Starbucks spends more on health insurance than coffee beans in 2010. ($300 million) That is almost 3% of total revenue. The impact of that spending on profits was even greater at nearly 5%. Ninety-eight percent of businesses in the United States have fewer than 100 employees. Most companies would not come close to $300 million in total revenue in a year. As a practical matter, Starbucks is a pretty large health insurance company since they are self-insured.
In most business negotiations, the more you buy, the more leverage you have in the negotiation—not so in healthcare. Companies like Starbucks pay the healthcare bills, but they pay an “ insurance company” to administer the claims. The insurance company acts as a third party administrator. They negotiate rates for services like CT scans and emergency room visits. with provider organizations. If your healthcare spend is $300 million, that should provide tremendous leverage, but it does not. Almost unbelievably, the negotiated price is often higher than the cash price. It is as if a customer buying one shovel is getting a better price than Walmart that buys hundreds of thousands of shovels. No business can successfully operate like that.
It gets worse. The big insurance companies who provide administrative services to you employer’s health plan do not even allow them to see what they are paying to various providers for different services. The data belongs to your employer by law under the new Consolidated Appropriations act. The big insurance companies are still fighting with your employer about access to the data. One of the tactics is to claim they cannot share patient data. Don’t be fooled. The data is de-identified. No one can link the data to you personally. If your employer cannot see the data, they don’t know the negotiated price is higher than the cash price. Your employer has a legal responsibility to see that your 401 k plan operates in your interest. Now he has a fiduciary obligation to see that your healthcare is effective and fairly priced. The legal responsibility does not fall on the insurance company. It falls on your employer. “Fines against health plans (your employer sponsors a health plan) and insurers of $100 per day per member for noncompliance are much larger than fines initially were for hospitals, which were raised from $300 per day initially to a maximum of just over $2 million annually for hospitals with more than 30 beds.”
Your company doesn’t need to remain a hostage to insurance companies that will not obey the law. There are 501 third party administration (TPA) companies in the United States who can manage your self-insured employer’s medical claims. I don’t just write about solutions to our health care system problems. I work on solutions for them. We already work with several TPAs who take the law seriously and they provide full access to this important claims data at the request of the employer. The company that I work for can access the data from the TPA and create a dashboard that your human relations staff has access to at any time. They can see in detail where the money is going, what it is being spent for and the amounts spent in each category. They can see how much they are paying for each service by location. There are also many stop-loss companies that can protect your employer from catastrophic claims. There are new solutions to this complicated problem.
Our company doesn’t just help you know your data. Patients with chronic diseases generate 86% of all healthcare costs. We identify the high-risk, high-cost patients with chronic diseases and provide the comprehensive services needed to improve health while reducing cost in collaboration with primary care doctors and work site clinics. We can save you money and provide the data that proves it. We can even help small employers come into compliance with the Consolidated Appropriations Act and related requirements. Contact me if you would like to discuss. wbestermann@congruityhealth.com
Thank you for this fascinating & disturbing post.
It seems to me that eventually the profit motive will need to be decoupled from health care. Although it would destroy the for-profit healthcare insurance industry, a single payer Medicare for all approach would have a salutary effect across the economy.
I’m curious about your take on Medicare for all, even if not implemented as single payer.
Yes, I’m in SC. We live over here in Johnston. Interesting to hear about the Alaskan system, for natives, by natives. There are multiple working models from other countries for universal healthcare, but the for-profit insurance companies have a financial lock on enough legislators to prevent reform.
I know seeing the inequality visible in our SC schools --in particular seeing kids without health insurance --turned me from someone who voted for W in 2000, to someone who campaigned for Bernie Sanders in 2016.
I don’t know what it’s going to take. We’ve had 2 opportunities to fix or improve the system -- the 2008 meltdown that briefly gave Obama a supermajority -- and CoVID. If Obama had included a public option in the ACA ... what could have been. And of course, CoVID horribly mismanaged by the Republicans ... a missed opportunity.
Thank you for your newsletter & the issues you draw attention to.