Healthcare Consumers: A Conversation with Terry Flanagan of Dann Insurance

Terry Flanagan is an employee benefit advisor for Dann Insurance. In this interview, he discusses the role of employee engagement in containing healthcare costs and what employers can do to foster that engagement.

What would you say are some of the key factors contributing to rising healthcare costs?
The primary factors are an aging population and increased utilization. We have a much more conservative definition of what constitutes an acute condition. Take a look at cholesterol. It used to be if your cholesterol level was 200 or above, you ended up on a cholesterol lowering drug like Lipitor or one of the others. Today, they’re trying to push that number down, saying that the threshold should be 160-170, and that automatically increases the use of medication.

How are businesses handling this issue? What are some of the strategies that companies tend to be adopting right now and are they effective?
The dominant strategy that employers are using is a two-prong approach of shifting premiums to the employees and increasing deductibles. Now the employee pays almost 30 percent of the premium. It used to be a 100-percent, employer-paid benefit. Increased deductibles mean transferring some of the entry level risk to the employees.

If these strategies had been working in the last five years, we should have seen healthcare increases reduced from the double digits down into the single digits. My contention and a lot of people’s contention in the industry is that it’s a failed strategy. So we’ve got to take a look at something else.

What role can or should employees play in this process?
This is a business where the employer pays for the benefit but has nothing to do with the purchasing of the services. The employee decides what health services are accessed, when and from whom. Most employees don’t know the cost of healthcare. Even when they get an explanation of benefits from the insurance companies, they still may not understand the attendant costs.

Getting the employee to be proactive about containing costs is perhaps the biggest challenge facing employers. There are things that the employee needs to know like what the cost of an office visit will be. An office visit costs more than the employee’s $20 co-pay. It’s closer to $80-$100. The cost of that brand-name prescription that you’re taking isn’t a co-pay of $25 or $30; it is probably upwards of $200 to $300.

Employees should know which hospitals are efficient and the best providers of a certain type of healthcare. If you happen to have a cardio problem and need to have open heart surgery, you don’t want to go to a hospital that does only a few surgeries a year. You want to go to one that does several of these procedures a day and several of them in a week or month with demonstrated performance and efficiencies.

This information generally is not available to employees or even really to employers.
It’s slowly becoming available. The more an employee can become proactive about demanding access to this information, the better. If the consumer gets out there and asks for the information, the provider community will be obliged to provide it.

Are there any resources to get this information now?
There are some resources becoming available on the internet: WebMD, for example. We offer our clients access to some information so that they can find out where a better hospital is or learn more about a particular condition. It’s much better to go into a doctor’s office and start off from a little bit more of an informed position rather than being totally unknowing and being somewhat intimidated about asking a question.

How can employers get workers to take a more active role in containing healthcare costs? 
The key is one of the fundamental concepts that Winning Workplaces talks about: open communication. If you speak openly about healthcare costs and what employees can do to improve the situation, people will change their behavior. They may not like what they hear, but they will listen and they will respond.

You have to engage people and get them to look at their lifestyles. For example, they can take a health risk assessment. When you go into a doctor, he might do a wellness exam but he doesn’t necessarily take the time to summarize your health risks. He might say you’re fine, but you still might be 20-30 pounds overweight or borderline diabetic. We’ve seen diabetes go from affecting just 4 percent of the population 10 years ago to 8 percent or 9 percent of the population today.

What are some of the cost benefits of engaging employees as healthcare consumers? 
If we take a look at an 8 percent compound rate of increase which is low, we’ll find that the cost of healthcare will double inside of five years. If it stays at the current double digit rate of 12-13 percent, it will triple in five years. So what is now a $5,000 to $6,000 per employee cost will increase to $12,000 to $18,000 per employee. That’s affecting our overall competitiveness in the world and that’s an issue of great importance to everybody in the U.S.