Are corporate health care costs a crisis, or not?

This time of year, we tend to see a lot of press around the rising costs of health care in the US. The prestigious Kaiser Family Foundation notes that “Annual premiums rose 5% to $19,616 for an employer-provided family plan in 2018.”

That sounds scary – I know my salary did not go up 5%. So, I’m taking home less pay, right? Well, yes and no.

In another recent article, Kaiser Family Foundation’s Drew Altman notes that, at least recently, there is no crisis. Here’s his chart showing how health care, as a portion of total compensation, has fared over the last decade or so:

There is definitely an increase over the last few years, but it may not be as bad as it seems. However, as Altman notes, “Even if health costs have not been growing recently as a percentage of compensation, there still can be sticker shock, with the average cost of a family policy around $19,000 per year, about the cost of a Honda Civic.” Yikes!

What this graph and his analysis has not captured is the cost shifting that has happened to a lot of US workers over this time. We’ve seen the growth of high deductible health plans and rising PPO deductibles and other cost shifting such as eliminating copayments or adding additional tiers of coverage for specialty medications.

So, while the premiums as a percentage of total compensation have been steady over the past few years, I know that many people who require some basic level of health care treatment are feeling much more of an impact at the point of sale.

The first Kaiser article cited above also notes “The average 2018 general deductible for individual-worker coverage was $1,573, according to the survey, up from $1,505 last year and $1,135 five years ago. Those averages don’t include plans that lacked such deductibles.” Here’s the chart showing the rise in the annual deductible over the past decade or so:

So, while premiums and employer costs may not feel like a crisis, health plan consumers, your employees, are absolutely feeling the crisis. We’re expecting employees and their families to pay for a lot of their health care costs (and those costs keep growing, as well) and that trend is definitely unsustainable.

Without this cost shifting, the total compensation chart above would look very different. So, unfortunately, I think the crisis is real!

 

Should employers pay off student debt?

higher ed costIt is the season for graduation, so student debt is on my mind. I have a child graduating high school in a few weeks, which means I am thinking a lot about the cost of higher education.

Student debt is out of control – let’s just get that out of the way. Yes, higher education has become very expensive and many people cannot afford the retail costs. Many students do get some forms of financial aid (including scholarships, grants and loans) but many put themselves into way too much debt for an education that may be marginally better than one at a lower cost alternative.

So, in an attempt to attract younger employees (who are mired in this debt) some employers are now helping to pay off their employee’s student loans. Sounds like a great way to attract talent, right?

It could be, but as the article notes, this does not tackle the larger issue of why higher education is so expensive.

Offering this cash pay-off may also create a disincentive for those who are currently debt-free. What if you put yourself through college, working two jobs in the process, and emerged with a degree and no debt? Good for you, right? So, how do your total rewards compare to your peer who accumulated debt? Are you, the employer, rewarding someone more for having this debt? Is that what you want to reward?

I know that student debt is not necessarily a choice, and that these payments really do not amount to a lot for any individual. However, based on the Employer Participation in Student Loan Assistance Act noted in the article, some want these payments tax-free up to $5,250/year (or $437.50/month).

Payments that high can create a bigger total reward gap among your peer employees. This gap may already exist within your organization, depending on which employees cover their dependents (if any) on their health care benefits, for example. In that case, you may be rewarding families more than single employees.

I am more concerned about yet another employer-funded benefit emerging instead of tackling the greater issue of overall cost of higher education (and educating potential students on the true value of higher education at different price points).

That said, tread lightly in this direction, should you choose. It is really hard to take away a benefit in the future, so offer only with this caveat in mind. As we saw with Starbucks recently, jumping too quickly into a response can also lead to a swift backlash.

Implicit Bias is Real! Now do something about it, please…

This is the first thing we should all understand – we ALL have our preconceived notions and regularly apply them to what we know. Humans are made to compartmentalize things. It is how we organize, think and learn.

These preconceived beliefs can get in the way of what we say and do everyday. This has been bothering me for a while – partly due to the “me too” movement, but also out of the “Black lives matter” and other recent groundswelling movements.

This kind of thinking can keep us from imagining women as surgeons, minorities as leaders, or even keep us from hiring the best person for the job. Maybe you don’t realize you do this, so how can you (1) recognize this type of behavior and (2) change your ways?

If you are looking for the magic switch, I have none for you. However, science can certainly help us. This Scientific American article helps put some framework around what I have been mulling over for a while.

In the article, it notes that “A majority of people taking [the Implicit Association Test (IAT)] show evidence of implicit bias, suggesting that most people are implicitly biased even if they do not think of themselves as prejudiced.” So, we are mostly biased and don’t know that we have a problem. We are mostly living with our heads in the sand on this issue.

What scares me most is reading sentences like:

Race can bias people to see harmless objects as weapons when they are in the hands of black men, and to dislike abstract images that are paired with black faces.

-and-

White applicants get about 50 percent more call-backs than black applicants with the same resumes; college professors are 26 percent more likely to respond to a student’s email when it is signed by Brad rather than Lamar; and physicians recommend less pain medication for black patients than white patients with the same injury.

Yikes!

So what can we do about this? I think first and foremost, admit you have a problem! This is something we ALL deal with – it does not mean you are a bad human being or even racist, sexist or ageist. It does mean that we need to fight the urge to make decisions based on our “gut” feelings. Those data are clearly flawed!

Consciously associate differing opinions with your own. Get outside of your “bubble” and hear different points-of-view. Don’t let these other opinions rile you, but truly listen. You can certainly disagree, but it is okay for others to have different opinions from your own. No one needs to “win” in the point-of-view game.

Instead, I would urge you to have more conversations with diverse people. Get different points-of-view – especially when hiring! Try to get a lot of opinions on a candidate, and make sure your interviewers are from different genders, races, age groups and religious leanings.

Lastly, remember that you have a problem and you are really fighting against human nature to tackle it. Recognize when making decisions that it might be playing into the process. Really push yourself to understand why you make certain decisions. Even consider removing names from resumes when reviewing your candidate pool.

Whatever works to keep your options and minds open – the world will be a better place and you will have a better team as a result, for sure!

Why we can’t have nice things…

Hopefully everyone saw the announcement last week that business titans Amazon, Berkshire Hathaway and JP Morgan Chase were teaming up to tackle the rising costs of healthcare. This announcement noted that this was solely to benefit the collective one million U.S. employees of the combined organizations; but many of us dreamed that they would disrupt the whole healthcare industry and solve the general healthcare cost crisis in which we appear to be stuck.

That is, we were hoping until everyone in the healthcare sectors started complaining to JP Morgan’s bankers.

Wait, what??? Well, I guess that is why we won’t see any healthcare disruption anytime soon. Or, as I tell my kids, here’s why we can’t have nice things…

The reality is that way too many players in healthcare today are making a lot of money (from insurance companies to physicians). So much money that they hire lobbyists, call their investment bankers at JP Morgan and otherwise make every effort to keep their income growing. Wouldn’t you?

One key component of why we pay so much for healthcare in the US is the lack of transparency and payment integrity issues (i.e., overcharging), resulting in large profits for many in the market. We are also so emotionally connected to our healthcare in the U.S., we have a hard time becoming a consumer when our own health is involved (especially on the pre-care/emotionally gut-wrenching side of healthcare decision-making).

In Texas, the Department of Insurance launched a mediation program to assist patients with large “surprise” bills ($500 or more). With this program in 2017, the mediation only paid the providers 14% of the charges they were billing ($1 M was paid out of $7 M in disputed charges). Keep in mind that this total is only limited to:

  • People who knew about and who took the time to use the program.
  • The provider did not have them sign a document that estimated the cost of the services, or where the actual cost actually exceeded the documented amount.
  • You were treated by a non-network Radiologist, Anesthesiologist, Pathologist, Emergency Department Physician, Neonatologist or Assistant Surgeon in a network hospital.

Imagine the numbers outside of that subset in Texas alone!

So, the lesson here is that we can all hope and dream that healthcare can be “fixed.” However, until we are all aligned and agree that there will be some losers in the new equation (including insurers, PBMs and even physicians), we’re still stuck with rising costs as long as we can continue to pay. I keep thinking that we’ll hit the spending limit some time soon, but it seems to just keep rising. Maybe someday we’ll find a reason to have nice things.

 

Uncertainty Is Certain in 2018 Healthcare

Wow, this has been an exciting week – the health care bills / withdrawals / repeals abound, but no resolution is in sight.

We do know that repealing the Affordable Care Act (ACA) will leave millions more without health coverage than under the current regulations – the CBO put the number at 32 million by 2026 (but, we’ll also lower the deficit by $473 billion).

While that does not seem to have support from the Senate, the uncertainty of the health care regulations is creating a lot of turmoil for insurance companies. How can you plan for the future, when the future of the health care rules might change?

NPR and Kaiser Health News (KHN) set out to see how much this uncertainty is costing consumers. If you were not aware, the insurance premiums were due to the respective state insurance boards in June. Many companies have been asked to revisit their rates and make adjustments, but what does all of this uncertainty do to the pricing?

A lot depends on the Federal subsidies in the marketplaces. If the current administration stops these subsidies in an effort to “gut Obamacare markets,” it will eliminate the “affordable” out of the Affordable Care Act for millions of Americans and many (especially healthier) people will be forced to drop their coverage due to the sharp premium increases.

It ends up, this uncertainty may cost consumers a lot next year. Per the NPR / KHN report, “In Pennsylvania, premiums next year without the subsidies would increase by an average of 20 percent, compared with 9 percent if they remain intact.”

The Pennsylvania Insurance Department further states that “Statewide average rate increases will be 36.3 percent if the individual mandate penalty is eliminated and cost-sharing reduction funding is also cut off.”

Average premiums in Pennsylvania in 2017 (without subsidies) are $533/month. That means, 2018 may have the following average premiums for those in Pennsylvania:

ACA Chart 2018

That’s just one state’s projections, and keep in mind that these are average statistics in Pennsylvania. Some will experience less and some more that what is noted above.

I am not sure who could lose their up to 64% subsidy (average of $340/month or $4,080/year in 2017) and then potentially shoulder an additional $2,300+ premium increase next year due to policy changes. That could be about $6,400 in additional premiums next year alone.

It does look like there may not be a full understanding of what health care premiums are from our current leader. I think $12-a-year premiums sound great, but even those of us with employer subsidized coverage don’t have that kind of deal.

Whatever the future holds, I hope we do not take coverage away from millions, either through mandate or affordability. Many employers are also struggling with affordability issues, and certainly do not receive any Federal assistance.

I do agree that all sides need to come together and come up with something to help fix the situation we are now in. There will be winners and losers in this process, but keeping the uninsured as the ongoing loser hardly seems fair.

However, this uncertainty may kill us before we ever get there…

When can you pay someone less for equal work? When they earned less before…

I just learned that the 9th U.S. Circuit Court of Appeals ruled yesterday that you can pay an employee less than another who is doing the same work, simply because they earned less in the past. Actually, the ruling was specific to a woman who earned less; but really, this has implications to anyone who earns less on a prior job – not just women.

Think about it – have you ever taken less salary to have better benefits? What about a better work-life balance? What if you worked in a location that had a lower cost of living (which is actually what seems to have happened in this case)? Did you think that those decisions/situations might impact your salary for the rest of your life? Probably not.

We all like to think that we get paid appropriately for the work that we do. However, this is very situational. You might want more to work in a fast-paced environment. Or, maybe less if they offer you a rich pension plan or more paid time off.

In this case, the court is saying that it is okay for an employer to allow a lower rate of pay to follow you around for the rest of your life (unless someone smarter realizes the injustice and decides to be more equitable).

I know that we’re dancing on a very fine line here – especially when it comes to quality of work and pay for performance. Do I like Bob’s work better than John’s because Bob and I are friends? What if Bob and I communicate well, but John and I do not. When is there bias in the decisions? We cannot often tell, nor are we always aware that we are being biased in these situations. So, we need to be careful in these valuations. But this decision does not take any variations of cost-of-living or total compensation into account, which seems very unfair.

This ruling is being sent back to U.S. Magistrate Judge Michael Seng for consideration. This judge previously decided that this behavior was grounds for bias. I ask you to think about what would happen if this happened to you, even if you are not female? Would you accept this if you found out another worker earned more just because s/he earned more in a previous job?

I hope this does end up in a higher court, as I have a hard time believing anyone would accept “prior pay” as a reason to pay someone less for very long. Seniority (years of experience), merit, quality or quantity of work all still sound reasons to differentiate pay (assuming you have as little bias as possible in the assessment). Good employees know they will be in demand, and will not tolerate discrimination for long. If possible, they will go to the smarter employer who will pay them what they deserve.

Let me know your thoughts on this topic…

Do you work in manufacturing? It might be time to revisit your HR policies…

I heard this report on the way to the airport this morning and this it deserves a mention: the women are coming to fill vacant manufacturing jobs! Maybe even the oil and gas fields?

So, what has traditionally been a male-dominated employer space may shift a bit toward attracting the female population.

What does this mean for you? Well, lots of things, but I focus on HR issues, so we’ll stick to that aspect of the implications.

Benefits

Make sure your policies are up-to-date and as female-friendly as possible. Do you have PTO or sick/vacation plans (young/healthy prefer PTO but once kids or illness is in the picture, employees prefer separate sick/vacation policies)? How about your maternity policies and coverage? How do you compare to your competitors on this front. It is a war for talent out there!

Training

Unfortunately, this also means that you probably need to beef up your sexual harassment policies and training. I’ve been in plants before, and women tend to put up with a lot of off-color remarks. However, I am also a bit older and used to living in that environment – younger women may not be so tolerant. Get ahead of any issues on this front.

What should happen if a field or plant worker becomes pregnant? What will you do with her job – keep her on it or move her to a desk role? What are the risks/implications of each? Please don;t consider termination! That will not end well

Other

Do you have a locker area for women? Lactation rooms close to your work sites? Is your safety gear available in female sizes?

You can see how this relatively modest shift can quickly change the dynamics of your work environment, and it is probably long overdue. Wasn’t Rosie the Riveter over 70 years ago?

rosie