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Demystifying Insurance Trends in Small Business: Confronting Healthcare Costs: Part 1 of 2

December 12, 2023

Are you ready to unravel the labyrinth of insurance trends in the small business sector? We’ve got you covered! We welcome insurance broker Matt Usher to our show who shares his knowledge on an array of topics. From understanding premium hikes, exploring alternative solutions for businesses against increasing costs, to the innovative designs like HSA plans in the post-COVID era, we leave no stone unturned. And that’s not all; stay on the line to hear more from Matt on HSA out-of-pocket maximums in our upcoming episode.

As we traverse the complex terrains of healthcare costs, we shed light on how insurance companies master the tightrope walk between profitability and providing quality care. We dissect the budding trend of reference-based pricing and how it could metamorphose employers’ health insurance offerings. In a riveting section, we address the steep cost of specialty medications in employer healthcare. From financial assistance programs to international sourcing, we showcase potential solutions to counteract the soaring costs of specialty medications. This exchange is a crucial one, as we delve deep into the current and future scenarios of healthcare costs and insurance. So, lend us your ears for these vital conversations that promise to enlighten and empower.

Guest: Matt Usher, Employee Benefit Consultant, W. Ray Williams & Associates Inc.

Matt started in the insurance business in 2006 with a specific focus on Employee Benefit plans. In 2008 he moved to Savannah, GA to start as a benefit consultant at W. Ray Williams & Associates, where he remains today. He has worked with businesses from 2 employees up to over 1000 employees. He lives on Skidaway Island with his wife and 2 daughters and enjoys spending his free time in the boat.


Speaker 1: 0:16
Welcome to Beyond the Stethoscope Vital Conversations with SHP. I’m your co-host, aaron C Higgins. Today is part one of a conversation that Jason Crosby and I had with Matt Usher. Matt is an insurance broker in the coastal Georgia area and has been the broker of choice for SHP for many years. Matt sat down to talk with us about the trends that he’s been seeing in the market in just the last few years, how third party administration plans have made a big splash and caused some confusion, and all about direct contracting and reference based pricing. Then be sure to tune in this Thursday as we talk with Matt about HSA’s ridiculous out-of-pocket maximums and much more. Are you ready for this vital conversation? Let’s get started.

Speaker 2: 1:03
Hey everyone, this is Jason Crosby and Aaron Higgins, with Strategic Health Care Partners, and your host for today. We’re joined by Matt Usher of Ray Williams Associates. Matt, thanks for joining us today and welcome to the podcast.

Speaker 3: 1:18
Hey guys, thanks for having me Super pumped to talk with you all today.

Speaker 2: 1:23
Yeah, fantastic and good time with a lot of the movement happening. But for our audience and background we’re familiar with Matt and somewhat of a disclaimer His firm, ray Williams, been our broker, shp’s broker, for a number of years. For as long as I’ve been with SHP and so has Matt, and so he’s kind of our go-to guy, especially this time of year, answering questions, helping SHP find our best options for all of our health plan needs and just a good, overall good guy. So we’re glad to have Matt with us. Matt, I want you to start us off maybe just a little bit about Ray Williams Associates and how you got involved and what you do and kind of your role.

Speaker 3: 2:01
Yeah, appreciate the kind words. So Ray Williams Associates we’re a smaller boutique insurance agency focused on employee benefit plans in Georgia, primarily in the coastal Georgia market, servicing businesses from two employees all the way up to a thousand employees is kind of what the experience that we have we’re just a few people, like I said, smaller in scale but able to get a lot more accomplished because of the type of approach that we take with our clients and a lot more hands on than maybe what people have seen in the market. Our agency started in 2001 with Ray Williams being the founding principal of that agency. I came to work with him in 2008 and we’ve been going at the small to midsize employee benefit market ever since then. Ray is kind of moving into his retirement phase and myself and a couple of account managers are kind of taking charge and leading our agency into the new direction.

Speaker 2: 3:14
Fantastic, well, great background For those who are active on LinkedIn. Just a little prompt from Matt. Matt does an excellent job of some brief educational videos, so for those interested in kind of learning more there, he does a great job. Maybe check out some of his videos there. So, matt, as we say here talking, most are going through or have recently gone through open enrollment, as we have. What trends are you seeing, whether it’s premium hikes, coverage options et cetera over these last couple of years in that smaller employer market?

Speaker 3: 3:47
Yeah. So there’s a lot going on which gives me really good job security. But when we’re looking at the trends that are occurring, you do have to kind of break them down into market segments. So looking at it from this point of view, you kind of have what we call the small business market, which would be anywhere from two employees to 50 employees, and then you have what’s called the large group market, which is really 50 employees or more. So the trends in the small group market are very easily to predict at this point because a lot of that data is being posted on an annual basis from all of the insurance companies as far as their premium hikes. So the first trend is premiums are continuing to kind of go up at, we would say, 15% to 20% is what we see for those small business plans again in that two to 50 market, and the data would show if you took an average it’s probably around 13%, but the effective increase that we see is around 15% to 20%. So that creates a huge problem for small businesses because a 15% premium increase is not sustainable. It doesn’t take but a couple years before that 15% increase takes your premium for maybe $500 a month at the employee level up to $800 a month at the employee level and it’s just not affordable. So what’s happening in that small business market is an emergence of other opportunities for employers to offer really good health insurance but avoid those predictable 15 to 20% increases. So that’s kind of one of the trends in the small business market is finding ways to get out of the primary market that has those 15 to 20% increases In that large group market. So in the 50 plus market the main trend that we’re seeing right now is Thinking about COVID. A lot of those policies received pretty favorable renewal increases the last three or four years because their renewals are based more on their actual experience or their actual risk. And so the insurance companies also didn’t really want to lose business during those COVID years because there was just so much going on. Some were making money, you know, some were maybe not making money, but they didn’t want to lose a client in that three or four year period or however long, it seems at this point. So what we’re seeing in that market again risk-rated, meaning your experience matters the insurance companies are starting to kind of catch up on those renewal increases that they didn’t give in the prior years and we’re starting to see kind of higher than normal trend increases, which trend in that market would probably be anywhere from a 10 to 12 percent increase. We’re definitely starting to see 16, 18 percent increases. But those large businesses have always had more opportunities to reduce that trend and get creative. It’s really interesting watching some of those solutions kind of move down market to be a solution for the you know, for the under 50 market, that small business marketplace.

Speaker 2: 7:14
Yeah, certainly a lot. I’m sure you’re seeing some creative designs, even on the employer side, of HSA plans and contributions being made there and that sort of thing what we’ll get to that too. How have the TPA solutions impacted smaller businesses, in particular this coming year?

Speaker 3: 7:35
Yeah, they’ve given small businesses, I would say, a ray of hope. Because you’ve been in this market where the options are slimming down. You have insurance companies leaving the market, you have insurance companies doing large rate increases and effectively pricing themselves out of the market and that’s all occurring and you just feel like, hey, we don’t have a lot of options and we’re stuck with this 15 percent increase. All of these third-party administrators and maybe smaller insurance companies are realizing that that small business marketplace has a lot of volume in it. There’s a lot of small businesses in America and solutions just simply were not appealing to them. What we’ve seen in the last probably 24 months is more and more third-party administrators or other smaller health plans kind of bundle these solutions that they might offer to a larger company and bring that down market and give a company with 25 employees the opportunity to do some really creative things that contain costs and help them avoid that 15 or 20 percent increase on an annual basis. We’re also seeing TPAs get even below the 25 threshold. We’re seeing more and more of those third-party administrators be able to offer solutions down to a company of maybe 10 employees or two employees. The challenge from our standpoint is we have to vet those companies. Our clients trust us. We are super excited to have all of these other opportunities to help our clients manage their insurance. But we’re talking about a really big investment on our clients part, because premiums are a lot of money and we want to make sure that those solutions actually meet the specific needs for our clients, and each client is different. We’re excited because of what TPAs are doing. They’re giving us more options. They’re effectively doubling, tripling, quadrupling the market options for some of these small businesses. You just have to know all of the ins and outs of each particular third-party administrator so that it really works for what your business is trying to accomplish.

Speaker 1: 9:58
I will say here too, as a business, that we have gone. We were just a couple years ago directly with a payer that’s now exited the market and now we’ve used the third-party administration to provide insurance at our organization. I will say, as both a consumer and user of the product, it can be a little confusing for the practices out there, for our practices that are taking and a part of these networks I’ll pick on R-Signa. You know you have to pay that TPA and it can be very confusing. So I think it’s important for front-end staff to understand how these TPAs work, that they’re essentially a front-end to the big payer network. So just because you don’t have Bob’s really good insurance company, who’s a part of the Cigna network, while you take Cigna, you’re part of the Cigna network. You can take Bob’s really good insurance company. So not really a question for you, matt, just an experience that I’ve had having to use a TPA type network and it really confuses the front-end staff. So bear that in mind when you’re training your front-end people. So, pivoting to a question Direct contracting. We’ll go down this road here. So direct contracting and reference-based pricing have been very strategic and strategic-driven. Have you seen more groups heading this way, or are they taking this path?

Speaker 3: 11:31
Yeah, we have to really think about the market that we’re in with these smaller businesses. These concepts of direct contracting are great, but it’s a real big challenge for a small company to have any scale or volume to make that contract relationship with. You know, whatever provider group or whatever specialty system they’re trying to work with, in the large market it’s definitely taken off. Direct contracting is becoming more and more popular, you know, every year because these larger employers they’ve been partially self-funded for quite a while. Now they’re looking at their claims more consistently and they’re starting to realize hey, you know, why was that knee replacement $100,000 when you know the Medicare rate might have been $15,000? Why are we paying such a large difference in that? And then what quality are we getting out of that actual $100,000 knee replacement versus what Medicare would pay $15,000 for? So it’s not coming to the small group market, the small business market, yet. But I do think that’s where the third party administrators have an opportunity to take some of those direct contract agreements that they are providing to some of their larger employers and move it downstream and give the small businesses an opportunity to reap the benefits of that as well. But in the large group market I see it just being more and more prevalent, and a lot of that is, you know, based on the frustration of dealing with insurance. I think everyone involved in the you know the payer system, from the front desk to your point, having to know whether or not they even take the plan right to the billing and finance office, having to collect from the insurance company but also having to collect from the member to the you know the doctor, trying to figure out where the care can be performed or where it can’t be performed, or getting the care approved to the actual member. Having to jump through hoops just to have a particular procedure done and also not knowing is this the best course of action for me. So I think direct contracting solves a lot of those issues. It’s just the amount of effort that it takes to get it built out and that’s where, you know, someone like myself is relying on some of these third party administrators to help kind of move that in the direction that we need it to be for some of our small business clients.

Speaker 1: 14:09
It’s interesting. You bring up quality. So we just talked about the quality payment program, which is the federal program tied to Medicare reimbursement rates, and there’s been a dream for a long time from CMS that private payers get in on doing some kind of thing like that. Have you heard of any similar QPP type program coming out of the private payers or do you think really the third party administrators are the ones to create something like that? Because, like you said, you know $100,000 for knee replacement that Medicare pays 15 grand for Outcomes are probably the same. Where are we getting this quality?

Speaker 3: 14:48
Right. So I don’t have any insight that would say otherwise, other than the fact that private payers are definitely trying to figure this out on their end as well. And part of it was what we talked about earlier with that whole vertical integration model. Obviously, that’s one strategy where if you’re keeping it in that model, then the incentive is to increase the price. But when you are not vertically integrated, the only way that you can cut your costs and increase your revenues from an insurance company standpoint is to find a way to also pay less for these same types of procedures. So you have to remember, you know the member might be paying five grand for the total knee replacement. The insurance companies on the hook for the remainder of that. So they have to come up with some type of quality standard that would dictate their ability to pay. You know, maybe a quicker payment or a reduced payment or a reduced payment on complication follow up care. You know, I’m not sure what all that would entail, but I do believe that while the insurance companies are working on that vertical integration kind of segment, I also think they’re working on a strategy to really rebuild their entire networks and that could be the door opener to some of these kind of direct contract arrangements that you don’t really. You don’t know that they’re direct contracted as a member, but that insurance company is certainly trying to steer you towards, you know, certain quality physicians versus other quality physicians.

Speaker 2: 16:34
Still as much as a network adequacy sort of bent than as much of a to Aaron’s point, quality reimbursement based mechanism perspective. It’s, I guess, from their perspective, the insurance. They’ve got to balance the two right to make sure that they’re filling an appropriate panel to build out the network so folks like yourselves can work with companies like ours to adequately present something. And let’s not forget, I guess they’re there after the bottom line as well, right, and so yeah, keep that in mind.

Speaker 3: 17:08
Just to touch on that, jason, if you don’t mind, like it’s interesting talking about the network piece and I know I want to talk about the reference based pricing piece as well but the networks, it’s so weird from 10 years ago when companies used to still have HMO networks or maybe you know a, a specific hospital system network. Now, because we only have three or four major insurance companies, they all have these large PPO networks and everyone you know at all levels the member, the employer, the, you know, the physician groups they’ve all been accustomed to these larger networks. So changing from one company to the other hasn’t really been that big of a deal because network adequacy exists, because they’re contracted with, you know, 90% of all the providers in certain areas. So, because that has been just the normal business operation in the health insurance market for the last five or six years, they have to figure out a way to break that model right and I know that y’all you know your practice is more in tune with the payer side of things. They have to figure out a way to renegotiate contracts with the physicians to make it appealing for the physician group, but at the end of the day they’re also trying to make it appealing for their bottom line and reduce the amount of money that they’re ultimately paying for these services. So that’s where I think you know right now they’re. They’ve got a lot going on behind the scenes. Certainly they’re not going to disclose that to someone like myself, but I do believe that they’re trying to build smaller networks where they can steer more care. They’re trying to do it where it’s actually affordable or less expensive than these traditional larger networks so that an employer actually has skin in the game and says, well, yeah, we will pay 20% less for this smaller network because right now it doesn’t exist. The smaller networks are a couple percentage points. No employer is going to say, yeah, we’ll take the smaller network if it’s safer, or employees 2%. No one’s going to do that right, and that’s been going on for years. So it’ll be interesting to see, kind of how that plays in and that’s a. That’s another piece to the reference based pricing that Aaron asked about. We’re not seeing a huge takeoff of reference-based pricing in our specific markets yet, but it’s coming and the reason that I believe it hasn’t taken off yet is because first, your business has to understand what you’re actually paying for the care that your employees are receiving. So if a business is fully insured, they’re not getting any data to tell them really what’s being spent of the premiums that they’re paying. So those businesses have to move into a partially self-funded arrangement or a fully self-funded arrangement, which is occurring. But at that point then now you have claims data and you can actually see oh wow, we did pay $100,000 for that knee replacement. And then you have to question well, that seems like a lot of money. Should we have paid that? And that’s where people like myself and third-party administrators will be able to give data to help them understand hey, you’ve been self-funded for several years. You’re doing the right things, you’re trying to make it affordable for yourself and your employees. But if you wanna really take it the next step further, you need to be considering a reference-based pricing model. And let’s talk about what that would look like from a claim standpoint. Right, if you have the data point of saying, hey, we paid $500,000 in claims this year, your TPA can actually tell you hey, if we were in a reference-based pricing model, that $500,000 might have been $225. And now, as a business owner, you have real dollars that you can evaluate, versus just saying, hey, we should be reference-based pricing because we’re gonna save some money but it might create some other challenges for your employees. They’re gonna take the path of least resistance and that’s not a reference-based pricing right off the bat. So it’ll be interesting to see that kind of emerge and I do believe it will become a bigger part of how employers offer health insurance in the next three to five years. It’s just the market is slowly stepping in that direction and part of that is because it was kind of rolled out poorly, I think, initially when reference-based pricing really came about A lot of negative narratives around those initial years and the initial percentages that they were paying above Medicare. And the new model is really totally different. Right that they learn from those mistakes and everyone’s trying to really create the right reimbursement percentage and I think that it’s just gonna become more and more popular.

Speaker 2: 22:20
You hit it too. Even from our client’s perspective as a, whether it’s been a client base in the mid-bust portion of the country or even here in Georgia, it just still carries that negative connotation from the administrator standpoint as well on the provider side, like no one wants to still touch it. And let me ask you this on that front but also they were contracting as you were talking through it. Maybe think of where we’ve seen it most in different markets. Obviously we’re all sitting in a two health system decent size market, but then we’ve got client bases in a much smaller, 20,000 population, single hospital type of marketplace where direct contracting feels a lot more palatable and something maybe that they appreciate a lot more right. There’s that community pride and community feel to it. Do you see those two sort of models translate more effectively in a smaller market or versus a larger, two multi-hospital type market? Do you see that fluctuation?

Speaker 3: 23:23
From what I gather, the direct contracting seems to work better in the larger markets actually, which kind of contradicts maybe some of the smaller market. But I think that the key piece to that is direct contracting. I think for it to be appealing to a provider is volume. There’s a volume piece and then there’s a financial piece. So I do believe in smaller markets it can work when you have large employers. But traditionally these larger employers you know 500, 1,000 employees and up are going to be based in those larger market segments which will have multiple you know hospital systems or multiple provider groups that could have an opportunity to play ball in that direct contracting negotiation. And then it really becomes competitive on both sides of the of the equation because you’re saying, hey, I’m a thousand person employer, we can funnel a lot of care directly to you, and you’re not trying to convince the provider group. Now it’s like, hey, if we don’t do this, the provider practice across the street might, and then you know we’re going to. Not only will we miss out on this opportunity, but we will also then miss out on the commercial pay side from all the people that might have been getting their care here through, you know, the regular commercial network that’s now getting it through the direct contracted arrangement.

Speaker 2: 24:56
That makes sense. You’re exactly right, not just volume, but almost that as much assured or guaranteed volume as they can get the better right. Unfortunately, still that to be the case. I’m going to pivot a little bit here. You know we as HP, we went through open enrollment here recently with you right, and a few of us, of course, you know being a lot of analytical folks over dissected some of the nuances of the plan design and we there’s lots of conversation around meds, especially meds right. What role have you seen specially meds have for employers and trying to keep plans more affordable or, you know, digested by their employees?

Speaker 1: 25:37
And Matt, before you answer that question, just to overemphasize how over analytical we are, there was about eight of us on a phone call and we spent close to an hour dissecting about five or six different plans and we finally narrowed it down to two, to which we continued via email, probably hours and hours and hours spent discussing this. So those who are listening, we are very analytical at S HP, so just to kind of put a little fine point on that.

Speaker 2: 26:09
Yeah, spreadsheets the whole nine yards.

Speaker 1: 26:11
It was something to behold.

Speaker 3: 26:14
Yeah, I have to be analytical, so I really appreciate when I get to work with other analytical people because it can sometimes be a very simple decision, but oftentimes it can be very complicated because you’re dealing with so many different aspects of what you need, the plan to do, what your coworker needs, the plan to do, what the business needs, the plan to do. So I’m glad to hear that y’all dug in that much. I do feel bad that maybe we complicated it so much that y’all had to spend all the time on it, but I like it because now more than ever, knowledge is power. At the consumer level, there’s just so many more things a average person can do to reduce their spend when they’re getting their care, even if they have the best insurance or the worst insurance. A little bit of consumerism goes a long way. So, pivoting back to Jason’s question about the specialty medications, it is the biggest threat to businesses being able to provide affordable healthcare, as I see it, and the reason that it’s the biggest threat is because these medications are crazy expensive and it doesn’t take but maybe one or two to prevent an employer from even having other options that would be affordable for their employees. So, for instance, if you’re a business with 20 employees on the plan and one person takes a $5,000 a month medication that may eliminate you from being able to get a competitive proposal from any company. So you effectively go from you know five to 10 options down to zero and then you’re kind of at the mercy of hey well, we’re on this train. You know we’re destined for whatever renewal increase they’re going to give us because we don’t have any other markets to really look at. So it’s a huge talking point in our industry. Everyone’s going after that. We’re all trying to find a way to reduce the specialty spend and reduce the impact to the employer. There’s a lot of great solutions. The problem right now is none of the solutions solve all of the issues, which I guess is you would expect that right, it’s just such a complicated issue that there isn’t a magic solution yet. But a lot of the things that are going on right now to help offset that specialty medicine cost is, you know, the financial assistance that the member can receive from the manufacturer directly. There’s patient assistance that a member can receive from the manufacturer directly. There’s international sourcing for the medication and then there’s just simply taking it off plan and buying it directly from the manufacturer. So each of those options kind of has a pro and con. What really complicates the situation for employers is twofold, in my opinion. Most of our employers really care about their employees. They want the medication to be covered if it is really in fact the only medication that will work for their employee, right? They want that solution in place. The member has no idea what the drug is actually doing to the employer’s plan, and this is because most of those specialty medications come with a discount card directly from the manufacturer. When the member receives that discount card, they just assume that if it’s free for me, it’s free for the plan, when in fact all that discount card is doing is getting that member to their out of pocket maximum on their medical plan. So they’ll give them that $8,000 if they’re an individual, or they’ll give them $16,000 if they have family coverage. They want them to get to that out of pocket maximum because then they know the insurance company is going to pay them for that medication for the next eight months, the next 10 months, however many months are left in that plan year. So it’s a problem that requires buy-in from three parts. The employer has to be willing to introduce a solution that helps reduce the cost of these medications, the third party administrator has to be willing to build that solution in and also reduce the premium because of implementing that solution. So they have to make it financially attractive. And then the member has to be willing to take the step of maybe filling out an additional form or bothering their doctor for 30 minutes or whatever it might take to get that solution implemented for their particular medication. The end goal is that the member still gets their drug at no cost. So we don’t want to disrupt that. But the employer now pays a significantly reduced cost for the medication or the medication is taken completely off the plan and they pay no cost for that medication. So where some of that is challenging is when you have maybe a high income person that’s taking the medication. They’re not going to qualify for the financial assistance or the patient assistance programs. So that’s, that eliminates a couple of those options and it makes it a little bit more challenging. But there’s still solutions that exist.

Speaker 2: 31:55
You’ve been listening to Beyond the Stealth Scope Bottle Conversations with SHB. This has been a production of strategic health care partners.

Speaker 1: 32:03
Your hosts are Jason Crosby and me, Aaron C Higgins. This episode was produced and edited by Nile and Weaver. Our social media content producer is Jeremy Miller.

Speaker 2: 32:14
The transcribers Heather McLean, and our executive producers are Mike Scribner and John Currie.

Speaker 1: 32:19
For more information about SHP, the services we offer, including the back library of episodes, episode transcripts, links to resources that we discussed, and much more, please visit our website at shpllccom. Thank you for listening.

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