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Sponsored by: Lockton Companies
November 22, 2024

Rethink employee benefit solutions.

Lockton is a privately held, family owned insurance brokerage and consulting firm helping employers purchase insurance and manage and transfer risk. With offices across the country and throughout the Northeast, Lockton’s Portland, Maine office focuses on the strategic management of employee benefits, helping employers make information-based decisions to balance talent attraction/retention, manage costs and promote employee wellbeing.

With what type of employers are you generally working?

In Maine we serve companies ranging from 150 to 10,000+ employees as a strategic advisor, broker and consultant with respect to insurance and employee benefits. These companies tend to be self-funded or have interest in learning about alternative funding vehicles. They are often growing, seeking better cost management and open-minded about change. We support clients across all industries.

What is contributing to the increases in healthcare costs?

Medical inflation has been 3.4 times CPI over the last year. The chronic disease level in America is at the center of the problem. Lockton recently studied inflation across a portion of our client base that is collectively spending $2 billion annually in medical and pharmacy. Pharmaceuticals drive costs particularly in the areas of cancer, immunodeficiency and anti-diabetics. High cost claims always pressure plan financials but we are seeing increased utilization below $250,000. 79% of inflation is driven by claims below $250k. This is to say that it is not just the high cost claims that are the major driver of healthcare inflation. More broadly, health system reimbursements are increasing while carrier claim payment accuracy is challenging in a complex healthcare system that has over 69,000 diagnoses and procedure billing codes.

How are some of your more aggressive clients tackling rising healthcare costs?

They are gaining better access to data so they can address specific needs in their unique population. Together, we work hard to correct the information imbalance in healthcare and healthcare financing. We aggressively negotiate both the pharmacy contracts (with Pharmacy Benefit Managers) and carrier contracts. Employers have to understand the competitiveness of their medical network - information that is available. They address health conditions in their population as well. Some will use a direct contract to the provider (orthopedic surgery and cancer for instance) to obtain lower costs. Some are using captives on the stop loss (reinsurance) component. While significant challenges remain with respect to managing rising healthcare costs, we see new opportunity and real progress being made to hold insurance carriers, providers, brokers and others in the supply chain to a higher standard of transparency.

What do you see on the horizon that will help employers with rising costs?

A concerted effort toward transparency. A good fiduciary — with the support of their broker/consultant — will demand a proper amount of plan claims data so the drivers of costs are known and then addressed. ERISA attorneys agree that an employer should have free access to their health plan data. Fairly recent federal legislation strengthens an employer’s ability to get good data and increases their fiduciary duty to do so. Transparency of data exchange is the key to understand where a given employer can make a difference in their costs. Other strategies that will continue to gain momentum are direct contracts with providers, heavy steerage toward Centers of Excellence, alternative care settings, taking on more risk and better communications with employees so that they understand benefits being offered and can make informed decisions.

As different from cost considerations, how are employers using their benefit plans to help their employees?

In all cases, offering “great benefits” is relative to the need of that population, designed appropriately and communicated effectively. Surveying employees and mapping employee preferences to benefits, perks, advocacy services, point solutions, is what helps close gaps in perception and satisfaction. Data can be used to recognize trends to inform which programs or tactics to prioritize at the group level (cancer care, mental health, financial education/wellbeing, etc.). Employees and their families benefit directly from lower cost, higher efficacy care. Working with partners and vendors that can intervene early on complex care provides a better member experience, which also benefits plan financials.

 

In summary, if employers’ healthcare costs increase as much in the next ten years as they have in the last ten, more employers will need to take advantage of innovation and disruption occurring in healthcare. Increased dissatisfaction with “status quo” carriers, plans and insurance brokers means employers are accessing tools and tactics that provide real ability to manage healthcare costs. More efficient healthcare purchasing allows employers to reallocate spending to best compete for talent and improve the wellbeing of the employees on whom their businesses depend. 

 

 

 

Edward Pierce
Partner & SVP,
Lockton Companies
m: 303 906 3171
edward.pierce@lockton.com

 

 

Marshall F. Johnson
Producer,
Lockton Companies
m: 207 653 0222
mfjohnson@lockton.com