gonna help them as, as an employer be stronger and also help their employees get the care that they need

Chris Hamilton 19:19

Yeah, absolutely. Well, the, the number one thing, I'll go back to what I said that got me into this business, is we've gotta understand what drives insurance

Sam 19:26

Mm-hmm.

Chris Hamilton 19:27

It's claims. Whether you're talking about homeowners insurance, and nationally rates are going up on homeowners. Why? Because there's floods, fires, hurricanes, hail, catastrophic loss. In different parts of the country, insurers are paying for that. Same with autos, As these cars have gotten more expensive to fix and people are having crashes, insurance rates are going up. The same exact thing is true for healthcare as healthcare costs go up. So medications, w- the, the, the prices that are paid by insurance companies to go in to have babies, and surgeries, and see doctors, all of those things in aggregate as they accumulate, um, are- go up, we've gotta raise the price of insurance. So the natural thing to s- to, to look at is are there things that can be adjusted to not only minimize the cost or reduce the cost, but in the process, can we create more access? And, and it turns out the answer is yes, which is so counterintuitive. When you... If we start talking about, um, particularly here in our society, if you pay more for something, do you generally get better quality? And for, in a lot of situations, the answer is yes. But healthcare is, it's like a, it, it, it's compl- It, it just boggles the mind that highest priced things generally aren't the highest quality. In fact, when you look at data, if you look at the median price of, of something, so you take a hip replacement, or a shoulder surgery, or a baby birth, or a gallbladder removal, that median price or just a click below the median price is where you're gonna get the best quality providers. Yeah.

Sam 21:06

Justine

Chris Hamilton 21:06

is that? It's because they're typically doing, uh, the procedures at scale. So that's the, the hip replacement. I had one of these in January of '20. The h- the, the... And I interviewed multiple surgeons before I did this. The, the, the gentleman that I saw could have done this in his sleep because he was doing 5 to 10 a week, and other, uh, surgeons I talked to maybe did four or five a month.

Sam 21:31

Yeah. Mm-hmm

Chris Hamilton 21:32

they're, so these, the, the highly skilled, high volume providers, they're blocking OR- big blocks of OR time. They're, they have a ton of experience. They've got this at scale. They don't char- they don't necessarily charge as much, and it's just a little bit counterintuitive, uh, to

Sam 21:46

Well, yeah, exactly. And as, and as a, uh, a patient, who do you wanna see? Do you wanna go see a specialist that's, that does these all day long, or do you wanna go see somebody that does it once a month?

Chris Hamilton 21:57

That's right. That's right. So the number one thing is how do we address the, the, the cost of the care that we buy? Uh, Sam, remind me, what part of the country are you in?

Sam 22:05

I'm in, uh, currently I'm in the, in the, uh, uh, Midwest

Chris Hamilton 22:08

Okay. Um, so I'm not sure what gas prices are out there. I was thinking, uh, I, I was gonna make sure you weren't, like, in California or New York. I'm in Texas, so, uh, right now with everything going on, gas prices are up. They're a high $3. But if I was to say to you, "Sam, hey, um, you're getting ready to go on a road trip. I'm gonna sell you, uh, gas at $10 a gallon," would, would you buy it from me?

Sam 22:31

Pretty expensive. They'd have to be pretty desperate

Chris Hamilton 22:34

Right. Because you can probably buy it right across the street from where you're at right now for what? What, what does gas run where you're

Sam 22:39

Yeah, I can go across the street and get it. Yeah, I can get it for five bucks a gallon, right? So half the price. I

Chris Hamilton 22:44

Five.

Sam 22:44

currently.

Chris Hamilton 22:45

that's pretty high. So

Sam 22:46

Yeah

Chris Hamilton 22:47

um, so, uh, basically I'm trying to charge you double,

Sam 22:50

Yep

Chris Hamilton 22:50

you can pay half, you're pretty smart, so you're gonna go pay... If I offered you 10 or $15 a gallon of gas, you're not gonna buy it because you know you can get it cheaper elsewhere. The same thing is true for medications, and many people realize this, or starting to realize this, that this pharmacy's gonna charge me 15 or $50 for a medication that I can get for 5 or 25 at a different pharmacy. that's a question that I often get is why are ph- uh, drug prices so different just going across the street? Or why does one hip replacement cost $60,000 but I can get it across the street for 20? Or an MRI might cost $5,000 at one facility or 500 somewhere else. But think about the insurance experience. Anybody listening to this has insurance, right? If you've got insurance, you've got an ID card. Does that ID card tell you where to go?

Sam 23:39

No, sure. Let's

Chris Hamilton 23:40

card tell you what it's gonna cost?

Sam 23:43

No, it does not. That's right. So, so this-

Chris Hamilton 23:46

do you typically, when, when do you typically find out when s- what something's gonna cost? Once you've scheduled it, you've handed your card, and they maybe don't even tell you what it costs until after you've had it done.

Sam 23:55

Correct. Yes. Mm-hmm. Yep. And then you have to wonder why there's, uh, extra charges on your bills that you didn't expect.

Chris Hamilton 24:02

That's

Sam 24:03

So there's a lot there

Chris Hamilton 24:04

So w- what if you built an insurance plan vetted the market for your, your employees and their family members and said, "Look- Here's the best quality, here's the best price. If you go here, we can waive your costs, meaning no copay no deductible, no out-of-pocket cost. Maybe there's a nominal copay, uh, but if you go somewhere else, the costs increase based on lower quality or higher cost. You're gonna share more of that cost if you go to higher cost providers that are, that are lower quality. You can a- that data's becoming available, and you can design those plans. So we wanna create incentives. We wanna, uh... I mentioned the health insurance system today as it is, the traditional model, there's a lot of misalignment, inefficiency, and conflicts of interest. goal for employers is, can we create a system that aligns everybody's interests, not just the insurance company with the employer, but the employer to the employee? Because at the end of the day, I mentioned that, that median, uh, income of a worker, if you're able to save them $6,000 of an out-of-pocket cost, that becomes very meaningful to them. And when you talk about retention and recruitment and retention, becomes very meaningful if they think to themselves, "I'm being offered more money from another employer, but they certainly don't offer the type of access and cost mitigation to my family my current employer does." the goal now is, let's design a custom plan that looks and feels like what employees have always gotten used to, but instead of doing something to an employee, and what I mean by that is, what typically happens when insurance costs come in at renewal, so rates go up 10, 20%, the employer's now figuring out, "Okay, how do I get this premium increase down? Well, I'm gonna increase deductibles. I'm gonna increase the out-of-pocket. I'm gonna reduce benefits. then I also may shift some of the premium cost to the employee." So where they were paying $50 before, now they're paying 60. So they just got a 20% increase out of their out-of-pocket, or, or their out of, uh, paycheck costs. Those are doing th- things to the employee. But when we think about doing something for the employee, which is an important distinction, is we're gonna... We'll, we'll keep your plan designs the same. You still have your deductibles and out-of-pockets, but if you wanna go see these doctors, you wanna go to these hospitals, you wanna get, Mark Cuban Cost Plus, m- um, a lot of people are familiar with what Mark Cuban's doing in the pharmacy world. There are programs like that that you add to your benefits. access those. We'll give all that to you for free, because the insurance, which is the employer at the end of the day, the, the insurance company's saving money, we're gonna share that savings with you by reducing your out-of-pocket. Everybody wins. The insurance company wins, the employer wins, the employee wins. Let's create alignment of incentives so that everybody wants the same thing, which is access to care. We don't wanna prevent someb- wh- what sense in the world does that make to prevent somebody from getting the necessary medication that can save their life? Or if it's a chronic medication them healthy. Nobody wins by denying that medication, not in the right system if it's designed properly. Let's make sure everybody has easy access to all that. 'Cause I would tell you, somebody taking a basic medication that's gonna keep them out of a hospital from whether it's having a diabetic reaction or if it's having a heart attack or a stroke, we should be giving that medication to people because you save money downstream. But let's just align this so that it works. So that's, that, that's the summary of this. Now, y- your, your next question's probably gonna be, 'cause when I explain this to employers, they usually say, "Okay, well how do I do that?"

Sam 27:39

Yeah

Chris Hamilton 27:40

great question. you're in the traditional system, so what we would consider a fully insured plan, I just described how insurance companies make money. They don't give you many choices. Sign on the dotted line for your fully insured insurance plan, and you're gonna get my network, you're gonna get my pharmacy benefit manager, you're gonna get my pharmacies, and if I own physicians, those are also gonna be there. But I'm not gonna tell you which ones I own. It's just gonna be up to luck and randomness that your employees may walk in and see them. It's a closed system. And oh, by the way, Sam, I'm not gonna share any information with you 'cause I don't want you to figure out what I'm doing to you or your employees. I'm gonna hide it all behind this veil of secrecy.

Sam 28:23

Right. That is not the way to go, right?

Chris Hamilton 28:25

When I just described that out loud, as I'm saying it out loud, in what world does that make sense? Some companies are spending a million, $3 million, $10 million for health insurance. Like, what world did we buy... It's a division of many of these companies. If you run a $5 million a year business, a service business, and you spend 800,000 to a million dollars, think ab- as a percentage of your revenue, that's a division of your company. But most people don't think of it as a division of their company, and they certainly don't run it like a division of their company. So

Sam 28:53

Yeah, that's the, that's the thing is, is a lot of, uh, employers treat, uh, insurance as, or health insurance as, as something that happens to them. You know? It's, uh, something that they, they have to pay just to, to be competitive, not aware of, of the options that exist in the, in the marketplace.

Chris Hamilton 29:09

Right. And so now the, now what I am teaching employers and empowering employers is how to take back that control.

Sam 29:17

Mm-hmm.

Chris Hamilton 29:17

And if you work with an advisor like me, and it doesn't have to be me, they're... W- the thing that I am most encouraged about over the last 12 years, when I started doing this 12 years ago, nobody was talking about it, and everybody said I was crazy. In fact, people in the industry mocked me. Some people did, like, "Oh, there goes Chris, the guy that's gonna fix healthcare." And the reality is the fix is out there, but it's employers have to know how to access it. They gotta go to the right people. And the thing that's most inspiring and I'm most hopeful about is there are an, there are armies of people just like me all around this country, I collaborate with many of them, that are doing this kind of work. And, and so the, the, the answer is to an employer that wants to take back control and get out of this rat race of just no data, no transparency, being taken advantage of, to build their custom plan. And that's also, I call it a non-profit health plan, 'cause most employers are not offering health insurance for a profit. A- and, and, and I, I do that intentionally, and then I tell them, when, when I say that to an executive and they go, "Yeah, that makes total sense. We should be doing a non-profit health plan," I say, "Well, great. That's called a self-funded health plan." It's a self-funded health plan. So let's, let's strip out as much of the waste and profit out of this as we can, and let's do it properly, 'cause you're never... Unless you're, um, Amazon or you're Walmart or you're Home Depot, you're not truly self-funded. There's always, always insurance behind there that stands behind the, the employer. There's a big misconception that self-funding is risky or riskier, and in fact, mathematically, if you do it properly, it's actually safer than being fully insured in a

Sam 30:57

So what, what size of, what size of organization is, is best for a self-funded plan?

Chris Hamilton 31:02

W- well, uh, you know, 10 years ago people would say if you didn't have, uh, more than 1,000, 500 to 1,000 employees, it wouldn't make sense. We see employers s- uh, at 50, even slightly below 50 employees on their plan that are doing it,

Sam 31:15

Okay

Chris Hamilton 31:15

um, nationally, uh, consistently. and we have clients in that size ra- I have clients that range anywhere between 50 employees that are self-funded, partially self-funded, I'll use that... Anyth- anytime I say self-funded in this context, an insurance company that's gonna stand behind catastrophic claims, so you're never, uh, at it alone. You're never fully self-funded. So we have clients that are at 50, and I, my, m- probably my largest client is about 7,000 employees. I'm not really competing in the jumbo, uh, you know, Fortune fi- that's not my niche. But that's a good range. You know, 50 to 1,000 employees is probably really where our- the majority of our business is.

Sam 31:54

Okay. But tell me in a self-funded plan, if you have, um, you know, a, a few employees that develop cancer, God forbid, I mean, so how is that gonna impact your situation?

Chris Hamilton 32:04

Yeah, so the number... Uh, in, in, in reality, in a self-funded plan, if it's designed properly, you're actually gonna pay less when somebody develops cancer, and you're gonna pay less w- if you have a million-dollar prem- premature baby because, uh, let's just use, um... I'm gonna use just round numbers here, okay? Um, somebody's paying a dollars in health insurance premium, the company, right? So between the employer and the employees, the total premium is million dollars a year, and somebody goes in and develops cancer, and it's gonna cost half a million dollars for one person. So let's just assume they were at a run rate that was gonna be about $800,000 for their claims 'cause there's about a 20% margin in there. Well, now all of a sudden, because there's a half a million dollar claim, insurance company's gonna come back and say, "Well, we just spent $1.3 million on your healthcare That's 130% loss ratio, right? You just do the 1.3 divided by the million. now gotta give you a 50% increase to kinda get you back in line. That's

Sam 33:05

Mm-hmm.

Chris Hamilton 33:06

actually how the math should work, but that's generally what they'll show you, is 130% loss ratio, we're gonna give you a 40 to 50% increase to help cover, 'cause that cancer patient probably is not resolved in the, in that first year. It's gonna be a 18, 24, 36-month battle, right?

Sam 33:22

Mm-hmm.

Chris Hamilton 33:23

So we know that's gonna be ongoing. Well, you're in a partially self-insured plan, for an employer of that size with a m- million dollars in premium, they might take the first $50,000 of cost on all of their members. that member that incurs or undergoes cancer treatment that's half a million dollars, the company's only gonna pay $50,000 for that claim, and the insurance company that stands behind the employer, so your company, Sam, is gonna pay the other $450,000. We've just shifted the risk to somebody else. Now, y- anybody listening to this is gonna say, "Well, what happens at the renewal, though? Are they just gonna increase my rates? You know, if I pay... In a, in a million-dollar plan, if I paid them 200,000 in premium and they paid $450,000 of my claims, I mean, is my premium gonna triple?" Well, this goes back to designing the contract to protect the employer, if you do it right, it makes it safer. you can put rate caps for renewals that, that linger for in So I just mentioned an employer that's got about a million dollars in premium. In a self-insured plan, they're only gonna pay $200,000 for stop loss insurance, so that's the insurance company that stands behind an employer, okay?

Sam 34:34

Yeah

Chris Hamilton 34:35

They paid $450,000 in claims. To just even get that right sized up, they've gotta triple my premiums. That's a 300% increase just to get it roughly on par with what they've paid, right?

Sam 34:45

Mm-hmm.

Chris Hamilton 34:46

If you desi- There are many carriers out there that will do this and guarantee that they can't increase your premium any more than 30%.

Sam 34:54

Okay

Chris Hamilton 34:55

So you take $200,000 in premium, 30%, it's only $60,000.

Sam 34:59

But then they can, can they, but they can drop you, right? They can drop you

Chris Hamilton 35:04

No, you get that in writing, too. It's guaranteed renewable.

Sam 35:07

Mm-hmm.

Chris Hamilton 35:07

be dropped. Guaranteed renewable. So worst case scenario, 30% on $200,000 of stop loss premium is what? $60,000. $60,000 of a million dollars in premium or total spend is what? 6%. So I just mathematically showed you how to make this cancer c- claim at now more cost-effective. Now, the other thing is, can we manage that half a million dollar cost for tr- for cancer that cancer claim less expensive? And the answer is yes, the most expensive part of cancer treatment is not the surgery to remove the tumor, it's the ongoing cancer infusions, the J-code drugs, the, the medications that are prescribed to members. So we just talked about pharmacy one, it's $50 for the medicine, pharmacy two, it's $25 for the medicine. The same thing is true for these cancer medications. And so there's different strategies they use to help reduce the cost without changing the provider that the member's going to. You don't wanna change somebody's oncologist. That's really important. That's a very sensitive and intimate relationship with a provider. You don't wanna disrupt that. But doesn't mean that we can't get their medications at a better price and make sure that the member's getting exactly what they need and we're paying less for it. anybody that I talk to seems to think, "Yeah, that makes total common sense." If it's gonna be $50,000 for this and you can get it for 20 or 25 and it's the exact same medication from the same maker, makes total sense. Like, who wouldn't wanna do that? So that just gives you a concept of where employers are going and what they're doing with their claims to help reduce the cost

Sam 36:40

Mm-hmm. So it's really making sure that, uh, you have proper contract design and, uh, management, uh, going forward. So it's not something that's... A- and, and so there's questions that, that, uh, um, I, I mean, a lot of employers are kind of tied to their broker. Like, they feel like, "Oh, I've had a relationship with this guy forever," and they, they're reluctant to kind of change or switch. But what are the, what are the questions that the, uh, employer should be asking their broker to kind of get them on, on the right path?

Chris Hamilton 37:12

Yeah, I, you know, I think that's a w- great question. I think the first thing you've gotta figure out is what type of broker that you're working with, and I'm not trying to cast stones in a glass house here, but I just wanna be transparent. Because just like in any profession, it doesn't matter if you're talking about plumbers or if you're talking about lawyers or if you're talking about doctors, people have specialties, what, what their niche is, what they're passionate about, what they're good at. There are multiple types of health insurance brokers out there. There are some that are just very much in the traditional market. They represent insurance companies, and they will go get you quotes from those big insurance companies. We do business with the big insurance companies even, but surprisingly, people ask me, "Are you able to do business with them as much as you talk about them?" Yeah, they want volume, and some people specialize in that. But there are other people that have a niche to know how to design these customized self-funded health plans like we do, they know what to look for. They know how to design them. They know what to request. They know what to demand for their employers. They know how to gauge a, an employer's risk tolerance. So you need to be asking questions around that. So if somebody wants to find somebody that, uh, can transact the type of work that I'm talking about, the questions you should ask W- what's going on in the healthcare market that's driving costs up? What's going on in the health insurance market that's driving costs up? Okay? And the reason... I just explained it to the employer, now they know what to look for. You need somebody that can articulate what's happening at the level I just gave you. If they're, if they're saying what I'm saying to you, somebody that is, that's definitely leaning in the right direction. Now, the next question you ask, "Okay, now that you just explained to me what's going on, what are leading employers doing to solve that?" And they should be des- describing customized plans that address the root cause, which is claims, healthcare claims, and that'll tell you that you're talking to somebody that really is staying abreast of what's going on in the market and what to do about it. I- if you talk to somebody, you, you'll get... Anybody listening to this, there's somebody listening to this right now that has gotten this response. I had somebody on, uh, people on my team that were like this. Uh, what's going on in the market? "Well, it's just this, you know, there's, costs are going up and, you know, it just, it kinda is what it is. There's not a lot of choices out there. We can shop these different insurance companies against each other." Wrong answer. Wrong

Sam 39:41

Yeah

Chris Hamilton 39:41

because the solutions have been out there well over a decade, probably 15 years. In fact, there are more and more hospitals and providers want to work around... They're wanting to work with employers that are doing what I'm talking about because they wanna get rid of, they wanna bypass the traditional insurance companies, and they're willing to give better prices to employers and their health insurance plans if you do it. Trust me, the hospitals and providers, physicians are g- uh, they're tired of insurance companies. They hate it. They've had to build massive bureaucracies internally, billing departments, and, uh, um, um, appeals departments, and just collections departments. It's just become this massive apparatus that the, it's a, it's bloat administratively. It's waste. It's creating waste in the system dealing with insurance companies. And anybody that's listening to this, if you've ever paid cash for something, gone to a doctor and said, "Hey, uh, w- I know with insurance my deductible is X and my out-of-pocket's Y, so it's gonna cost me five grand. If I paid you cash, what would you take for it?" "Oh, uh, we'll, we'll, we'll give half the price or a third of the price." Sam, what, what that's telling me is that they value the time value of money, getting their money now, having to fight it, and the administrative bloat is worth at least 50% off.

Sam 41:01

Yeah.

Chris Hamilton 41:01

pretty, pretty incredible when you think

Sam 41:03

It is. I found that myself. Yeah, it is crazy the difference. Well, th- this, uh, you know, Chris, uh, this is, you know, highly valuable. I know our listeners out there are, are just eating this up. So I know that you mentioned, uh, that you have y- y- you, uh, have a YouTube channel, and, and so where, where can, where can, um, leaders that are listening in learn more and, and find you?

Chris Hamilton 41:28

Um, yeah, so I, I create content. I create short form content on... I never thought I'd be on TikTok, but that's, yeah, I'm on T- uh, TikTok, LinkedIn, YouTube, just most of the social channels. The best place to find me gonna be my website. It's, it's Chris Hamilton, I-T-S Chris Hamilton.com. Uh, there's case studies there. There's access to, um, each of the social channels that I'm on, depending on what you're looking for. Long form content, I have a... It's not a podcast, it's more of a solo cast, where I'll take common themes. You know, what, what is a self-insurance? What's a TPA? What's a PBM? How to design custom benefits. I break that down in longer form content on YouTube. But the It's Chris Hamilton website will get you to any of the type of content or, uh, information that you wanna learn about. And if an employer's out there and they're just looking for a, a, a different set of opinions or eyes, uh, on the plan that they're running, uh, I'm happy to make connections. I've got literally, uh, counterparts of mine that I collaborate with in all 50 states, Alaska and Hawaii. So if anybody's wanting t- a local connection to be made, I'm happy to do that or, uh, provide advice, um, just as a second opinion, um, for anybody that's interested in something like that.

Sam 42:39

Great. So for our listeners out there, Chris has helped us reframe and understand how benefits in health and welfare actually work and, uh, some of the flaws in the system and how they can be solved. So, uh, the big idea here is, is that if we navigate around these, these issues, retention, uh, for your employees can be enhanced by inc- by providing more valuable plans that are customized to their needs. So it comes into designing, uh, plans in, in those contracts effectively, and a person like Chris can make that happen. So, uh, we've heard that, uh, a, a lot of different issues here that, uh, I'd love to dive in with you in a, in a later time, Chris, but, uh, thank you so much for, for joining us today

Chris Hamilton 43:27

Yeah, I appreciate you having me. I'd love to come back on if you wanna continue the conversation. Thank you

Sam 43:31

Great. Thank you. And for our listeners out there, if this conversation gave you a new lens, uh, please follow the show and, uh, share this episode, uh, or, uh, visit our YouTube channel for other strategy insights. But, uh, uh, this is, this is, uh, very revealing on, on what you need to do with your benefl- benefit plan, uh, in the next review, renewal cycle. And so I implore you to go out there and, and, uh, reach out to professionals like Chris and his network. All right. Well, take care, and we'll see you next week on The People Strategy Forum. Thanks everyone