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Can Employers and Patients Trust Healthcare Insurance Companies? Part 2

Stanley Feld M.D., FACP, MACE

Michael O’Grady of Grosse Pointe Farms, MI expresses the mistrust between the employers and the healthcare insurance industry much better than I can. He also confirmed for me that people on the internet are not only thinking about the problem of healthcare and what I am saying but are upset about the terrible things that are going on in the healthcare industry.

“I must comment on two key components of the healthcare system I felt were blatantly missing from your blog. ”

“The first was in your list of stake holders. No where to be found are the employer groups who actually fund most of the health care in this country.”

At the time I received Michael’s comment he was correct. I was concentrating on how the 46.7 million uninsured can be insured. The key answer is for employers to be able to provide tax deductible funds to their employees in order for the employees to purchase their own healthcare insurance policy with their own money. If an employee chooses not to buy healthcare insurance he does not get the money.

This maneuver accomplishes three things. First, it gets the employer out of the healthcare insurance loop. Employers may stay in the loop if they think they can protect their employees. Second, the employee relieves the employer of the burden of negotiating a premium at a tremendous disadvantage. Employers have noticed that they have be less than effective in keeping premium cost down in recent years as expressed by EC previously. Third, it puts the patient in charge of his healthcare dollar. This creates a huge buyer pool and forces the healthcare insurance companies to develop innovative and cost effective products. If they do not become efficient, someone will come along and take away the business.

Unemployed or self employed consumers can buy healthcare insurance with pre-tax dollars. This level playing field does not exist today. A self employed or unemployed person must be able buy insurance with after tax dollars. Notice that this simple change in the tax law would weaken the healthcare insurance industries hold on healthcare and force them to compete for the healthcare insurance dollar.

President Bush has called for this tax reform. However, there has been no follow-up. It seems he has backed off. Congress has no interest in passing this logical law that could help cure the uninsured problem. It would be putting power in the hands of the consumer. It has been opposed by the healthcare insurance companies lobbying effort. The evaluation of the Congressional Budget Office seems to point to a positive outcome when read in detail.

“Although you appear to have many good ideas, and are a proponent of changing many of the necessary evils of the broken health care system, you are in fact a stake holder.”

Michael, I am presently a consumer stakeholder. I retired from an excellent practice of Clinical Endocrinology in order to devote adequate time to help repair the healthcare system for the benefit of the consumer and the survival of the patient physician relationship. I believe the patient physician relationship is a critical therapeutic element in the care of sick patients. Making medical care a commodity will destroy medical care in this country.

“The employers are the one in the end who actually foot the bill for most of the health spend in the U.S. The unfortunate circumstance is they are being led blindly down the path of excessive baggage by consultants and their partners, who we refer to as BUCA (Blues, United, CIGNA, and Aetna).”

Michael, you are correct. The large employers have human resource officers whose responsibility is to choose the correct healthcare insurance plan for its employees. The BUCA have learned to manipulate and confuse the human resource officers. It gets back to the old question: would you let your human resource officer, or insurance company purchase your food, your clothing or your car? You might let the HR person negotiate for you. However you are the owner of the purchase and would be responsible for the choice. Your unwillingness to let the HR person negotiate for you would increase if the purchases became more confusing and unsatisfactory. You would want control.

The seller (healthcare insurance company) is motivated in the present system to confuse the HR officers. The seller also has the advantage because the number of people in a single company is small compared to the total number of people in society as a whole. The key to repair is to motivate the seller to compete. In a real price transparent environment the healthcare insurance industry would be competing for customers. All the necessary changes would have to occur at the same time for it to be effective.

“The second piece I felt that was missing was the reimbursement methodology in place today prevents any fix of the health care system. The PPO discount system is a disaster and adds between four to six billion unnecessary dollars to the health care system each year. These are dollars employer groups are paying to the BUCA’s and PPO networks in access fees each year, to provide provider discounts. Twenty years ago there may have been a value to an employer group to receive discounts in exchange for steering patients. There may have been a value to a provider to provide discounts in exchange for steerage. These days are over, and retail is for suckers.”

Michael, you are right on target. No one pays retail unless they want to. The reason Sam Walton went from a bloomer salesman to the largest department store on the globe is because he learned how to provide the best price with a good quality product to the consumer . Consumers figured out which price and product was best for them.

“So why should employers pay four to six billion a year for what really amounts to retail pricing? Transparency? Does it matter if a provider makes transparent their charge master? Each network or carrier has their own deal with each provider that is considered proprietary. What is being charged by the provider is irrelevant, thus making any HSA plan doomed to failure.”

Price transparency is bogus in healthcare lingo presently. The automobile industry is getting close to real price transparency. They are not there yet. The electronic industry is close with organizations like c/ and The consumer is not stupid. When they are in control or their healthcare dollar they will force real price transparency. Actually, they are getting smarter each day.

“A new reimbursement methodology needs to be adopted. This new methodology needs to be developed in partnership with employer groups and providers. There is a necessity for administrative functions within the health care system. Third party payers and insurance carriers do provide a valuable service. Unfortunately, BUCA now is the majority stake holder in health care. Until this changes, and employers and providers begin to work together, BUCA and the consultants will continue to take advantage of this lack of connectivity and continue the path of absolute disaster.”

Bravo, Michael O’Grady. The easy way to accomplish your goal is to get the employer out of the picture. As EC pointed out the employer really wants to provide healthcare insurance to his employees. However, it is becoming an impossible and over costly task. Let it be between the patient and the physician. Reducing the physicians overhead by 20-30% will give the physician the ability to reduce his price. If he doesn’t he will suffer the consequence of the consumer walking with his feet and pocket book.

It does not have to be complicated. The primary stakeholders are the patients and the physicians. They should be the interface for the medical care transaction. If a hospital is too expensive, he would send his patients to another hospital. If patients had no choice of hospital the government should impose regulations on the hospitals to reduce the price. It can be done. It can also be profitable for everyone except the stakeholders that profit from the 150 billion dollars of administrative waste.

The healthcare insurance companies would once again be converted to a 6% broker and not the unconscionable owner of the healthcare system.

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