1 00:00:00,040 --> 00:00:02,480 Welcome to the Bringing the Human Back to Human Resources 2 00:00:02,480 --> 00:00:04,800 podcast. I'm Tracy Chernoff, and I've 3 00:00:04,800 --> 00:00:07,240 spent my entire professional career in HR. 4 00:00:07,720 --> 00:00:10,840 Each week, we'll explore the delicate balance between people 5 00:00:10,840 --> 00:00:13,840 and business with the aim to reconnect the two and create 6 00:00:13,840 --> 00:00:16,720 meaningful outcomes. Listen in as I share my own 7 00:00:16,720 --> 00:00:20,560 experiences, challenge the status quo, and chat with guests 8 00:00:20,560 --> 00:00:23,560 from various industries about our mission to bring the human 9 00:00:23,560 --> 00:00:26,200 back to human resources. Hi everyone, welcome back to the 10 00:00:26,200 --> 00:00:28,280 Bringing the human Back to Human Resources podcast. 11 00:00:28,280 --> 00:00:30,320 Thank you so much for being here for another week. 12 00:00:30,320 --> 00:00:33,280 Don't forget to rate, review, subscribe, share it with a 13 00:00:33,280 --> 00:00:37,000 friend, do whatever you've got to do to amplify the podcast and 14 00:00:37,000 --> 00:00:41,520 my fabulous guest that I have on most weeks because we appreciate 15 00:00:41,520 --> 00:00:45,200 it and thanks for being here. So this week we're talking about 16 00:00:45,280 --> 00:00:50,640 very riveting topic, which kind of all comes down to insurance 17 00:00:50,640 --> 00:00:54,960 and benefits and, and things that really impact people very 18 00:00:54,960 --> 00:00:57,120 deeply and companies very deeply. 19 00:00:57,120 --> 00:01:00,560 And so to talk about this, I have Chris Hamilton ON who is a 20 00:01:00,560 --> 00:01:03,920 partner at Hotchkiss Insurance in Texas, where he leads the 21 00:01:03,920 --> 00:01:05,760 employee benefits consulting practice. 22 00:01:05,920 --> 00:01:09,160 He specializes in managing healthcare and insurance costs 23 00:01:09,400 --> 00:01:12,960 to improve benefits coverage, reduce expenses, and enhance 24 00:01:12,960 --> 00:01:15,880 employee health outcomes. With over a decade decade of 25 00:01:15,880 --> 00:01:19,720 experience in corporate finance, Chris has advised clients across 26 00:01:19,720 --> 00:01:23,040 various industries, including private equity and oil and gas. 27 00:01:23,320 --> 00:01:26,120 And in his free time, he enjoys traveling, working out, 28 00:01:26,120 --> 00:01:29,160 attending live music events, and of course, spending time with 29 00:01:29,160 --> 00:01:31,240 family. Chris, thank you so much for 30 00:01:31,240 --> 00:01:33,080 being here and for joining the podcast. 31 00:01:33,320 --> 00:01:34,520 Yeah, Tracy, thanks for having me. 32 00:01:34,760 --> 00:01:37,000 Pleasure to be here. Of course, of course. 33 00:01:37,240 --> 00:01:40,240 Well, I had shared this with you right before we started 34 00:01:40,240 --> 00:01:44,080 recording that we are recording this episode effectively at the 35 00:01:44,120 --> 00:01:49,880 end of my my companies like where I work full time open 36 00:01:49,880 --> 00:01:55,280 enrollment period. And I had shared that this open 37 00:01:55,280 --> 00:01:59,240 enrollment and this particular cycle, we were met with 38 00:01:59,240 --> 00:02:03,400 significant increases in insurance costs for various 39 00:02:03,400 --> 00:02:05,160 reasons. Of course we, you know, 40 00:02:05,160 --> 00:02:10,479 companies generally see this, you know, the, the cost of 41 00:02:10,479 --> 00:02:13,960 healthcare if someone, if people on the team are really sick or 42 00:02:13,960 --> 00:02:18,040 you know, require a lot of continuing continuous medical 43 00:02:18,040 --> 00:02:21,280 attention, for example. So naturally that's a thing. 44 00:02:21,520 --> 00:02:26,000 And I'm also aware that across the country healthcare premiums 45 00:02:26,000 --> 00:02:29,200 and insurance premiums have risen quite significantly. 46 00:02:29,200 --> 00:02:31,280 I think the website correct keep me honest here. 47 00:02:31,480 --> 00:02:34,600 I think it's like healthcare.gov or something like along the. 48 00:02:34,600 --> 00:02:37,040 Exchange. Right, exactly. 49 00:02:37,240 --> 00:02:42,760 So we can see that this is not unique to my employer, but that 50 00:02:42,760 --> 00:02:45,720 this is something that's generally happening or happened 51 00:02:45,720 --> 00:02:49,920 for 2025. So I am most curious to 52 00:02:49,920 --> 00:02:56,360 understand from you how employers kind of interact in 53 00:02:56,360 --> 00:03:00,120 these moments because it puts so much pressure on the employer to 54 00:03:00,120 --> 00:03:02,240 figure out like, what is their funding strategy? 55 00:03:02,240 --> 00:03:04,760 How do they do the right thing? Do we need to switch to 56 00:03:04,760 --> 00:03:08,680 different plans in order to give employees the best benefits 57 00:03:08,680 --> 00:03:11,960 possible while not, you know, breaking the bank, so to speak? 58 00:03:11,960 --> 00:03:14,600 I mean, when we're talking about, I mean, I think most 59 00:03:14,600 --> 00:03:16,880 people know that payroll and benefits are like the most 60 00:03:16,880 --> 00:03:18,480 expensive part of running a business. 61 00:03:18,960 --> 00:03:23,680 And if someone, if a company has like AI don't know $5,000,000 62 00:03:24,320 --> 00:03:27,520 cost on their healthcare premiums, like when you go up 63 00:03:27,840 --> 00:03:29,960 50%, I mean you're talking about millions of dollars. 64 00:03:29,960 --> 00:03:33,080 So I'm curious about your perspective on that. 65 00:03:33,480 --> 00:03:35,360 Yeah, I mean, there's a lot to unpack there. 66 00:03:35,520 --> 00:03:38,080 I I will say for any employer that's listening to this, this 67 00:03:38,080 --> 00:03:40,800 was a really painful year for most employers nationally. 68 00:03:41,000 --> 00:03:43,680 A lot of the surveys that have come out have have given the 69 00:03:43,680 --> 00:03:46,520 national average increase of about 9 1/2 to 10%. 70 00:03:47,080 --> 00:03:49,320 And just to put that into perspective, this is a really 71 00:03:49,320 --> 00:03:51,760 hard market, probably the hardest market we've had for 72 00:03:51,760 --> 00:03:53,680 cost increase in the last 15 years. 73 00:03:54,160 --> 00:03:56,760 And there's a number of things that attribute that to. 74 00:03:56,880 --> 00:04:00,120 But what I would just say from what the employers that we work 75 00:04:00,120 --> 00:04:03,200 with and we have clients primarily in Texas, but we do 76 00:04:03,200 --> 00:04:07,440 business across coast to coast. Most of the midsize employers 77 00:04:07,440 --> 00:04:11,000 out there, and that's employers that have 100 to 2000 employees, 78 00:04:11,080 --> 00:04:13,440 they're not seeing 10% increases on average, they're seeing 79 00:04:13,440 --> 00:04:17,519 closer to 20. And it's this convergence of a 80 00:04:17,519 --> 00:04:19,680 number of things. One, we're coming out of this 81 00:04:19,680 --> 00:04:26,200 post COVID economy, if you will. And if you look at the cost to 82 00:04:26,200 --> 00:04:29,120 operate hospitals in particular, on average, it's about an 83 00:04:29,160 --> 00:04:31,800 average operating cost increase of about 10% a year. 84 00:04:32,280 --> 00:04:34,640 And when you look at what Medicare, Medicaid and other 85 00:04:34,640 --> 00:04:36,760 government programs are reimbursing hospitals, it's not 86 00:04:36,760 --> 00:04:39,520 keeping pace with that operating inflation and you can't 87 00:04:39,520 --> 00:04:42,560 negotiate with the government. So where can these hospitals 88 00:04:42,560 --> 00:04:43,520 negotiate with? Right. 89 00:04:43,520 --> 00:04:45,600 It's commercial insurance. And it's the blue crosses, 90 00:04:45,600 --> 00:04:48,040 United Health, Cigna's and Aetna's that all the employers 91 00:04:48,040 --> 00:04:52,240 nationally are buying into. And so they're seeing increased 92 00:04:52,240 --> 00:04:56,600 cost demands from hospitals. They're leveraging out higher 93 00:04:56,600 --> 00:04:58,640 reimbursement rates. And what people need to 94 00:04:58,640 --> 00:05:01,000 understand is the more we're paying for healthcare inside of 95 00:05:01,000 --> 00:05:04,240 hospitals and prescriptions and doctor's offices, insurance 96 00:05:04,240 --> 00:05:07,160 costs have to rise to cover that and provide a profit to the 97 00:05:07,160 --> 00:05:08,440 insurance companies. OK. 98 00:05:09,120 --> 00:05:12,720 And so you're seeing this fight happen coast to coast, where in 99 00:05:12,720 --> 00:05:15,760 big cities you'll have one of the major hospital systems that 100 00:05:15,760 --> 00:05:18,320 threatens to drop out of network with one of the insurance 101 00:05:18,320 --> 00:05:20,280 carriers. Well, the insurance company at 102 00:05:20,280 --> 00:05:22,720 the end of the day, whether it's United Health or Cigna or Blue 103 00:05:22,720 --> 00:05:26,200 Cross, they need that hospital system and network, otherwise 104 00:05:26,200 --> 00:05:28,080 they risk losing employer groups. 105 00:05:28,600 --> 00:05:30,480 So at the end of the day, they're going to come to some 106 00:05:30,480 --> 00:05:32,720 sort of agreement where they're going to agree to pay the 107 00:05:32,720 --> 00:05:35,040 hospital what they want because the hospital has leverage in 108 00:05:35,040 --> 00:05:39,000 that situation. And what it ultimately results 109 00:05:39,000 --> 00:05:42,920 in is higher costs to those that are on that insurance plan. 110 00:05:42,920 --> 00:05:45,000 And the reason why you're seeing this now because COVID has been 111 00:05:45,120 --> 00:05:48,280 somewhat in the past, you know, over the last couple of years, 112 00:05:48,680 --> 00:05:50,720 but these contracts are multi year agreement. 113 00:05:50,720 --> 00:05:53,840 So they're now coming up for renewal and hospitals are 114 00:05:53,840 --> 00:05:55,880 demanding higher pricing. You're seeing that being passed 115 00:05:55,880 --> 00:05:59,920 on along with just this overall confluence, if you will, of 116 00:05:59,920 --> 00:06:02,840 large claims that are happening nationally that insurers have to 117 00:06:02,840 --> 00:06:06,760 help cover. So there's a number of things to 118 00:06:06,760 --> 00:06:08,360 address this. I mean, I would say the first 119 00:06:08,360 --> 00:06:10,920 thing that most of the employers that we see, they're looking at 120 00:06:10,920 --> 00:06:14,200 alternate ways to structure their insurance benefits. 121 00:06:14,200 --> 00:06:17,200 As you mentioned, it's a really important cost, not just for 122 00:06:17,200 --> 00:06:19,840 operating a business, but for retaining and attracting the 123 00:06:19,840 --> 00:06:21,440 talent. We're in a talent war right now. 124 00:06:22,160 --> 00:06:26,480 And so a couple of things to keep in mind is, you know, how 125 00:06:26,480 --> 00:06:30,240 does an employer's benefit, not just the coverage, but the cost, 126 00:06:30,240 --> 00:06:32,600 how does that compare to their peers? 127 00:06:32,600 --> 00:06:35,240 And I talked to a lot of employers that are mid size all 128 00:06:35,240 --> 00:06:37,760 the way up to national publicly traded companies that don't 129 00:06:37,760 --> 00:06:41,080 really look at what is it that we offer and how does it compare 130 00:06:41,080 --> 00:06:43,400 to where we're trying to pull and retain talent from. 131 00:06:44,480 --> 00:06:46,800 And so that's kind of the first step. 132 00:06:46,960 --> 00:06:49,920 The second step is how do we design our insurance? 133 00:06:49,920 --> 00:06:53,120 And most companies are used to buying insurance through a 134 00:06:53,120 --> 00:06:56,720 broker with one of the big traditional insurance companies. 135 00:06:57,280 --> 00:06:59,480 So name any of the ones that I just listed off. 136 00:07:00,120 --> 00:07:03,280 And part of the issue that we see with that is that the big 137 00:07:03,280 --> 00:07:06,880 insurance companies, it's the way they make money, it's the 138 00:07:06,880 --> 00:07:09,240 incentive. And I think, you know, Charlie 139 00:07:09,240 --> 00:07:13,760 Munger, Warren Buffett's right hand man, once said, show me a 140 00:07:13,760 --> 00:07:15,720 man's incentive and I'm going to show you the outcome. 141 00:07:16,600 --> 00:07:18,680 And if you look at the incentives that insurance 142 00:07:18,680 --> 00:07:21,480 companies have, they don't have the same incentive that you or I 143 00:07:21,480 --> 00:07:24,080 do or a business owner or HR leader listening to this. 144 00:07:24,560 --> 00:07:26,240 They don't have the same incentive that we do, which is 145 00:07:26,240 --> 00:07:28,080 to offer better coverage at lower cost. 146 00:07:28,120 --> 00:07:32,120 They actually have the opposite incentive to see costs go up. 147 00:07:32,120 --> 00:07:35,040 And in fact, they participate in those cost increases. 148 00:07:35,040 --> 00:07:37,160 And it's one of the problems that we see with insurance 149 00:07:37,160 --> 00:07:39,400 today. So the the first piece of advice 150 00:07:39,400 --> 00:07:42,800 that I give to HR leaders and executives that are looking to 151 00:07:42,800 --> 00:07:45,560 tackle this particular issue of what does it cost and how do we 152 00:07:45,560 --> 00:07:48,840 provide better coverages? How does your insurance company 153 00:07:48,840 --> 00:07:50,320 make money? Where are there misaligned 154 00:07:50,320 --> 00:07:53,000 incentives and where are there inflated costs that you don't 155 00:07:53,000 --> 00:07:55,360 see? We have to uncover those. 156 00:07:56,080 --> 00:07:59,920 And so I would describe it this way, if we're paying $1000 a 157 00:07:59,920 --> 00:08:03,240 month for a medication and this is a life saving medication that 158 00:08:03,240 --> 00:08:05,880 the member actually needs, like that's really important. 159 00:08:05,880 --> 00:08:07,160 We want to make sure that that's covered. 160 00:08:07,160 --> 00:08:09,600 But what if you could get that same exact medication, the name 161 00:08:09,600 --> 00:08:11,920 brand and everything, and it was only $300 a month? 162 00:08:13,280 --> 00:08:16,440 That's a 70% cost reduction. And how many of those 163 00:08:16,440 --> 00:08:18,800 occurrences are happening inside of the plan that we have? 164 00:08:18,800 --> 00:08:21,720 If you can ring that waste out, you can reduce the cost of 165 00:08:21,720 --> 00:08:23,720 health insurance and keep the coverage the same. 166 00:08:23,720 --> 00:08:26,840 And what many employers are figuring out is if we're able to 167 00:08:26,840 --> 00:08:31,160 do that exercise and it works effectively, wow, we could 168 00:08:31,160 --> 00:08:33,760 actually increase the coverage that we have for the same cost 169 00:08:33,760 --> 00:08:37,240 or even still reduce costs. There's there's that much waste 170 00:08:37,240 --> 00:08:40,159 in the system. And so I'll, I'll kind of go 171 00:08:40,159 --> 00:08:42,400 back to how insurance, traditionally insurance 172 00:08:42,400 --> 00:08:45,560 companies are making money. There's a provision in the 173 00:08:45,560 --> 00:08:48,080 Affordable Care Act that limits the amount of profit that an 174 00:08:48,080 --> 00:08:51,560 insurance company is going to make at the insurance holding 175 00:08:51,560 --> 00:08:53,080 company level, which makes sense. 176 00:08:53,080 --> 00:08:55,360 We don't want insurance companies taking our premiums, 177 00:08:55,720 --> 00:08:58,680 denying all of our claims and making a really fat profit by 178 00:08:58,680 --> 00:09:01,240 doing it right. That, that makes a lot of sense. 179 00:09:01,400 --> 00:09:03,560 If they're going to take our money, they should be obligated 180 00:09:03,560 --> 00:09:05,520 to pay a certain percentage of it for our healthcare. 181 00:09:06,200 --> 00:09:08,400 Well, the unintended consequence of that is these companies are 182 00:09:08,400 --> 00:09:11,800 publicly traded. And if you're the CEO and CFO 183 00:09:11,800 --> 00:09:13,840 sitting around the boardroom thinking, how are we going to 184 00:09:13,840 --> 00:09:16,960 show a return to shareholders? We've got to figure out how do 185 00:09:16,960 --> 00:09:22,360 we get the, the, the pie to grow so that our 15% because every 186 00:09:22,360 --> 00:09:25,720 year becomes a bigger number. So the immediate incentive is 187 00:09:25,720 --> 00:09:29,800 how do we get premiums to spiral upward so we can take 15% of a 188 00:09:29,800 --> 00:09:32,840 growing number is 1. And the second thing that these 189 00:09:32,840 --> 00:09:34,880 insurance companies have done, and this isn't new, but it's 190 00:09:34,880 --> 00:09:37,720 really accelerated since the passage of the Affordable Care 191 00:09:37,720 --> 00:09:40,240 Act is they've become vertically, vertically 192 00:09:40,240 --> 00:09:43,400 integrated, which means if you look at any of the insurance 193 00:09:43,400 --> 00:09:46,320 companies, they own their own PBM, the pharmacy benefit 194 00:09:46,320 --> 00:09:48,760 manager, it's simply a middle man that's setting the 195 00:09:48,760 --> 00:09:51,640 contracted price that insurance companies pay for drugs. 196 00:09:52,320 --> 00:09:55,560 But that's a mechanism that they use to shield profitability 197 00:09:55,560 --> 00:09:58,840 that's accepted from that 15% profit margin they're allowed to 198 00:09:58,840 --> 00:10:02,360 make as an insurance company. So they've, they've done that. 199 00:10:02,440 --> 00:10:07,880 They now own physician groups, facilities, clinics, pharmacies, 200 00:10:08,320 --> 00:10:10,920 specialty pharmacies. So they're, they're very 201 00:10:10,920 --> 00:10:13,880 vertically integrated. And those entities that kind of 202 00:10:13,880 --> 00:10:17,480 sit as subsidiaries systematically overbuild the 203 00:10:17,480 --> 00:10:20,000 insurance company to show that they're spending money 204 00:10:20,520 --> 00:10:25,040 overcharging our businesses and overcharging our employees and 205 00:10:25,040 --> 00:10:28,400 members. And at the end of the day, they 206 00:10:28,400 --> 00:10:31,680 come back to an employer and say your loss ratio or your claims 207 00:10:31,680 --> 00:10:34,120 utilization is high. Therefore, we need just this is 208 00:10:34,120 --> 00:10:36,320 justification for us to increase your premium. 209 00:10:37,080 --> 00:10:40,320 But if you're to pull each of these companies filings, they're 210 00:10:40,720 --> 00:10:43,920 10 KS and 10 QS, you're looking at quarterly and annual data. 211 00:10:45,320 --> 00:10:47,720 If you look at where their revenue and profitability is 212 00:10:47,720 --> 00:10:51,320 derived, it's almost primarily from the subsidiaries, not the 213 00:10:51,320 --> 00:10:53,920 insurance companies. So the insurance companies will 214 00:10:53,920 --> 00:10:55,800 run lean. All of the money is being 215 00:10:55,800 --> 00:10:59,200 captured in their verticals. And so the thought that these 216 00:10:59,200 --> 00:11:01,520 insurance companies would have, and I'm rambling here, but this 217 00:11:01,520 --> 00:11:04,520 is really important for people to understand, is vertical 218 00:11:04,520 --> 00:11:06,520 integration is not necessarily a bad thing. 219 00:11:07,080 --> 00:11:10,920 Think about Amazon As for example, the value prop to them 220 00:11:10,920 --> 00:11:12,840 is to be able to deliver something in your doorstep same 221 00:11:12,840 --> 00:11:16,480 day or within two days. They used to rely on FedEx, USPS 222 00:11:16,480 --> 00:11:20,000 and UPS, all that money that was being captured as profit to 223 00:11:20,000 --> 00:11:23,120 those entities, they were able to ring that out by building 224 00:11:23,120 --> 00:11:26,680 their own shipping fleet and the value is now passed on to the 225 00:11:26,680 --> 00:11:29,080 customer. Insurance is the opposite. 226 00:11:29,080 --> 00:11:32,360 The value that's created by this vertical integration is captured 227 00:11:32,360 --> 00:11:34,920 for shareholders. And you can see it in two ways. 228 00:11:35,600 --> 00:11:38,080 One, their profitability and their stock price continues to 229 00:11:38,080 --> 00:11:40,920 climb. And two, the end user, the 230 00:11:40,920 --> 00:11:43,880 customer cost continues to climb as well. 231 00:11:43,880 --> 00:11:46,960 So I would argue that that vertical integration is actually 232 00:11:46,960 --> 00:11:49,720 for the benefit of shareholders, not the membership. 233 00:11:50,360 --> 00:11:52,920 And the insurance companies fiduciary obligation is to 234 00:11:52,920 --> 00:11:58,160 shareholders, not the members. So once you understand how the 235 00:11:58,160 --> 00:12:00,440 insurance companies are designed and how they make money, the 236 00:12:00,440 --> 00:12:04,000 question then becomes as an HR leader and an executive is, OK, 237 00:12:04,760 --> 00:12:07,560 we understand that mousetrap. Now how do we get rid of those 238 00:12:07,560 --> 00:12:09,640 conflicts of interest and misaligned incentives? 239 00:12:09,640 --> 00:12:12,160 And how do we design a plan where everybody's actually 240 00:12:12,160 --> 00:12:15,840 aligned with the goals that we have, which is top tier 241 00:12:15,840 --> 00:12:18,440 benefits, the best coverage possible at the best possible 242 00:12:18,440 --> 00:12:20,800 price. And that's usually where we 243 00:12:20,800 --> 00:12:24,960 start that conversation. That's really, really helpful. 244 00:12:24,960 --> 00:12:29,520 I have so many questions coming out of what you shared and I'll 245 00:12:29,520 --> 00:12:32,680 try not to throw them all at you at once. 246 00:12:34,240 --> 00:12:38,280 The first question is kind of going kind of back to what you 247 00:12:38,280 --> 00:12:41,480 were saying around like understanding the goal of an 248 00:12:41,480 --> 00:12:44,640 insurance company. And I've seen your Tik Toks, 249 00:12:44,640 --> 00:12:48,640 I've seen the one that you you kind of went viral with with the 250 00:12:48,640 --> 00:12:51,120 urgent care. And I saw a lot of the comments 251 00:12:51,120 --> 00:12:53,040 where people are like, insurance is a scam. 252 00:12:53,040 --> 00:12:58,240 And of course, this is the widely held belief and one of 253 00:12:58,240 --> 00:13:03,200 the questions that I have is kind of around what really helps 254 00:13:03,200 --> 00:13:05,360 Dr. profits for insurance companies. 255 00:13:05,840 --> 00:13:10,400 Is it maybe let me back backtrack for a second. 256 00:13:10,600 --> 00:13:15,680 The, I think most people say, at least this is what I read a lot 257 00:13:15,800 --> 00:13:20,000 online and, and just, you know, kind of see in terms of people's 258 00:13:20,000 --> 00:13:22,240 skepticism over insurance companies, which I'm not saying 259 00:13:22,440 --> 00:13:24,440 they shouldn't be skeptical. I'm just saying this is 260 00:13:24,720 --> 00:13:29,680 generally the the vibe is that insurance companies want us to 261 00:13:29,680 --> 00:13:34,560 be less healthy because then they make more money and that 262 00:13:34,880 --> 00:13:39,000 the more we require coverage or the more coverage we require, 263 00:13:39,000 --> 00:13:41,600 the more we need our insurance, the more money they make. 264 00:13:42,960 --> 00:13:46,240 I have family and loved ones who work in healthcare, doctors and 265 00:13:46,240 --> 00:13:48,800 others. And they say, well, no. 266 00:13:49,360 --> 00:13:52,200 And there there is a a second question that I have here. 267 00:13:52,200 --> 00:13:54,000 So I'm glad that I saw that you were writing something down 268 00:13:54,000 --> 00:13:56,240 because I'm going to probably throw a couple of these at you 269 00:13:56,240 --> 00:13:58,480 at once. But they sometimes say, well, 270 00:13:58,680 --> 00:14:00,840 yeah. However, insurance companies 271 00:14:00,840 --> 00:14:03,880 make more money when people are paying high premiums and not 272 00:14:03,880 --> 00:14:06,520 getting sick. So when people are healthy or 273 00:14:06,520 --> 00:14:10,320 healthier, insurance companies are making more because they're 274 00:14:10,320 --> 00:14:14,080 not, they don't have like these crazy costs of coverage. 275 00:14:14,840 --> 00:14:18,560 And that's why you see, you know, benefits like gym 276 00:14:18,560 --> 00:14:20,800 reimbursement and things like that in insurance, which 277 00:14:21,120 --> 00:14:23,760 arguably $200 a year is not a lot. 278 00:14:23,760 --> 00:14:27,240 But when you add it or multiply it by hundreds of thousands of 279 00:14:27,240 --> 00:14:30,840 people, that obviously adds up. So that's the first question is 280 00:14:30,840 --> 00:14:33,880 like, what actually makes insurance companies money? 281 00:14:34,240 --> 00:14:37,080 And the second question that I have here for you is actually 282 00:14:37,080 --> 00:14:39,920 around the healthcare side and the healthcare provider side, 283 00:14:40,520 --> 00:14:44,200 because I, I have, you know, loved ones in healthcare, they 284 00:14:44,200 --> 00:14:48,240 often say that they're in the last like five years or so, 285 00:14:48,280 --> 00:14:51,720 maybe even in the last three or a little bit more. 286 00:14:53,120 --> 00:14:58,800 There has been a huge reduction in reimbursements to healthcare 287 00:14:58,800 --> 00:15:01,560 providers from insurance companies and it's forced 288 00:15:02,080 --> 00:15:05,760 healthcare providers to join hospital networks rather than, 289 00:15:06,200 --> 00:15:09,240 you know, retaining or remaining in their private practices. 290 00:15:09,800 --> 00:15:12,720 And so one of the thoughts that I had as you were sharing all of 291 00:15:12,720 --> 00:15:16,280 this is, is there, and maybe you don't know the answer to this, 292 00:15:16,280 --> 00:15:20,920 but maybe you have a belief, is there a correlation between 293 00:15:20,920 --> 00:15:27,880 insurance revenue and being like really focused on hospital 294 00:15:27,880 --> 00:15:29,840 networks? Because they have, you know, all 295 00:15:29,840 --> 00:15:33,720 of these, they, they, the X-ray machine is there, the CT scanner 296 00:15:33,720 --> 00:15:37,040 is there like everything is there versus private practice 297 00:15:37,040 --> 00:15:39,920 where maybe costs are a little bit lower for some people, you 298 00:15:39,920 --> 00:15:41,600 know, it, it, I could see it varying. 299 00:15:41,920 --> 00:15:46,720 And so insurance companies potentially have this like 300 00:15:47,040 --> 00:15:52,880 underlying motivation to see everything exists in hospitals 301 00:15:53,440 --> 00:15:56,440 rather than seeing, you know, greater reimbursements for 302 00:15:56,440 --> 00:15:59,840 private practicing physicians or healthcare providers because 303 00:15:59,840 --> 00:16:02,560 maybe they're able to keep costs slower and that impacts the 304 00:16:02,560 --> 00:16:05,840 insurance company's bottom line. So this is, these are, these are 305 00:16:05,840 --> 00:16:08,240 two questions. I know they're big questions so 306 00:16:08,240 --> 00:16:11,400 feel free to break it down, but I couldn't help but ask that I. 307 00:16:11,440 --> 00:16:14,320 Have like a bazillion thoughts on all of this because you're 308 00:16:14,320 --> 00:16:16,880 asking the right question in questions. 309 00:16:16,880 --> 00:16:20,400 These are the questions that HR leaders and executives should be 310 00:16:20,400 --> 00:16:23,680 asking. And because what you have to 311 00:16:23,680 --> 00:16:25,000 really understand two different things. 312 00:16:25,000 --> 00:16:28,080 There's an insurance, health insurance, and then there's 313 00:16:28,080 --> 00:16:31,280 healthcare. We often confuse them as one 314 00:16:31,280 --> 00:16:34,120 because health insurance pays for healthcare, but Healthcare 315 00:16:34,120 --> 00:16:36,840 is a completely separate business than health insurance. 316 00:16:36,840 --> 00:16:39,400 So let's talk about the healthcare side first because 317 00:16:39,400 --> 00:16:41,680 this is what drives the cost of health insurance. 318 00:16:42,400 --> 00:16:44,520 So your question about independent practices versus 319 00:16:44,520 --> 00:16:48,880 hospital systems, hospital systems have in, in this is 320 00:16:48,880 --> 00:16:51,560 happening everywhere in the country right now and it has 321 00:16:51,560 --> 00:16:53,280 been since the passage of the ACA. 322 00:16:53,800 --> 00:16:57,160 What you're seeing is hospitals have purchased other hospitals. 323 00:16:57,880 --> 00:17:01,080 So they've consolidated, they've done something similar to the 324 00:17:01,080 --> 00:17:03,600 insurance companies where they have vertically integrated. 325 00:17:03,840 --> 00:17:07,040 Because if you're a hospital, you, you're, this is the brick 326 00:17:07,040 --> 00:17:09,280 and mortar building that people walk into. 327 00:17:09,640 --> 00:17:12,920 How do we get the patients in the door of the hospital? 328 00:17:12,920 --> 00:17:17,599 You've got to have steerage. So the, the pitch was, you know, 329 00:17:17,599 --> 00:17:20,000 the Affordable Care Act and electronic medical records and 330 00:17:20,000 --> 00:17:22,720 compliance is going to be really difficult and expensive for you 331 00:17:22,720 --> 00:17:24,800 as an independent provider to do this. 332 00:17:25,240 --> 00:17:27,640 Join our hospital system. We'll take care of that for you. 333 00:17:27,640 --> 00:17:29,760 We can give you referrals. You give us referrals. 334 00:17:29,760 --> 00:17:32,560 And So what you've seen is hospitals have purchased other 335 00:17:32,560 --> 00:17:36,440 hospitals, they've consolidated, they've purchased primary care 336 00:17:36,440 --> 00:17:41,120 physicians, specialists. So the OBGN, the oncologist, the 337 00:17:41,120 --> 00:17:43,680 dermatologist, they're purchasing all of these 338 00:17:44,400 --> 00:17:48,440 providers, they're building physical therapy clinics, 339 00:17:48,480 --> 00:17:52,520 outpatient surgical imaging facilities, all to create a 340 00:17:52,520 --> 00:17:56,080 single ecosystem so that no matter where somebody goes in to 341 00:17:56,080 --> 00:17:58,880 the healthcare ecosystem, they've got a solution for it, 342 00:17:58,880 --> 00:18:01,520 which it makes a lot of sense. There's continuity of care, 343 00:18:01,520 --> 00:18:04,160 there's simplicity of medical records and those sorts of 344 00:18:04,160 --> 00:18:08,240 things. But what you see happening is a 345 00:18:08,240 --> 00:18:10,000 member may not go to a primary care doctor. 346 00:18:10,000 --> 00:18:12,840 They may just go straight to an orthopedist with a knee injury. 347 00:18:14,120 --> 00:18:17,920 Since that orthopedist is owned by a hospital system, they're 348 00:18:17,920 --> 00:18:21,360 directed on where they're dictated to essentially where 349 00:18:21,360 --> 00:18:24,240 they can send patients. You work for us. 350 00:18:24,280 --> 00:18:27,200 When you order an MRI, you're sending it to a hospital owned 351 00:18:27,200 --> 00:18:30,520 facility that we own. And when that surgery needs to 352 00:18:30,520 --> 00:18:33,640 be conducted, performed, you're going to do it inside of our 353 00:18:33,640 --> 00:18:36,280 hospital. And all of that results in a 354 00:18:36,280 --> 00:18:39,560 higher cost because what's happening with the hospital to 355 00:18:39,560 --> 00:18:42,600 the insurance company, they're now, I'll call it just the too 356 00:18:42,600 --> 00:18:44,960 big to fail theory. This is back from the financial 357 00:18:44,960 --> 00:18:47,000 crisis where the banks were too big to let fail. 358 00:18:47,520 --> 00:18:49,160 I'll call this on the insurance spectrum. 359 00:18:49,160 --> 00:18:53,880 It's a too big to not allow. And that is we are the big 360 00:18:53,880 --> 00:18:56,480 hospital system. We're the £800 gorilla in New 361 00:18:56,480 --> 00:19:00,640 York City or Houston, TX or LA, California. 362 00:19:01,320 --> 00:19:03,080 You can't afford to not have us in network. 363 00:19:03,080 --> 00:19:07,240 Therefore, you're going to pay us what we need and we're going 364 00:19:07,240 --> 00:19:10,920 to do everything inside the walls of our ecosystem. 365 00:19:11,520 --> 00:19:15,760 And ultimately what you see and we call this side of care, you 366 00:19:15,760 --> 00:19:19,280 see this everyday a doctor since we'll stay on the orthopedic 367 00:19:19,440 --> 00:19:21,880 condition side. So somebody has a knee injury 368 00:19:21,880 --> 00:19:24,200 that orthopedic needs to order an MRI. 369 00:19:24,680 --> 00:19:28,360 Sending that to the hospital for that MRI is about in my market 370 00:19:28,360 --> 00:19:31,400 it's about 2500 dollars, 15125 depending on if it's got 371 00:19:31,400 --> 00:19:33,960 contrast or not. So let's just say $2500. 372 00:19:34,920 --> 00:19:37,640 But if they were willing to go to a free standing imaging 373 00:19:37,640 --> 00:19:41,000 center, same MRI machine, they're all made. 374 00:19:41,000 --> 00:19:43,040 There's only a few makers of those machines. 375 00:19:43,920 --> 00:19:47,040 It's all digitally transmitted. That image can be shot, sent to 376 00:19:47,040 --> 00:19:49,480 the orthopedic doctor. You can get that same image for 377 00:19:49,480 --> 00:19:54,080 four or $500.00. So if you are a provider of 378 00:19:54,080 --> 00:19:58,520 benefit and HR leader and you understand that the cost of 379 00:19:58,520 --> 00:20:00,840 Healthcare is going to drive the cost of your insurance, do you 380 00:20:00,840 --> 00:20:03,560 want to? Help your member get the $500 381 00:20:03,560 --> 00:20:07,360 image that's the exact same quality because you can provide 382 00:20:07,680 --> 00:20:09,880 five of those images for the price of 1. 383 00:20:11,600 --> 00:20:14,200 So side of care becomes an important issue and there's ways 384 00:20:14,200 --> 00:20:17,440 that you can design a plan to incentivize people to have a 385 00:20:17,440 --> 00:20:20,240 choice. But that's really what's 386 00:20:20,240 --> 00:20:22,560 happening on the the healthcare side. 387 00:20:22,560 --> 00:20:24,160 Just to give people kind of a little flavor. 388 00:20:24,160 --> 00:20:25,760 What's happening on the insurance side? 389 00:20:25,760 --> 00:20:27,800 To answer your question about how insurance companies are 390 00:20:27,800 --> 00:20:32,200 making money, it makes total sense for any business leader. 391 00:20:33,480 --> 00:20:36,200 Revenue minus cost is profit, right? 392 00:20:36,520 --> 00:20:38,920 But insurance math doesn't work that way. 393 00:20:39,560 --> 00:20:44,800 So for an insurance company, their profit margin is capped 394 00:20:44,880 --> 00:20:46,400 for this. When we're talking about large 395 00:20:46,400 --> 00:20:49,760 employers and by law large employer is identified as 396 00:20:49,760 --> 00:20:52,440 somebody that has more than 50 full time equivalent employees. 397 00:20:52,440 --> 00:20:53,880 So that's what we're talking about. 398 00:20:54,560 --> 00:20:57,000 South, an insurance company that has a block of business 399 00:20:57,000 --> 00:21:00,840 nationally with large employers has more than 50 employees. 400 00:21:00,840 --> 00:21:03,120 They can only make 15% profit margin. 401 00:21:03,800 --> 00:21:07,040 So that's revenue of premium, all the premiums everybody's 402 00:21:07,040 --> 00:21:09,000 paid in minus all of the healthcare costs. 403 00:21:09,000 --> 00:21:13,520 If they make 16%, seventeen percent, 18%, which this 404 00:21:13,520 --> 00:21:16,080 happened during COVID because people weren't using insurance 405 00:21:16,080 --> 00:21:21,200 because facilities were closed, they have to return that premium 406 00:21:21,200 --> 00:21:25,120 back to the policyholders, anything above 15%. 407 00:21:25,120 --> 00:21:29,240 So if they're making a 20% margin, they're giving 5% of 408 00:21:29,240 --> 00:21:31,480 that back to all of the companies that paid in. 409 00:21:31,960 --> 00:21:34,040 So their margins cap. This is where the vertical 410 00:21:34,040 --> 00:21:37,520 integration piece comes in. And So what insurance companies 411 00:21:37,520 --> 00:21:40,080 really want, I'm just putting my insurance executive hat on here. 412 00:21:41,560 --> 00:21:45,480 I need people paying premium in and I really need people to use 413 00:21:45,480 --> 00:21:48,240 the insurance and I need them to use certain things. 414 00:21:48,240 --> 00:21:49,840 I need them to use prescription drugs. 415 00:21:50,640 --> 00:21:53,000 I need them to use the the doctors and the facilities that 416 00:21:53,000 --> 00:21:55,000 we own. Primarily, if you're one of the 417 00:21:55,000 --> 00:21:57,360 big insurance companies, people think of Aetna as an insurance 418 00:21:57,360 --> 00:21:59,360 company. It's actually owned by CVS. 419 00:22:00,240 --> 00:22:05,320 And what else does CVS own? Massive pharmacy chain. 420 00:22:06,200 --> 00:22:09,640 They own an insurance company, Aetna, and they own one of the 421 00:22:09,640 --> 00:22:11,920 largest pharmacy benefit managers that's setting the 422 00:22:11,920 --> 00:22:15,440 price that insurance pays and what the pharmacy they own pays. 423 00:22:15,920 --> 00:22:18,120 What could possibly go wrong? You talk about fox guarding the 424 00:22:18,120 --> 00:22:19,200 hen house. Is there anything wrong? 425 00:22:19,200 --> 00:22:21,920 It's like asking the fox is anything wrong. 426 00:22:21,920 --> 00:22:25,040 And he coughs up a bunch of feathers and says, no, no, 427 00:22:25,320 --> 00:22:27,960 definitely not a problem, right? That's exactly what's happening. 428 00:22:28,680 --> 00:22:31,920 And So what insurance companies want is people to, I don't want 429 00:22:31,960 --> 00:22:33,920 to say they want people to be sick, but we need people to use 430 00:22:33,920 --> 00:22:35,880 the insurance, but not too catastrophically. 431 00:22:36,840 --> 00:22:39,120 They want people to need coverage of some kind. 432 00:22:39,560 --> 00:22:42,720 They do, and at the end of the day, people think that insurance 433 00:22:42,720 --> 00:22:45,600 companies are the ones that are taking all the risk, and they're 434 00:22:45,600 --> 00:22:47,240 not. It's not their money. 435 00:22:47,800 --> 00:22:49,760 The way to think about an insurance company is there a 436 00:22:49,760 --> 00:22:54,000 middle man between the healthcare that's provided and 437 00:22:54,000 --> 00:22:56,840 the people that actually pay for healthcare, which is employers. 438 00:22:56,840 --> 00:22:59,000 About half of Americans are getting insurance through an 439 00:22:59,000 --> 00:23:02,680 employer. So the, the, the, the real power 440 00:23:02,680 --> 00:23:04,680 is an employer's hands to solve this problem. 441 00:23:04,680 --> 00:23:07,200 They're the ones paying for half of healthcare in the United 442 00:23:07,200 --> 00:23:10,640 States. And what most employers don't 443 00:23:10,640 --> 00:23:13,640 realize is that if your claims are high in a given year, you 444 00:23:13,640 --> 00:23:15,760 just experienced this with your own company, you got an 445 00:23:15,760 --> 00:23:19,520 increase, right? The costs are going to be 446 00:23:19,520 --> 00:23:21,960 shifted back to employers no matter what. 447 00:23:22,080 --> 00:23:25,840 So the onus we think, well, I'm locked in for a year with this 448 00:23:25,840 --> 00:23:27,600 insurance company no matter what happens. 449 00:23:27,600 --> 00:23:30,960 I mean, my price is guaranteed, but no, is it really, it may be 450 00:23:30,960 --> 00:23:35,200 guaranteed for a 12 month cycle, but in month 13 you might get a 451 00:23:35,200 --> 00:23:38,640 really big increase. So it's really incumbent upon 452 00:23:38,640 --> 00:23:41,840 all of us as leaders to figure out what's really driving cost 453 00:23:41,840 --> 00:23:43,360 and what can we really do about it. 454 00:23:44,360 --> 00:23:46,400 And so I don't know if that really answers your question, 455 00:23:46,400 --> 00:23:51,480 but I go, I go back to the the the way insurance companies make 456 00:23:51,480 --> 00:23:52,720 money. If you look at their financial 457 00:23:52,720 --> 00:23:55,600 statements, it's through the usage of the healthcare system 458 00:23:55,760 --> 00:23:58,360 and it's particularly things that they have ownership in. 459 00:23:58,360 --> 00:24:00,800 And I think it's one of the biggest problems that the 460 00:24:00,800 --> 00:24:02,880 current administration is going to have to address. 461 00:24:02,880 --> 00:24:06,400 You see little bits and pieces of them trying to address it, 462 00:24:07,040 --> 00:24:14,120 but institutional ownership of the healthcare ecosystem by 463 00:24:14,120 --> 00:24:16,440 publicly traded and private equity backed companies is a 464 00:24:16,440 --> 00:24:19,200 real problem. Yeah, I totally agree. 465 00:24:19,200 --> 00:24:22,560 I I also think, you know, we often on this podcast we talk 466 00:24:22,560 --> 00:24:28,200 about kind of that intersection between regulation and, and lack 467 00:24:28,200 --> 00:24:31,800 of regulation or where, you know, companies can do their own 468 00:24:31,800 --> 00:24:34,520 thing and where government sometimes needs to step in, 469 00:24:34,520 --> 00:24:36,360 whether it's local, state or federal. 470 00:24:36,800 --> 00:24:40,800 And I have been reflecting on this recently that, you know, 471 00:24:41,040 --> 00:24:44,800 it's kind of feels like things have come to a point where 472 00:24:45,560 --> 00:24:48,880 employers are doing a lot. Maybe there are some who need to 473 00:24:48,880 --> 00:24:52,800 do more. And now there's obviously, I 474 00:24:52,800 --> 00:24:55,760 think obviously a need for the government to kind of step in 475 00:24:55,760 --> 00:25:00,360 and say, hold on, like, is this really what can happen here? 476 00:25:00,560 --> 00:25:05,400 Because at some level, I think the government does care about 477 00:25:05,680 --> 00:25:08,920 employers staying in business in order to employ people. 478 00:25:09,240 --> 00:25:15,120 And when costs just year over year rise so significantly on 479 00:25:15,120 --> 00:25:18,200 top of all these other costs that rise significantly, whether 480 00:25:18,200 --> 00:25:23,400 it's groceries or gas or you know, electricity, whatever it 481 00:25:23,400 --> 00:25:26,520 is, right? Those things they all like play 482 00:25:26,520 --> 00:25:31,480 a a very significant role in how employers can actually conduct 483 00:25:31,480 --> 00:25:34,640 their business. And when I think about just the 484 00:25:34,640 --> 00:25:37,840 rising cost of healthcare coupled with how insurance 485 00:25:37,840 --> 00:25:41,160 companies make money, I think this is where sometimes 486 00:25:41,160 --> 00:25:46,200 regulation steps in to say, OK, hold on, sure, you're a business 487 00:25:46,200 --> 00:25:48,960 too, you're publicly traded, you have stakeholders and all of the 488 00:25:48,960 --> 00:25:52,640 shareholders and all that. However, we're also talking 489 00:25:52,640 --> 00:25:58,120 about people who you are kind of requiring to have insurance 490 00:25:58,120 --> 00:26:01,560 because also when you when even though certainly people can get 491 00:26:02,120 --> 00:26:05,520 care and coverage without insurance, you know, there is 492 00:26:05,520 --> 00:26:07,400 obviously a financial burden there. 493 00:26:07,960 --> 00:26:11,360 Some people are starting to make the argument, not many, but some 494 00:26:11,640 --> 00:26:15,840 in a niche, in a niche way that not having insurance is less 495 00:26:15,840 --> 00:26:19,960 expensive sometimes like it kind of depends on what their 496 00:26:19,960 --> 00:26:23,120 circumstances are. And so I could see for sure the 497 00:26:23,120 --> 00:26:25,720 need to have more regulation or at least like government 498 00:26:25,720 --> 00:26:28,000 interference in some of these things. 499 00:26:28,320 --> 00:26:34,000 And I'm curious also because at least in my experience as an HR 500 00:26:34,000 --> 00:26:37,800 leader, through all of the open enrollments that I've kind of 501 00:26:37,800 --> 00:26:42,240 been a part of or conducted, it seems most of the time, the 502 00:26:42,240 --> 00:26:48,680 larger the team, the lower the costs on employers can be in 503 00:26:48,680 --> 00:26:53,200 terms of plan premiums and how effective their funding strategy 504 00:26:53,200 --> 00:26:56,320 can be. But I'm curious if there's 505 00:26:56,480 --> 00:26:59,760 statistical significance there. Like if it's just that, well, 506 00:26:59,760 --> 00:27:01,920 you can have more employees and you can have a greater 507 00:27:01,920 --> 00:27:04,720 percentage of them who are actually requiring more 508 00:27:04,720 --> 00:27:06,800 significant healthcare. And so it kind of comes out in 509 00:27:06,800 --> 00:27:09,440 the wash and doesn't really matter or, you know, cuz also 510 00:27:09,440 --> 00:27:12,840 like this idea of a large employee, large employers, large 511 00:27:12,840 --> 00:27:16,800 businesses being 50 plus, most people would probably think a 512 00:27:16,800 --> 00:27:18,880 large employer is way bigger than that, but it's because 513 00:27:18,880 --> 00:27:23,760 small businesses are under 50. So I'm curious if there is kind 514 00:27:23,760 --> 00:27:28,280 of a correlation between business size and cost of 515 00:27:28,600 --> 00:27:33,240 healthcare in terms of, I should say, cost of insurance premiums 516 00:27:33,240 --> 00:27:36,320 on the employer. And then obviously sometimes 517 00:27:36,320 --> 00:27:38,560 that does translate to the employee too, if the employer 518 00:27:38,560 --> 00:27:43,440 can't cover or refuses to cover in their funding strategy, more 519 00:27:43,440 --> 00:27:46,840 of the the cost of coverage. Yeah, I think those are great 520 00:27:46,840 --> 00:27:48,760 questions. In my experience, what you'll 521 00:27:48,760 --> 00:27:52,640 find is there's small and smaller employers. 522 00:27:52,640 --> 00:27:56,400 And let's just even use this definition of 50 or more 523 00:27:56,720 --> 00:27:59,880 employees inside of an employer. Let's just use a round #100 524 00:27:59,880 --> 00:28:03,880 employees. That company might spend 1.2 to 525 00:28:03,880 --> 00:28:06,880 $1.5 million a year in health insurance premiums. 526 00:28:08,680 --> 00:28:11,400 Is that statistically significant risk dispersion? 527 00:28:11,400 --> 00:28:14,840 And I would say, no, that's not for health insurance reasons. 528 00:28:14,840 --> 00:28:17,560 And I would tell you we used to measure the size of a large 529 00:28:17,560 --> 00:28:20,080 claim. If the claim was over $100,000 530 00:28:20,160 --> 00:28:22,760 fifteen years ago, that was a notable claim and then it was 531 00:28:22,760 --> 00:28:25,640 250, then it was half a million. A few years ago. 532 00:28:25,640 --> 00:28:28,280 We started measuring claims at the $1,000,000 mark and more 533 00:28:28,280 --> 00:28:31,720 because it used to be very rare to see that, but we see it quite 534 00:28:31,720 --> 00:28:34,160 frequently now. And now the catastrophic claim 535 00:28:34,160 --> 00:28:37,520 threshold that we monitor is this $2,000,000 limit. 536 00:28:37,520 --> 00:28:40,560 So somebody gets a really, I mean, we have the, the, the 537 00:28:40,560 --> 00:28:42,480 blessing here is that we have the technology and the 538 00:28:42,480 --> 00:28:47,240 capabilities to treat people with a multitude of illnesses 539 00:28:47,240 --> 00:28:49,960 and, and, and conditions that we used to not be able to treat. 540 00:28:50,080 --> 00:28:52,080 So that's the blessing in disguise here is like, we can 541 00:28:52,080 --> 00:28:54,520 now treat things, but there's a price tag associated with it. 542 00:28:54,520 --> 00:28:58,680 So you might have an employer with 100 employees that's paying 543 00:28:58,680 --> 00:29:02,880 a million to in premium and they end up with a $1.5 million 544 00:29:02,880 --> 00:29:08,840 claimant premature baby that's in a NICU neonatal intensive 545 00:29:08,840 --> 00:29:12,160 care unit for three months. And that could be a million and 546 00:29:12,160 --> 00:29:13,920 a half dollars or $1,000,000 or more. 547 00:29:14,560 --> 00:29:17,680 So just in one person, the insurance company has paid out 548 00:29:17,680 --> 00:29:20,160 more than the group has paid in a premium. 549 00:29:20,160 --> 00:29:22,360 So what do you think is going to happen to that group at renewal? 550 00:29:22,360 --> 00:29:23,800 Right. They're going to probably expect 551 00:29:23,800 --> 00:29:28,360 a sizable increase, but there is a law of diminishing return. 552 00:29:28,440 --> 00:29:31,040 I mean that that holds true. You do need a significant size 553 00:29:31,040 --> 00:29:34,560 of of employees to disperse the risk. 554 00:29:34,560 --> 00:29:37,320 It's similar philosophy to investing in our four O 1K. 555 00:29:37,680 --> 00:29:40,200 We're not taking our four O 1K money and putting it in a single 556 00:29:40,200 --> 00:29:40,880 stock. Why? 557 00:29:40,880 --> 00:29:43,840 Because that would be crazy. It's not, it's not diversified. 558 00:29:44,320 --> 00:29:46,400 So what do we do? We buy a mutual fund that might 559 00:29:46,400 --> 00:29:49,200 invest in two or three hundred other companies and we'll buy 560 00:29:49,200 --> 00:29:51,560 three mutual funds. So in aggregate, we've got a 561 00:29:51,560 --> 00:29:55,800 little bit across 2 or 3000 companies were diversified. 562 00:29:55,800 --> 00:29:57,960 Hopefully we've picked different industries and different size 563 00:29:57,960 --> 00:30:01,400 companies and and whatnot. And so we're what we see 564 00:30:01,400 --> 00:30:05,600 employers doing today is that similar strategy to manage their 565 00:30:05,600 --> 00:30:08,360 insurance. And so we see employers were 566 00:30:08,360 --> 00:30:11,320 grouping them together around the country where you might pull 567 00:30:11,320 --> 00:30:16,080 together 1000 employers in a common pool and there might be 568 00:30:16,080 --> 00:30:21,040 10 or 15,000 employee lives in that risk pool, if you will. 569 00:30:21,040 --> 00:30:25,480 And allows a smaller employer that maybe has 102 hundred 500 570 00:30:25,480 --> 00:30:29,920 employees to now buy insurance at scale because they've been 571 00:30:29,920 --> 00:30:33,280 able to diversify their risk. That's just one component. 572 00:30:34,120 --> 00:30:37,320 If we're all doing our insurance through one of the big four 573 00:30:37,320 --> 00:30:40,480 insurance companies and we allow them to monetize our claims 574 00:30:40,920 --> 00:30:43,840 through their vertical, that's going to result in higher cost. 575 00:30:44,240 --> 00:30:46,840 So the ultimate best outcome where you have the best of both 576 00:30:46,840 --> 00:30:49,840 worlds is you're pooling together employers that have a 577 00:30:49,840 --> 00:30:54,040 similar mindset to say we're going to align our plans in the 578 00:30:54,040 --> 00:30:56,360 right way, where we're buying pharmaceuticals the right way, 579 00:30:56,360 --> 00:30:58,120 we structure the plans the right way. 580 00:30:58,720 --> 00:31:01,240 We create incentives where employees can win and get low 581 00:31:01,240 --> 00:31:04,280 cost, no cost healthcare because we're buying it the right way. 582 00:31:05,600 --> 00:31:09,200 As those types of employers come together, you're able to offer 583 00:31:09,640 --> 00:31:13,080 more diversified risk, you're able to lower the cost of 584 00:31:13,080 --> 00:31:15,720 insurance and you're able to lower the cost of healthcare. 585 00:31:15,720 --> 00:31:19,200 That really is the trifecta that we see the employers that are 586 00:31:19,200 --> 00:31:21,560 winning in today's market, that's the direction that 587 00:31:21,560 --> 00:31:24,440 they're going. They've realized doing it the 588 00:31:24,440 --> 00:31:27,840 way we always have doesn't work. And you mentioned inflation. 589 00:31:27,840 --> 00:31:31,440 We talk about wage inflation, electricity, groceries, 590 00:31:31,440 --> 00:31:33,360 gasoline. What's interesting, if you're to 591 00:31:33,360 --> 00:31:35,440 look at gas, I don't, I don't know what the gas prices are in 592 00:31:35,440 --> 00:31:38,520 New York, but I'm in Texas. $3. Yeah, we're paying about two, 593 00:31:38,680 --> 00:31:41,840 255 to 265 in Texas, depending on which market you're in. 594 00:31:42,080 --> 00:31:47,920 What's funny is back in 2006, 2005, I was paying close to 595 00:31:47,920 --> 00:31:50,160 $4.00 a gallon. I'm actually paying less today. 596 00:31:50,920 --> 00:31:52,840 And if you ask people what's something that's really 597 00:31:52,840 --> 00:31:54,520 inflationary, they'll say gasoline. 598 00:31:55,280 --> 00:31:58,000 Well, it might spike, but it comes down and it goes back up 599 00:31:58,000 --> 00:31:59,200 and it kind of fluctuates, right? 600 00:31:59,840 --> 00:32:01,880 But if you look at healthcare, and in fact, the Department of 601 00:32:01,880 --> 00:32:04,800 Labor has statistics on this, it's the most inflationary thing 602 00:32:04,800 --> 00:32:07,560 in our economy. Insurance particularly, it is a 603 00:32:07,560 --> 00:32:11,760 hockey stick up and to the right above everything else. 604 00:32:12,560 --> 00:32:15,640 But if you look at other industries like consumer goods, 605 00:32:15,640 --> 00:32:20,520 televisions, technology, I don't know how old you are, but do 606 00:32:20,520 --> 00:32:24,200 you? I remember when OK, so VCRS you 607 00:32:24,200 --> 00:32:25,680 don't know what that? Technology is I know of. 608 00:32:25,960 --> 00:32:28,240 Oh, OK. I remember as a kid, we walked 609 00:32:28,280 --> 00:32:30,680 in. Yeah, I remember as a kid, we 610 00:32:30,680 --> 00:32:34,560 walked into a con's electronics store and I was a little kid and 611 00:32:34,560 --> 00:32:38,120 we bought a VCR. We paid $750 for a VCR. 612 00:32:39,400 --> 00:32:42,080 You can't even find that technology now, but before it 613 00:32:42,080 --> 00:32:46,200 was old technology, you could buy them for, I don't know, 614 00:32:46,200 --> 00:32:49,960 $25.00, right? The first flat screen plasma 615 00:32:49,960 --> 00:32:52,600 television was $10,000. I can go buy something that's a 616 00:32:52,600 --> 00:32:56,400 much better technology for a few $100. 617 00:32:57,040 --> 00:32:59,520 And what you see is this. There's consumerism. 618 00:32:59,520 --> 00:33:02,320 People have multiple places to buy them, multiple places to pay 619 00:33:02,320 --> 00:33:03,840 for them. They can read reviews, They have 620 00:33:03,840 --> 00:33:08,400 that entire information set in their hands and they can shop 621 00:33:08,400 --> 00:33:10,040 and they understand how it works. 622 00:33:10,400 --> 00:33:11,760 Healthcare doesn't work that way. 623 00:33:12,080 --> 00:33:16,640 There's very few suppliers, there's very few payers. 624 00:33:16,760 --> 00:33:18,760 If you're buying it through an insurance company and there's a 625 00:33:18,760 --> 00:33:21,000 lot of power in very few hands and there's no information. 626 00:33:21,000 --> 00:33:23,040 Nobody knows what is a baby birth cost? 627 00:33:23,040 --> 00:33:26,520 Is it 5 grand or is it 50 grand or the price of their 628 00:33:26,520 --> 00:33:28,080 medications? Most people don't understand 629 00:33:28,080 --> 00:33:30,800 what that is. So you can actually design that 630 00:33:30,800 --> 00:33:33,520 into your plan to where members at the touch of a fingertip with 631 00:33:33,520 --> 00:33:37,480 a smartphone know if I go here, it's more expensive. 632 00:33:37,480 --> 00:33:39,600 If I go here, I can get it for free. 633 00:33:42,120 --> 00:33:43,720 So there's just a lot that can be done with this. 634 00:33:43,720 --> 00:33:45,440 And I know I just kind of rambled, rambled there, but 635 00:33:45,440 --> 00:33:48,080 there's so much, there's so much here that for an employer to 636 00:33:48,080 --> 00:33:49,880 actually grab a hold of. And the last point I would make 637 00:33:49,880 --> 00:33:53,040 to this, because you kind of alluded to this, the, the role 638 00:33:53,040 --> 00:33:55,560 of an HR leader and the executive team in managing 639 00:33:55,560 --> 00:33:57,920 benefits. You're seeing a lot more of this 640 00:33:57,920 --> 00:34:03,520 come to light now that the employer is a fiduciary of their 641 00:34:03,520 --> 00:34:06,120 employee benefit plan on the on behalf of their members. 642 00:34:06,120 --> 00:34:08,679 And you've seen some lawsuits, the big notable ones are going 643 00:34:08,679 --> 00:34:12,960 to be Wells Fargo and Johnson and Johnson, where the HR team, 644 00:34:13,000 --> 00:34:17,719 the HR leader and the CFO specifically were named in these 645 00:34:17,719 --> 00:34:21,280 lawsuits for breach of fiduciary duty. 646 00:34:22,239 --> 00:34:25,960 And that what that really underscores to me is the role 647 00:34:25,960 --> 00:34:29,360 that we all play, making sure that we have the right advisor 648 00:34:29,800 --> 00:34:32,719 that's helping us understand and properly vet the market. 649 00:34:33,239 --> 00:34:36,760 Because you can, you can tell a broker or an advisor go get us 650 00:34:36,760 --> 00:34:39,960 some options, but are they the right options? 651 00:34:39,960 --> 00:34:43,000 And did you look at all of the options that truly were 652 00:34:43,000 --> 00:34:46,320 available to you to provide the best benefit and to get rid of 653 00:34:46,320 --> 00:34:47,560 this waste? And the thing that people are 654 00:34:47,560 --> 00:34:54,120 looking at, the regulators are really looking at is are there 655 00:34:54,120 --> 00:34:57,600 conflicts of interest in your plan that you should be aware 656 00:34:57,600 --> 00:34:59,720 of? And you've allowed these 657 00:34:59,720 --> 00:35:05,000 companies to essentially RIP you off and RIP off because in one 658 00:35:05,000 --> 00:35:07,600 of the lawsuits, the J&J lawsuit, they specifically cited 659 00:35:07,600 --> 00:35:12,080 a medication that was over $1000 a month that could be purchased 660 00:35:12,080 --> 00:35:14,560 for $38. Unbelievable. 661 00:35:14,560 --> 00:35:17,960 And, and the member was forced to go through that Channel and 662 00:35:17,960 --> 00:35:20,200 pay egregiously for something they didn't have to. 663 00:35:21,040 --> 00:35:23,720 But there's that pricing discrepancy inside of these 664 00:35:23,720 --> 00:35:26,000 insurance plans across the board. 665 00:35:26,680 --> 00:35:30,000 And as you solve that particular problem, that is how you bring 666 00:35:30,000 --> 00:35:32,800 down the cost of insurance and improve the benefit coverage to 667 00:35:32,800 --> 00:35:36,400 the employee and the membership. That's really helpful. 668 00:35:36,400 --> 00:35:39,440 And actually I think it's a perfect segue for one of my last 669 00:35:39,440 --> 00:35:43,840 questions for you, which is what is some if someone's listening 670 00:35:43,840 --> 00:35:47,400 today and they're like, Oh yeah, the open enrollment process in 671 00:35:47,400 --> 00:35:49,800 2025 was brutal. I never want to go through that 672 00:35:49,800 --> 00:35:52,040 again. You know, this episode is coming 673 00:35:52,040 --> 00:35:53,760 out of the pretty much at the top of the year. 674 00:35:53,760 --> 00:35:58,240 So we have effectively like 9 months to figure it out and 675 00:35:58,240 --> 00:36:03,440 figure out how we as HR leaders can do better for not only 676 00:36:03,440 --> 00:36:05,800 ourselves but our employees and our companies. 677 00:36:06,120 --> 00:36:10,080 What is something that they can do today that can improve their 678 00:36:10,080 --> 00:36:14,240 outcomes and frankly, the experience for their employees 679 00:36:14,240 --> 00:36:17,400 and the company? Yeah, wonderful question. 680 00:36:17,600 --> 00:36:21,720 I always the advice I give to leaders is start early. 681 00:36:22,240 --> 00:36:25,680 Most of the time when we when we speak with groups, they're 682 00:36:25,680 --> 00:36:28,680 telling us we don't really address benefits until until 683 00:36:28,680 --> 00:36:32,080 towards the end of the year. And really benefits management 684 00:36:32,080 --> 00:36:35,160 should be a year round cycle. There's there, there should be 685 00:36:35,160 --> 00:36:38,440 at least monthly or quarterly at least touch points where you're 686 00:36:38,440 --> 00:36:40,920 reviewing plan performance and options. 687 00:36:40,920 --> 00:36:43,520 And so when you get to the renewal, there's no surprises. 688 00:36:44,320 --> 00:36:48,560 And if a if a company is looking at alternatives, they should be 689 00:36:48,560 --> 00:36:51,040 talking to multiple advisors. Because if you talk to three 690 00:36:51,040 --> 00:36:53,680 advisors, you might get 3 different opinions about what 691 00:36:53,680 --> 00:36:58,520 your options truly are. And a good advisor is going to 692 00:36:58,520 --> 00:37:01,240 ask a lot of questions. They're going to ask for some 693 00:37:01,240 --> 00:37:04,200 information and they're going to do an assessment of your plan 694 00:37:04,200 --> 00:37:07,400 and provide you a strategic review that says here's what you 695 00:37:07,400 --> 00:37:10,840 have today versus what your stated goals and plans are. 696 00:37:11,200 --> 00:37:14,040 Here's the gaps and how you address those gaps. 697 00:37:14,080 --> 00:37:16,600 And that really should happen before the midway point. 698 00:37:16,600 --> 00:37:19,880 So if somebody's listening to this in January and they, their 699 00:37:19,880 --> 00:37:24,200 plan renews in, you know, January every year, you really 700 00:37:24,200 --> 00:37:27,120 should be talking to advisors in probably April or May, 701 00:37:27,880 --> 00:37:32,760 preferably March, sitting down early in the summer, late 702 00:37:32,760 --> 00:37:35,760 spring, early summer to set those plans of what your renewal 703 00:37:35,760 --> 00:37:38,040 is going to look like for January. 704 00:37:38,040 --> 00:37:41,920 You're making decisions in July based on what the strategic 705 00:37:41,920 --> 00:37:45,880 review showed you in May or June so that you have a long enough 706 00:37:45,880 --> 00:37:48,600 runway to properly address the issues. 707 00:37:48,920 --> 00:37:52,840 Because what we see a lot of companies doing is they'll wait 708 00:37:52,840 --> 00:37:56,000 until, you know, August, September, when the renewal is 709 00:37:56,000 --> 00:37:58,520 about to be issued. And there's just not enough time 710 00:37:58,520 --> 00:38:01,840 to do a proper evaluation in a vetting process. 711 00:38:02,560 --> 00:38:05,880 Because sometimes you're tweaking a plan that an employer 712 00:38:05,880 --> 00:38:07,400 has. Sometimes you're rebuilding it. 713 00:38:09,320 --> 00:38:11,760 Sure, sure, that makes total sense. 714 00:38:11,760 --> 00:38:15,120 I have a lot to think about here, you know, thinking about 715 00:38:15,120 --> 00:38:18,400 the next 12 months or so because based on when we're recording. 716 00:38:19,360 --> 00:38:22,400 Thank you so much, Chris. This has been more than a 717 00:38:22,400 --> 00:38:25,880 riveting conversation for me and certainly I hope for the 718 00:38:25,880 --> 00:38:29,720 listeners also. Where can they learn more about 719 00:38:29,720 --> 00:38:32,760 you and what you do and and maybe even connect and follow 720 00:38:32,800 --> 00:38:34,560 your content? Yeah, I appreciate that. 721 00:38:34,880 --> 00:38:38,440 I'm on LinkedIn, TikTok, excuse me, TikTok and YouTube. 722 00:38:38,440 --> 00:38:41,400 I post long form podcast content where I really break down some 723 00:38:41,400 --> 00:38:44,360 of these contents on YouTube. The central where people can 724 00:38:44,360 --> 00:38:47,240 find me and get access to all of the the the materials, case 725 00:38:47,240 --> 00:38:49,240 studies and content I create is a website 726 00:38:49,240 --> 00:38:53,840 calleditschrishamilton.com. So it's me. 727 00:38:53,840 --> 00:38:56,600 It's Chris hamilton.com. Amazing. 728 00:38:56,840 --> 00:38:59,160 And we will make sure that everything is linked also. 729 00:38:59,160 --> 00:39:03,680 And I really appreciate you helping us to better understand 730 00:39:03,920 --> 00:39:07,520 some of the really a lot of the complexity behind this subject. 731 00:39:07,520 --> 00:39:11,400 So thank you so much and come back, you know, on the podcast, 732 00:39:11,400 --> 00:39:15,200 if if something changes in the in the insurance world, 733 00:39:15,200 --> 00:39:17,520 especially if the government ends up getting involved, I 734 00:39:17,520 --> 00:39:19,960 think that could be very interesting to break down. 735 00:39:19,960 --> 00:39:22,320 So we'll see. But in any case, thank you so 736 00:39:22,320 --> 00:39:23,640 much, Chris. Really appreciate it. 737 00:39:23,840 --> 00:39:24,960 Thanks for having me, appreciate it. 738 00:39:25,800 --> 00:39:28,720 Hey, just before you go, don't forget to subscribe to this. 739 00:39:28,720 --> 00:39:31,960 Show so that you are the. 1st to hear when an episode drops each 740 00:39:31,960 --> 00:39:35,400 week and maybe leave a five star review and a comment about how 741 00:39:35,400 --> 00:39:38,520 much you loved this episode. Plus if you have someone in mind 742 00:39:38,520 --> 00:39:40,680 who would really enjoy this episode, make sure you share it 743 00:39:40,680 --> 00:39:42,680 with them. Thank you so much for tuning in 744 00:39:42,680 --> 00:39:44,040 and I'll see you next week.