Dr. David Berg, DC, is an Entrepreneurs' Organization (EO) member in Arizona and co-founder and Chairman of the Board of Redirect Health, a national leader in healthcare innovation. Dave is focused on "creating an amazing healthcare customer experience by simplifying traditionally complex systems that most believe could not be changed. With deliberate and strategic, outside-of-the-box thinking, he innovates new ways to deliver easy and affordable healthcare to people everywhere." We asked him how a healthcare plan can generate ROI for your business. Here's what he shared.
About 10 years ago, I sat across the table from my company's insurance broker looking over the rate renewal sheet for our health insurance plan. I leaned back in disbelief, put my head in my hands and sighed. He tried to reassure me, "This is the standard for insurance today ... and you're better off than some of my other clients."
Our rates were going up again, despite minimal claims the prior year. We thought we'd done everything possible to control our healthcare costs. It felt like no matter how well we managed claims, we would never truly be able to reduce our health insurance costs.
It was in this pivotal moment that I realized something so many business owners are experiencing today―health insurance is just too expensive. Every entrepreneur knows, and some will even admit it: Even in a favorable labor market, we are competing with large corporations, who are often positioned to offer robust benefits packages. In my situation, the rising cost of providing healthcare benefits started to become an Achilles' heel for my growing business.
When labor markets tightened in 2006, our situation worsened. The talented people I relied on to deliver a consistently great customer experience and grow my business were no place to be found. And when health insurance deductibles crested above US$1,000, we couldn't afford the health insurance my team needed. This was a double hit. My best people started leaving to work for larger corporations that could afford to offer plans with lower deductibles, and I couldn't replace them fast enough. We had no choice but to hire more and more people who were not a good cultural fit to replace employees we'd lost. Core value alignment waned, and our efficiencies and productivity suffered. And my profits were dismal.
To solve this problem, I built a new healthcare model for my business that didn't start with the insurance companies or brokers. It was specifically designed to attract and retain the people I needed to run my company effectively and generate profits. The best part about this strategy, though, is that you don't need to be in the healthcare business like me to implement it for your business.
You're likely not a healthcare expert, so let's keep it simple. Nail these three easy steps and most of your company's healthcare problems will fade away within two years, and you'll have built a solid foundation for ongoing results. Here are the basic steps:
- Establish a Self-funded Group Health Plan. Most large companies have already abandoned rigid health insurance models and opted to participate under the more flexible federal Employee Retirement Income Security Act (ERISA) rules. Your company might have this option, too. Yes, it requires research and advanced planning, but the long-term benefits make it well worth the effort.
- Implement Smart Benefit Design. Make sure your plan's incentives are smart and make sense. Traditional thinking creates obstacles for inexpensive routine health services that result in a higher utilization of overpriced specialty and hospital services. Always incentivize people to use more affordable healthcare options first. Certain common procedures can easily cost five times more at a hospital than they would at an off-site clinic. A third-party care logistics partner can help educate your team on what the "right places" really are.
- Educate Your Team About Two Simple Concepts. Because there are many intricacies in the healthcare system that can cause you and your employees to pay too much―the rationale behind most of them could drive you mad―it's important to adopt two best practices. First, teach employees to avoid all hospital-owned facilities and opt for independent clinics and doctors' offices whenever possible. Second, encourage your team to download the GoodRx.com app, which will significantly increase their odds of paying fair prices for prescriptions.
It's important to note that there are entrepreneurs―I'm a prime example―who have taken their company healthcare plans to new heights of performance and results based on these three steps. After you've mastered the foundation, there are many simplistically brilliant tactics that can be implemented to eliminate even more waste and unnecessary administrative costs. Eventually, your healthcare cost increases will become irrelevant. Case in point: My companies spend less on healthcare than we did 15 years ago despite the astronomical spike in healthcare costs in the same time period.
Instead of focusing on coverage, copays, deductibles and networks, focus on your team's unique needs and create a smart health plan that can protect them and always deliver the correct care. Different workforces will have different needs. For instance, construction companies may require more injury and chiropractic care, while a younger workforce may need more robust maternity services. It's important to take a customized approach when designing a plan.
Today, we're facing another very tight labor market, and health insurance rates and deductibles have never been more unreasonably high. The good news for entrepreneurs is that we have the ERISA option of self-funded group healthcare that can keep your costs predictable. Entrepreneurial companies that have adopted this strategy, including my own, are no longer victimized by out-of-control healthcare cost increases, and are attracting greater than 10x the candidate pools to hire from. When you do healthcare the right way for your business, the competitive advantages are endless.