If you could see a ranking of business owners and executives who best control healthcare costs and then designate the “top 1%,” you would have to include David, the owner of a retail chain in the Midwest.
David is a “one percenter” in controlling healthcare costs for three reasons:
1) He commits to thinking rationally about healthcare. 100% of rational, fact-driven business owners and executives tend not to view healthcare costs with the same rational approach they apply to other significant expenses.
Unlike other expenses, health insurance directly affects employees who are seldom educated adequately on how win/win scenarios can benefit both employee and employer at the same time. Usually the employee expects the employer to have the best answers but the employer is under-resourced and assumes that a commissioned sales person, the health insurance broker, will be able to figure it out with input from the HR department. The HR department is motivated to have all employees happy and not complaining. HR is also motivated to show costs are not escalating dramatically year over year. All brokers want to keep the client and most want to keep the current level of commission – a motivation that automatically separates the broker’s interests from the client’s.
“Some owners see a broker the way tribal villagers see the village shaman,” David shared with me. “He’s the guy who interprets the dark secrets, and saves the villagers who wholly trust him alone to deal with the things they don’t understand. This gives them security.” After gaining a full understanding of healthcare costs without the help of his previous retail broker, David had an interesting way of dealing with that broker. “I threw him off the porch,” he said.
2) He has owner/HR alignment. Both David and his HR department must: a) share an objective understanding of all healthcare cost drivers, and b) master the best alternatives for reducing costs. Their ability to be fully engaged and aligned, which is more than mere agreement, is the second factor that makes David a member of the one percent.
3) His total cost puts him in the one percent. The total cost of healthcare is more than just the premium amounts. The true cost of healthcare is:
TOTAL PREMIUMS FOR THE EMPLOYEE ONLY (EMPLOYER & EMPLOYEE SHARE)
ALL ADDITIONAL PREMIUMS PAID BY EMPLOEE OR EMPLOYER TO COVER DEPENDENTS
ALL DEDUCTIBLES AND COPAYS PAID BY THE EMPLOYER AND THE EMPLOYEE.
Add up those three component numbers then divide the sum by the total number of employees in your plan. What do you get?
For companies in the bottom 50% of cost-efficiency, this number will be greater than $12,000 per employee per year (PEPY).
For companies in the top 50%, this number may be closer to $8,000 PEPY.
One percenters like David are well under $5,000 PEPY.
If you don’t already know your full cost on a PEPY basis, do the math now. It might be true that no one besides your retail broker could possibly reduce costs any lower and without sacrificing quality, but why risk it?
Before your company commits to another year of unnecessarily high costs, contact DCI. Our solutions and strategies do not require you to switch brokers or networks and you don’t have to reduce coverage or increase employee deductibles. Our analyses give you the insight and power to be a one percenter!
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