When it comes to health care, there's no such thing as a free lunch

Health insurance, especially in post-Affordable Care Act America, has become so expensive, so complicated, so nauseatingly nuanced that most employers (and most people in general) cannot stomach trying to figure it all out. So they don’t. Instead, employers have left everything to the big insurance companies, who then take advantage of their ignorance and their desire to stay that way.

In effect, they’ve been taking employees to dinner and sticking employers’ with the tab.

Allow me to elaborate.  

Say you’re an average employee, who decides to go out to your favorite fancier-than-usual restaurant. And what do you know, your big insurance vendor is there. Vendor waives you over like you’re old friends, invites you into their corner booth, and insists you sit down. To your shock and delight, Vendor informs you they will be picking up the tab! Nice. And now you look at the menu with increased vigor. Vendor insists you should order anything you want; and you know Vendor can afford it. So you pull out the wine list and get a bottle. You wrack up quite a bill at Vendor’s insistence, not even aware of the prices, as your restaurant menu doesn’t even have them (they rarely do!). 

When the check comes, Vendor won’t even let you see the bill. In fact, you can never see the bill that comes from the “restaurant.” You leave feeling full, with warm feelings towards Vendor. You don’t really know what the cost was. But you had to eat!

But, a few months later, you get a bill from Vendor. A big one. Because there’s no such thing as a free lunch (or free health care).

Obviously, the “restaurant” in this story is any health care provider, a hospital or doctor’s office. The employer, not even present for any of this, is often denied access to prices, or even any information about what the employee “ordered.” And in the world of copays, the employee is also in the dark about the actual costs of their health care until the bill comes many days (or months) later. As a result, employees make decisions they might not have made if they had all the information at the time of care. 

The point is, when employers leave all their health care decisions to a Big Vendor (Big Insurance, Big Hospital, and Big Pharma), employers are tricked into handing over their power and their right to transparency in exchange for relief from thinking about health insurance. 

Historically, employers have been enticed to pick up most of the tab due to tax incentives. Couple that with the fact that in the 80s, 90’s, and 2000’s, the employee deductible or copay was very low, so the employers weren’t concerned. All the restaurants were cheaper! 

Health plans’ rational response to profit-limiting attempts 

The Affordable Care Act attempted to control health care profits with the Medical Loss Ratio cap, which dictates that health insurers can keep 15% of their premiums. But this also incentivizes higher premiums in order to make more money. 

As a direct result of the ACA passing, in order for health insurance companies to maximize their profits for their shareholders, health care costs have gone up. Drastically. Higher health care costs yield a higher percentage of “non-care costs,” which includes profits. 

In 2000, health care spending in the U.S. was $1.4 trillion. In 2020 (about 10 years into the Affordable Care Act), it was $4.1 trillion. Over that same time span, health care spending per person has increased from $4,845 to $12,531. And employers are the ones paying, both literally and figuratively.  

This is what happens when employers allow the Big Vendors to take care of all their health care needs. The Big Vendors work together to drive up health care costs and maximize their own profits. 

So what can employers do? 

Take back the power by removing their employees’ health care from the hands of the Big Vendors, who have proven they will only increase costs. 

The alternative is to move to a third-party administrator (a company that acts like a carrier that pays and administers claims), and a stop loss carrier whose best interests are to keep health care costs low so they can earn your business.  

A big advantage of this type of plan? Employers can see actually what’s on the bill and how much it costs. In the wake of exponentially increasing health care costs, a growing number of employers are doing just that: Taking their own employees to “dinner” so they know what health care is costing them.  

Employers carry the insurance risk 

Now, if you’re thinking: “This sounds like a lot of work, and the whole reason I have a health care plan with a Big Vendor is so I don’t have to deal with health insurance.” Or, “I’m not a

health insurance company; my employees are comfortable with the Big Name Vendor, you’re not alone. But here’s the truth: If you’re a company, larger than 50 people, you are a health insurance company already.

Whether you know it or not, whether you like it or not, you are responsible for the health care of your employees and you’re probably spending north of a half a million dollars a year (at 50 employees) or more. Yes, that much. And you’ve been doing it for a decade without thinking about where those dollars were going. How many of you have spent countless hours on a workers comp audit, countless dollars reducing shrink, millions of dollars increasing marginal efficiencies, only to see your second largest line item, health insurance, go up 10% every single year, for 10 years?

That’s what happens when you continue going with the Big Vendors. But there are other options. In the last decade, there has been an emergence of people writing about and fighting against this very thing. Organizations such as Health Rosetta and NextGen Benefits understand this pervasive problem well and are committed to combating health care inflation using the self-insured model and avoiding the Big Insurance companies. If you’re finally fed up and ready to explore your options, consider a self-insured plan with a third party administrator and a stop loss carrier in which you’ll maintain transparency and cost control. 

Instead of letting a Big Vendor take your employees to dinner, take them yourself. It’ll save both of you a lot of money. 

If you think there’s no such thing as a free lunch, you’re right. Someone is paying for it.

Michael Patton is a benefits advisor with Excel Health Plans. He has a passion for helping fix the rampant health care inflation problem. He has consulted on hundreds of self-funded cases, and is an industry leader at self-funding, direct agreements with providers and facilities, as well as integrating these platforms into high performance health plans.