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Save Your Business – Flatten The (Health Insurance) Curve

While flattening the curve of COVID-19 infections will save lives, flattening the inflationary curve of employer-sponsored health plans will save businesses. 

Luckily, both are possible.

Given the uncertainty we all face, one thing is sure: Businesses need to take extensive measures to improve operating leverage and cash-flow NOW.  Before layoffs and other draconian measures are considered, companies would be wise to pull a lever often overlooked by Chief Financial Officers — their company health plan.

The Opportunity for Mid-Size and Large Businesses:

The following chart illustrates what is commonly seen in the mid-market space. The company in this example is going to spend $4.5 million dollars to cover 320 employees this year. Assuming their benefits stay the same, here’s how it plays out over the next 5 years (see red line titled “No Change”). 

Inaction results in a 34% increase in just 5 years. Left unchecked, the misallocation will stifle growth initiatives and may even facilitate their demise. 

Now contrast this reality with the benefits of changing and flattening the curve:

Slow Incremental Change (blue): 

  • First-year savings of $1,701/employee — $544,320 total 
  • Five-year savings of $6.2 million dollars

Moderate Change (green):

  • First-year savings of $2,976/employee — $952,560 total
  • Five-year savings of $9.7 million dollars 

Aggressive Change (yellow): 

  • First-year savings of $4,784/employee — $1,530,900 total
  • Five-year savings of $10 million dollars

Companies who embrace health plan innovation benefit from improved cash-flow, margins, and operating leverage — all of which are desperately needed at this time. Is the transition easy? No. Is it worth it? Absolutely. 

Flattening The Curve – 4 Steps For Survival:

  1. Stop Ignoring Operating Expenses: the first step toward change is recognizing that health insurance inflation is hurting your business and its employees. If your company hasn’t experienced a meaningful reduction in health plan costs in the past 5 years (without increasing employee costs), you might be missing an opportunity. If your company has never been presented with these savings opportunities, it’s probably because you’re working with a selling agent (see #2). 
  2. Stop Working with Selling Agents: when buying a home, you wouldn’t hire the selling agent to help you negotiate the purchase price, would you? Of course not. And yet, many businesses work with Benefits Brokers who accept undisclosed payments from Insurance Carriers — the more you spend, the more money these Brokers make. Fixing our broken system requires businesses to hire Registered Employee Benefits Consultants who disclose all forms of income allowing them to sit on the same side of the proverbial table as their client. Only then will companies receive the objective expert advice desperately needed to drive down costs and improve benefits.
  3. Stop “Punting” to HR: while HR plays a vital role in plan implementation, to achieve financial results, many companies need to fundamentally change the way health plans are financed. This requires engagement and buy-in from company executives with profit and loss responsibility.
  4. Stop Thinking in 12-Month Cycles: does your company plan on being in business 5 years from now? If the answer is “yes”, then they need to stop making tactical decisions about one of their largest expenses every year. Instead, work with your Registered Employee Benefits Consultant to develop a multi-year strategy that consistently reduces financial risk

While this level of engagement isn’t for everyone, growth champions and performance leaders who take action will gain a competitive advantage. 

With the fate of millions of jobs and thousands of businesses on the line, now is the time for executives across the country to pull this lever and harvest the benefits of flattening the health insurance curve.

About Health Compass Consulting:

Health Compass Consulting is a next-generation employee benefits consulting firm that solves America’s healthcare problems by building high-performance health plans for businesses. Headquartered in Orlando, FL, the firm serves mid-size and large businesses in all 50 States. Chief Executive Officer, Donovan Pyle, is a Registered Employee Benefits Consultant.

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