Small and medium-sized businesses in the U.S. are facing a crisis: employee healthcare plans. The costs are out of control and going up… while benefits don’t offer a great experience for employees.
Allison De Paoli of Altiqe Consulting has experience on the provider side and now helps owners create benefits programs that don’t break the bank and provide better care – which helps attract top talent.
One way is to take out the hidden healthcare costs most people aren’t aware of, including one component of typical plans that could save you 25% to 30% without disrupting your employees
- The dirty little secret of healthcare
- How better healthcare benefits your entire business
- Quality health insurance plans for companies with less than 100 employees
- Why you should switch providers – and how to do it right
- The impact of having an advisor who sits on your side of the table
Mentioned in this episode:
Ryan Englin: Welcome back to another episode of the Blue Collar Culture Podcast. I’m your co-host, Ryan Englin. I’m here with Jeremy Macliver, Jeremy, say hi.
Jeremy Macliver: Hello, everybody. Welcome back.
Ryan: And I’m really excited to talk to our guest today because what she’s solving, the problem she’s solving is something we hear a lot, especially in the SMB space, the small and medium-sized business. And she’s been solving this healthcare crisis for employers who were sure there was nothing they could do to control their costs or make it a better experience for employees. We all know healthcare costs and insurance costs are going up right now.
She actually co-authored the Amazon bestseller, Breaking Through the Status Quo: How Innovative Companies Are Changing the Benefits Game To Help Their Employees and Boost Their Bottom Line. And she was recently recognized as a 2019 top women in advertising by Benefits Pro Magazine. I’d like to welcome Allison DE Paoli to the show today. Thank you, Allison, for joining us.
Allison De Paoli: Thank you, gentlemen, for having me. Pleasure to be here.
Ryan: So I always like to start with hearing a little bit about your story, a little bit about your journey. How you got into helping companies save money, use their benefits package as a differentiator when they’re looking for people. How did you get to where you are today?
How Allison Got Into Health Insurance Consulting
Allison: So I come from a family of entrepreneurs. My grandfather, my father, my uncles, my cousins, we’ve all owned some variety of business. Some very small, some kind of mid-size with several hundred employees. And we always took very good care of our employees. Paid most of the health insurance premium, provided resources to make sure that the workplace was appropriate and it was a good place to work.
People were paid well, had great benefits. And the things that we used to do, there isn’t an employer I know that can do them anymore. And I’ve been in the benefits space for longer than I care to admit. And I was in the benefits side, the traditional medical dental vision kind of benefits side, pivoted into another part of the benefits space, and woke up one day and thought, this train has really gone off the rails and they’re, I know that there are things that you can do to help contain this problem.
So I pivoted my firm back into the medical side. And there are wonderful tools now to help contain costs and make the healthcare system a better, give a better user experience to people who use the plant and make it useful for them because right now, most employers are functionally uninsuring their employees. And many employers realize that and do not know how to fix it.
Ryan: So I’m listening to you talk about this. And it sounds like you’re pretty passionate about small business, medium business. But more importantly, this health side of it, whether we call it insurance benefits, health care. I hear a little bit of passion there. Where’s that coming from? This is not one of those topics that people usually like to talk about.
Allison: No. People will occasionally run away screaming. I’m a little bit of an insurance nerd. So I know you’ll get me back on the rails when I jump off there. But, you know, employers offer benefits packages to offer a benefit. And a plan with a 3500 or 5000 or even a $2500 deductible is not usable for most people. Most people over 50% don’t have $1,000 in their checking account to cover an unexpected expense. And almost 80 percent don’t have $400 to cover an unexpected expense. And the result of that is like this vicious circle. You know, which came first the chicken or the egg?
The $2500 deductible, so you don’t get care because you don’t feel well because it costs, you know, several hundred or several thousand dollars to get care. Most people use the emergency room as their first place of care so they’re not going to go. And then you have somebody in the emergency room six months later, a year later, who has just spent $40,000 of your money. And if you are self-insured or fully insured and we can talk about the difference between the two in a second, it’s still your money. So how do you build that to make it work for an employee?
Ryan: No, it totally makes sense. Being an entrepreneur myself, this is something that I think about usually once a year when it’s time to re-enroll people and figure out everything. And one of my least favorite times of the year, to be honest. I’m not a big ban of insurance because it’s become so overly complicated in the last few years. But I like what you’re saying just like thinking about it just a little bit differently, almost from the employees’ perspective. is that right?
Costs for Great Care are Less Than You Think
Allison: So the dirty secret of the healthcare world is that the highest quality care is generally in the bottom quartile of costs.
Ryan: What’s that mean?
Allison: What that means is if you take, let’s use knee replacements as an example. A knee replacement, depending on the provider, so the surgeon, the facility and what goes on in the emergency room, in the operating room can cost $13,000, $25,000, $29,000, $36,000, $48,000, $72,000, $127,000, right? And that doesn’t make any sense, right? When you go back and look at all the providers that have done that surgery, you will find the ones with the highest quality metrics, which are almost impossible to figure out, by the way, are the ones that are charging in the bottom quartile of those costs, almost always.
Ryan: Why is that?
Allison: Because they know, because they do a lot of it, right? So if you’re going to have your knee replaced, my advice to you would be to look for somebody that does two or 300 a year because they know what they’re doing, they have a team that knows what they’re doing, they have seen everything, and they want to do it and be on to the next one. So they’re going to make sure that it’s done right. If you have somebody that does this two or three or four times a year, they don’t have a lot of experience and things can go off the rails quickly which will escalate your costs not just for the procedure, but for the aftermath of the procedure.
Ryan: So it’s almost like in business once you have a process and it’s something you can repeat and do over and over and over again, you can usually bring costs down, which is something that Jeremy and I are both very passionate about.
Allison: Yes, because you know where the pitfalls are.
Ryan: And we know how to overcome them without a lot of overhead or burden. So for the business owners listening right now that are thinking, you know what, this is all great, but how does that help me? Like as someone who has to just select the new insurance plan or have this conversation with you and think about the company as a whole, how does that information benefit them?
Allison: The information alone, as in most situations, does not benefit them. They have to know how to get what is going on, get the information about what is going on in their own plan. And when you’re smaller, when you’re under 100 lives, a hundred employees enrolled on your plan, that can be a challenge. I am betaing a new tool which will allow us to get out that information, even if your insurer doesn’t want to give it to you, which is typically the case. And what you really need to do is follow something that I call the benefits advantage roadmap.
That is just my process for it. And once you have your data, and it is your, as the employer, it is your data. I live in Texas, you have a right to get your data twice a year. Insurance company has to give it to you. So once you get your data and you see what’s going on, you’ll know what’s driving your cost. And then there are tools that you can use to direct savings at those costs.
So finding different providers, high-quality providers, helping people understand how to find and helping them find a high-quality provider, pharmacy, the pharmacy spend is the fastest-growing part of the health plan for many employers. It’s almost 25% of their budget now. That is the easiest place to pull out, 25 or 30% savings without disrupting employees.
Jeremy: So the pharmacy spend is, so what you’re talking about here is with this data, we can now make very pinpointed decisions on where we’re going to target and improve, you know, part of the, almost process improve. Yeah, focus our efforts in on that specific area because if we’re having a rise in pharmacy costs, we can focus on training our employees how to be selective, protective in that space versus it might not be an emergency room visit that’s really costing us a lot right now.
Allison: Right. So you might have, I live in South Texas. Metabolic syndrome is a huge problem here. So metabolic syndrome is pre-diabetes and diabetes. And you may have 100 employees and you may have 10 or 15 people that have diabetes. If the employees that you have are taking their medicine, getting their routine checkup, getting their eyes examined, getting their teeth cleaned, that’s really not a lot of money.
Taking the medication that is prescribed those, that is really not very expensive. That may be a couple of thousand dollars a year in cost per employee, it may be even less. If you have 10 or 15 people that have diabetes on your plan and people aren’t taking their medication because they can’t afford it, they haven’t been to the eye doctor because they don’t know how to get to the eye doctor. They don’t want to pay for it out of their pocket and they don’t get their teeth clean, that is $40,000 in your emergency room at some point in time.
And it’s just a shift in thinking to understanding how to value services and how to help people access care. And another oxymoron in the health insurance space is that the more care that is delivered, the lower your costs are over time. Yes, for those 10 or 15 people that have diabetes, they’re going to be regular users of care. They’re going to be regular users of preventive care and low-cost medication, which is very different from being a type four visit in the endocrinologist office and having very complicated medications.
Ryan: That was one of, that reminds me of something one of our prior guests said. He was an attorney. He says it’s cheaper to stay out of trouble than it is to get out of trouble. That’s almost what you’re saying here. Is that right?
Allison: That is absolutely what I’m saying here but traditional health plan won’t give you the tools to do that.
Ryan: How do we bring this down to that business owner that is wearing 17 different hats? Risk management is one of them. Employee engagement is one of them. Hiring is one of them. They got all these hats on. And the health benefits part is really important, especially in today’s marketplace. How do we bring that down to the business owner who’s already running a business? And a lot of the stuff you said like, it makes sense but how do you do that? How do I learn something else to do in my business?
Implementing a New Healthcare Structure
Allison: I would argue that you should not learn something else. You should be working with partners who know how to do this and can do that for you. So there’s a little review. There’s a little extra review that you need to do, particularly as you’re implementing the layers of strategy. And for most of my clients, we run on a, generally a three to five-year strategy. We’re not going to change everything at once unless there’s a huge financial problem in the business.
But we’re going to work, you know, 2, 3, 4 or five years out and layer things in over time. But for a recent client of mine, we did not change their health insurance carrier and we did not change their prescription card. We put in some tools in the background and that allowed the employer to do a couple of things. They changed their plans and we reduce their deductible. That’s the only change we did. We didn’t change the network or the insurance company or anything like that. And we just changed, reduce the deductible.
Jeremy: Reduce a deductible, so we lowered it for all of our employees?
Allison: We lowered it.
Jeremy: That’s not the normal right now.
Allison: That is not normal. We lowered it. We changed all maintenance medications, generic maintenance medications to a zero dollar copay, which means that they didn’t now have to pay 10 or $15. They could pay zero dollars. So all they had to do is show up in the pharmacy with their drug card and they would get their medication at zero cost. Generics only. And then we put a couple of tools in the background and in their pocket to reduce their costs. And the tools were, there were three tools. One was an advocacy service that the employee could call at any time to get guidance about medical decisions.
If they have a medical crisis, if they have an ongoing condition, they could reach out 24 hours a day to talk to a nurse to help get their information filled out or maybe get directed to another provider or make sure that they were receiving the right course of treatment. The, at this nursing, this care management service also reaches out to employees that have chronic conditions, small or large, and make sure that they are doing all of their preventive care and that their treatment plan meets industry guidelines. If it doesn’t, they’re welcome to continue it. But if they’re concerned about that, then the nurse is there to help provide some additional resources.
The care management will also vet providers and this example might be funny for some of your listeners, the CFO of one of our clients called the care management company and said I need a knee replacement. I did my research. I’m going to this facility and I’m going to go to this doctor. Are we set? And the nurse said we really liked the facility. It’s very highly rated. But we’re not really wild about this position. He has a 26% readmit rate. There are these other two physicians that practice at the same facility. One has a 1% readmit rate and the other has a 2% readmit rate. Do you think you might want to visit with one of them about doing your surgery?
And the CFO laughed and said, I chose that guy because he was the head of the department and ended up choosing one of the others to do his surgery. So as a consumer, you really don’t have good tools to know who is the high-quality provider and who’s not, right? So give people that. It helps your employees. You’re doing something good for your employees and it helps you control your costs. You’ll pay 13 or $26,000 for that knee replacement, rather than 48 or 64 or 127. And then we do Some alternate sourcing for pharmacy, which allowed them to source brand and specialty drugs at a better cost.
Ryan: So I’m hearing all of this and as an entrepreneur, I’m thinking, Okay, you’re really taking on this perspective of what’s in the best interest of the employee. Better benefits, more tools, all that other stuff. I just see dollar signs costing me more and more money. But that’s not really what’s going on here is it?
Allison: It is not what is going on here. Let me give you an example for one of my clients where we just implemented this alternate sourcing program. I just reviewed a couple of their prescriptions and there were three prescriptions that we used an alternate source for, and rather than costing $3446 at the pharmacy, they were 1200 dollars. Three prescriptions. Now multiply that by the number of employees you have and that’s some substantial savings. And in that alternate sourcing, the employee copay can go away. So not only are you benefiting by paying less, the employee is paying less.
Jeremy: So I know you have the book out about the army and they’re at the Instant EBIDTA: Five Steps To Gain Control Over Your Healthcare Spend. So what does this look like for the business owner?
Have an Advisor Who Sits On Your Side of the Table
Allison: So Instant EBIDTA is a guide that an employer can use to map out their journey. I would recommend that you have an advisor who sits on your side of the table when you do that. But basically what you’re looking for is who’s spending the most money. So find out what kind of claims are driving your claim spend, right? Then look for tools to help contain that cost. Tools that will drive to quality, make sure diagnoses are correct. Control the cost. You know, a PPO discount is a made-up number of a made-up number, honestly.
Communicate it to employees. I think employers often forget that employees have budgets too. They want high quality for themselves and their families and they don’t want to pay any more for it than you do, right? Then, so roll it out, refine it, because the tools are changing rapidly and getting better every day. And then just optimize, optimize, optimize every year. There’s always more things that you can do to help people access high-quality care and control the cost.
Ryan: So as a business owner thinking about this, what was that?
Allison: I said it sounds simple, it’s not always easy, which is why you need people that work on your behalf.
Ryan: Well, and that’s where I was gonna go with this. So it definitely sounds like it’s become a lot more complex, it’s something that I imagine is changing quite frequently. And unless you’ve got a champion on your team who does not work for the insurance companies or a healthcare provider, the odds of you being able to figure all this out because of the complexities is pretty slim. So what’s that look like having someone on my team to help me with this?
Allison: I am a big believer in both transparency and fiduciary obligation. And I think that whoever you are, you are obligated to the person that signs your check, right? So does your advisor work on a fee basis? And do you pay that fee basis? Or do they work on a commission basis and are they paid by somebody else? That’s a question to ask. The next question to ask is are my contracts fiduciary contracts? Do all of my vendors have fiduciary responsibility to me? I think that people are entitled to make a living and a good living at that.
If I’m writing the check, I deserve to know what I’m paying. And often when there’s a commission or a, you know, or if you’re fully insured, then there’s a commission, there is a whole host of things that are never disclosed to an employer. Block retention bonuses, renewal bonuses. Once you hit a certain threshold, there’s often an additional quarter or half a point or even sometimes a full point in commission that is never disclosed to the employer. And most people will tell you well, the employer doesn’t pay that. Really? Who’s paying the premium?
Ryan: There’s no such thing as a free lunch.
Allison: There is no such thing as a free lunch. So
Ryan: So, that’s a lot of numbers there and yes, and there’s a lot of things That happens behind the scenes that as business owners, we’re just simply not aware of because it sounds like that’s the way the industry has built itself over the last few years. What are some of the, if you could, share a couple of success stories with us, some things that you’ve been a part of and you’ve been able to make huge changes, not just for the employer and their bottom line, but it was something that really made things better for the employee.
Allison: Sure. So my client that I was mentioning earlier, we had, I was explaining some of these services about how there was now care management and they were going to reach out and you could call them any time and we had an alternate sourcing mechanism for prescriptions. And if you took an expensive medication, they were going to reach out to you as well. And there was a gentleman sitting in the back and he looked a little grouchy to me, and that happens sometimes at open enrollment meetings.
He raised the hand and for a moment I thought, Oh no, here we go. And he said, I just want to be clear. I have a kid with a complicated medical condition. Somebody is going to call me and make sure that the care plan is right? Yes, sir. And she takes a lot of medication. Somebody is going to call me and tell me how I don’t have to pay so much for this medication? Yes, sir. And he said, I think that’s terrific. Thank you. I’ve never had that experience in an open enrollment meeting before. So that is personally quite satisfying to me.
And I’m happy to report that his medication costs and the employer’s medication costs have decreased substantially. And his daughter is in fact, on the right care treatment plan and is doing quite well. So I think those are both wins. And from an employer side for another client of mine and manufacturer who works on a very small margin, they have about a little over 100 employees on their plan and they changed from one company to another, one third party administrator to another.
So when you’re self-insured, that’s who administers your claim. This one has fiduciary responsibility to the employer. We change some internal mechanisms of the plan about how things are paid, kept the plan design the same and implemented one cost containment service. So the plan is an HSA plan and has a $4,000 deductible. So that’s a little complicated when you’re trying to save people money. The minimum deductible that you can have on an HSA plan is $1350.
So when an employee needs something, a surgery, inpatient or outpatient, advanced imaging, lab work, whatever, they call this service, the service negotiates a cash price for them, and the employer passes on 100% of the savings to the employee until their deductible is 100, has been met. So they have to pay the first, employee has to pay the first 1350, which makes it a little complicated, but between 1350 and $4,000, the employer pays 100% if they use the service. It’s been a win for both. Employees have, you know, gotten faster treatment because they pay less for it and the employer has saved a significant amount of money.
Ryan: Those are great stories. I want to shift gears just a little bit. As you know, this is the Blue Collar Culture Podcast and we’re really passionate about helping business owners when they’re growing, being able to build effective teams, create amazing cultures inside of their business and really just be excited about the team they’re building. And it comes up a lot. We don’t talk about it a lot in the book or in our podcasts.
We actually have a book about building effective teams, we really don’t talk about benefits a lot because it changes frequently, it’s a very complex subject, you could write a whole book just on how to navigate the health benefits world. When it comes to building teams, looking for people in today’s job market where we have one of the lowest unemployment rates, when it comes to keeping good people, what impact can a good benefits package have?
The Impact of a Good Benefits Package
Allison: A typical manufacturing job is about 100% of somebody’s salary to replace, correct? That’s about right? Might be a little bit high depending on the job, but somewhere in there, about 100% is normal. So if you can retain one employee by offering a better benefits plan, perhaps 100% plan. That’s always my goal is to get employers to the point where the employee is seeking high-quality care, there’s nothing coming out of their pockets. You’ve just saved one person’s annual salary.
Now multiply that by five or seven. Benefits still count for more than salary. Just a little bit, and your salary can’t be really off. But as an employee is looking at two positions and let’s say that each one pays $40,000 a year and one has a $5,000 out of pocket on their medical plan and one has zero. Which is more appealing? And which one costs less? Probably the one with zero out of pocket. And not only does it cost the employer less, it costs the employee less.
And benefits our retained, are valued a little bit higher than salaries so you can both keep and recruit. And, you know, it’s less expensive, right? It’s less expensive to have, I know this is gonna sound very oxymoronic for many people, it is more cost-effective to have a rich, high-quality benefits plan than it is to increase your payroll. You can control the cost of the high-quality benefits plan more effectively over time than you can a salary increase. So let’s say that your annual healthcare spend is the national average of about $15,000 per employee.
What does it mean for your business if you can get it to 10? What does it mean, does it mean for your business if you can get it to six? And what does it mean if you can get it to 3500? If you can contain that cost, imagine what you can do. You can hire more people, you can open a new division, you can open a new location. The sky’s the limit. And it becomes, that becomes predictable, repeatable, and you get real ROI because people want it and they like it, and they’ll pay for it.
Ryan: So I love, and the oxymoronic piece, we could probably spend another 45 minutes just digging into that how a richer health plan can actually be less expensive. But one of the things that I hear a lot is, this is great for big companies. When you got 10,000 people, you’ve got enough people that can really help you drive the cost down and you can offer richer benefit plans. If I’ve got 50 employees or 100 employees, can I even do this stuff?
Allison: Absolutely. It requires that you be willing to look at your healthcare division because even if you’re not in the health care benefits business, if you offer health care, if you offer health insurance benefits, you have a healthcare division. It requires that you look at it like look at all of your other expenses. I don’t know a manufacturer who doesn’t know the cost of every input and they know what inputs produce what kind of output. So it requires that you look at your healthcare spend like you look at your cost of goods sold.
And that requires a different kind of benefit partner. And it is a partnership because there are decisions to be made and rules of the road to follow. So once you look at it like that and you understand that you can manage that risk like you manage every other risk in your business, it completely changes how you deal with the plan.
Ryan: So it’s really just thinking about benefits just different than we’ve been trained to think about it, which is an expense, it’s expensive. It’s complicated. If you have the right partner, you can really make a ton of headway in saving the company money, saving the employee money and offering these rich benefits because the competition may not be doing it.
Allison: Correct. And, you know, in Texas, employment is less than 3%. So, you know, the war for talent is real and manufacturers are pretty challenged all over our state. So anything that you can do to recruit without having to increase your wage base, I think is a valuable thing to have. And you want to keep those that you want to keep. And now with everything that’s happening in the world in these last few weeks, you know, economic uncertainty is even more prevalent than it was a couple of months ago. So anything you can do to lower your cost becomes more important, I think.
Ryan: Absolutely. Absolutely. And reducing turnover helps lower costs and being able to hire more easily lowers costs. Absolutely. You’re not always competing on pay. So, Allison, I mean, this has been, it’s been a little technical in information and I think the big lesson for me here is that if you offer health benefits, you’ve got to have a partner that’s on your side of the table. Is that right?
Allison: Yes. That is the biggest takeaway. You want somebody who sits on the same side of the table as you.
Ryan: So for those listeners out there that are going okay, this is, she’s making it sound way too easy and she’s making it sound like I can actually save some money and have a more competitive business. But they’re, they don’t have someone on their side right now. How do they get ahold of you? What’s the best way to contact you? And then do you have anything that you can offer them as maybe a free download or some training or something like that?
Allison: Absolutely. So I’m going to create a special site just for your listeners. So if they go to altiqe.com/bluecollarculture they will find my contact information along with the book, the ebook, Instant EBDITA, and that will be a good place to get them started. There’s also a link on that page. If anybody would like to talk to me, they’re free to schedule 15 minutes on my calendar whenever it is that works for them. And I will be happy to help anybody and I will be able to help some people and other people I will need to direct elsewhere but I’m happy to do so.
Ryan: That’s amazing. Thank you for that and Altiqe is spelled ALTIQE.com. Thanks again, Allison. I’ve really enjoyed it. Some great, great information. I’m sure our listeners have enjoyed it as well. Thank you again.
Allison: Thank you for having me.
Jeremy:Thank you so much, Allison. It’s been great.