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Health Insurance: “Employers vs. Health Costs”

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In Friday morning’s Wall Street Journal, Louise Radnofsky article caught my attention.

While I’ve seen employer’s alliances before, most have whithered and died on the vine before a measurable difference occurred. Part of the problem was the purpose; part of the problem was the participants. We employers have a dual dilemma. We have to provide health insurance in order to attract the talent required to drive the business to the performance level required to grow and prosper. At the same time, most of us are not healthcare experts so we tend to focus on those areas we know and understand with the hope that our healthcare system would act like any normal functioning businesses.

By that I mean offering the highest quality product at the lowest possible price. Unfortunately, with healthcare costs approaching 18% of GDP, that couldn’t be further from the truth. As our world continues to get flatter, we here in the US are becoming less competitive when you factor the cost of healthcare to the products and services we produce. Certainly the size and the complexity of our economy can support additional expense but we’re over 5% higher than our closest competitor of comparable size.

You don’t have to be a rocket scientist to determine that healthcare is the most inefficient industry we have here in the United States. Most industries here and around the world have gone through, and are continuing to go through, the “lean” revolution that came with the push for higher quality and lower costs. Advances in technology have exacerbated this revolution by decreasing the time between idea creation and value realized. This means that in an industry like healthcare, which is today managed retrospectively, our task is much more daunting. Lean concepts are built around customers. Healthcare has been built around care delivery with little attention paid to the patients/customers. So how do we turn the corner???

 I think Louise’s article is capturing a future trend that has legs. Privately insured businesses have done a remarkable job squeezing every penny of EPS from their supply chains by using “lean” concepts. The next logical place to attack is the largest expense they incur, people costs. The one area where most of them have little or no transparency as to how their dollars are being spent is the very healthcare benefit they are compelled to deliver. While most companies get views into their claims, the data lags the events. The only way to impact the dollars is to be aware as to how the dollars are being spent and how services are being rendered to their employees.

Lean is driven by “data”. The company’s successful transition from being just a provider of insurance to a partner with their employees is dependent on the healthcare delivery system, the payers, and the government creating an environment to do so. In the 35 years I’ve been in this industry that has very rarely happened. I do get the sense that that’s about to change. For all of our sake let us hope so.

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