Episode 100 - Benefits in the Round - Seth Denson, Chris Hamilton & Dennis Fowler

This roundtable discussion, featuring expert employee benefits consultants, provides an in-depth analysis of the current state and future trajectory of the employee benefits and healthcare industries. The central theme revolves around navigating the complexities of rising healthcare costs, the shifting power dynamics among major carriers, and the essential role of the modern advisor in guiding employers toward sustainable, high-quality benefit solutions. The conversation stresses the need for advanced data utilization, technological integration, and a fundamental shift in the advisor's focus from transactional sales to strategic business consulting.

A major focus of the discussion is the "convergence of three trends," primarily the aggressive vertical integration of major insurance carriers (payers) into the provider space. Carriers like United Healthcare and CVS/Aetna are amassing large armies of physicians, owning PBMs, and controlling specialty distribution, aiming to steer patients through their proprietary systems. The consultants view this as a potential conflict of interest that often leads to higher costs and a lack of control for employers. To combat this, the experts advocate for "deconstructing and reconstructing" the healthcare ecosystem, unbundling carrier services, and strategically rebundling them using independent, high-performing vendors. This approach leverages direct contracting, direct primary virtual care, and technology to achieve better outcomes and lower unit costs.

The consultants also delve into the critical need for enhanced business acumen among advisors. Success is defined not by selling insurance products, but by understanding the client's core business strategy, P&L, EBITDA, and labor market challenges. This elevated consultative approach requires asking better questions to identify, quantify, and solve business problems, with benefits being a crucial component of the solution. Furthermore, the discussion highlights the generational shift in the workforce, emphasizing that successful benefit plans must be "multilingual," catering to both older generations who prefer human interaction and younger generations who demand seamless, app-based virtual access and high financial literacy. The ultimate goal is to design plans that automate incentives, making the "right choice" (high quality, low cost) the easiest and most rewarding choice for the employee.

Detailed Key Takeaways

• Vertical Integration Creates Conflicts: Major carriers are vertically integrating by acquiring PBMs, specialty distribution, and provider groups (including physicians and facilities). This strategy aims to amass scale and steer patients, often resulting in misaligned incentives and higher costs for employers, necessitating independent advisory intervention.
• Reconstruct the Healthcare Ecosystem: Advisors must deconstruct the bundled carrier model and reconstruct a tailored ecosystem using independent vendors. This includes leveraging direct contracts for high-cost services (like MRIs or surgeries) and implementing direct primary virtual care to increase utilization of lower-cost, preventative services.
• Data is the New Currency, but Action is Key: The industry is currently "informed idiots," possessing vast amounts of claims, EMR, and hospital data but lacking the clinical capability and strategic direction to act on it effectively. Robust data engineering and clinical analysis are essential to move beyond simple cost containment.
• Focus on Population Health Management: Meaningful cost reduction comes from identifying and managing the small percentage of "complex patients" (e.g., those with multiple comorbidities like diabetes and heart disease) who drive the majority of spend. This requires integrating all data sources and providing dedicated clinical quarterbacking for these individuals.
• Advisor Role Must Shift to Consulting: The modern advisor must transition from a transactional "broker" to a strategic "consultant" or "advisor." This involves understanding the client's business strategy (P&L, EBITDA, talent retention) before discussing insurance specifics, and operating on a fee-based model to eliminate conflicts of interest inherent in commission-based structures.
• Incentives Drive Consumerism: Effective plan design requires strong incentives (carrots and sticks). The most successful plans make the high-quality, low-cost option free for employees, while making the non-compliant or high-cost option very painful (high deductibles). This foundational component is necessary to drive true consumerism.
• Be a Specialist, Not a Generalist: Consultants should focus on what they excel at (being an expert) and be willing to bring in other experts (vendors, partners) for areas outside their core competency. The value lies in identifying the problem, quantifying it, and revealing the solution, not in controlling every piece of the solution.
• Small Group Market Opportunity: The small group market (50-1000 employees) is underserved and ripe for disruption. Captives and hybrid self-funded models offer these employers access to sophisticated risk management and cost control strategies previously reserved for large corporations.
• Preparation Leads to Confidence: Young advisors must prioritize preparation and continuous learning (business acumen, market trends) to build knowledge and confidence. This knowledge allows them to articulate complex solutions without arrogance and navigate the constant economic and legislative changes.
• Embrace Multilingual Benefit Delivery: Benefit communication and access must cater to generational preferences. While human concierges are vital for complex navigation, technology (apps, virtual care) is necessary to meet the demands of the younger, digitally native workforce.
• The Future of Advisory is Problem Solving: Technology (including AI/LLMs) will automate underwriting, placement, and network identification. The enduring value of the human advisor will be in asking the right questions, providing independent change management, and serving as the Arbiter of Independence against carrier conflicts.

Key Concepts

• Vertical Integration: The strategy where insurance carriers (payers) acquire or control entities across the healthcare supply chain, such as PBMs, specialty pharmacies, and provider groups/facilities.
• Informed Idiots: A term used to describe industry professionals who possess vast amounts of data but lack the strategic capability or clinical guidance to translate that data into actionable, cost-saving solutions.
• Deconstruction/Reconstruction: The process of breaking down the traditional, bundled carrier plan and rebuilding it with best-in-class, independent vendors (PBMs, TPAs, Direct Primary Care, etc.) to optimize cost and quality.
• Multilingual Benefits: Designing benefit access and communication strategies that cater to different generations—some requiring high-touch human interaction, others preferring virtual, app-based self-service.

Examples/Case Studies

• 100-Employee Success Story: A small company (100 employees) moved from a fully insured Blue Cross plan (facing a 30% increase) to a self-insured plan utilizing cost management strategies. Over five years, the company saved approximately $2 million (30% less than their initial fully insured rates) while simultaneously offering free healthcare access to their employees through strategic plan design.
• Acute Cost Steering: Successful strategies involve steering employees away from high-cost hospital settings for routine procedures. Example: Directing an employee to a specialized facility for a $400 MRI instead of allowing them to get the same service at a hospital for $2,000.
• Free vs. Painful Plan Design: An extreme example of incentive design where an employer offers completely free healthcare (zero copay, zero deductible) if the employee uses the preferred, high-quality, directly contracted providers, but imposes very high deductibles if the employee chooses to go outside the guided ecosystem.