There's a rumble in the distance. Dark clouds are rolling over the horizon. The radar is flashing red.
And as the healthcare industry's self-proclaimed stormchasers, we're sounding the alarm: This year is shaping up to be the Perfect Storm.
With several concerning trends recently emerging in healthcare, this upcoming renewal season may be unpredictable at best. At worst, it could become the most expensive renewals in recent history.
HR leaders, brace yourselves — but don't take cover just yet. We've brought in a renewals expert from America's biggest employer (and the largest buyer in healthcare) to help you prepare.
As the Senior Vice President of Walmart Health (and Nava Advisor), negotiating and deploying employee healthcare plans is Marcus Osborne's specialty — and he does it well. So well, in fact, that he's perfected his own cost-saving renewal strategy to scale to any size employer.
If you want to weather this unpredictable renewal season, read on for scalable tips straight from the pages of Marcus' playbook.
Three signals on our radar
They say a perfect storm is the conversion of multiple separate meteorological events. It doesn't happen often — but when they intersect, the effects are brutal.
In this renewal season superstorm, we're keeping an eye on these three weather patterns:
Low Supply and High Demand for Care
"When we talk about medical cost inflation, that's largely being driven by Covid," Marcus explained. "We've lost providers." Many providers, across specializations and types of care, have made the decision to stop practicing for one reason or another. Some retired, some were furloughed — but at the end of the day, we're left with fewer care options.
So following the rule of supply and demand, a lack of providers has fueled an increase in healthcare costs. "Inflation is increasing because the underlying supply for care has fundamentally diminished or has not kept up with demand."
A High Volume of Deferred Care
As lockdowns barred most patients from accessing care, millions of Americans (read: 44% of employees) decided to delay their appointments. So this year, our healthcare system will bear the weight of all those deferrals.
But here's the thing about healthcare — the more you put it off, the more likely the underlying condition will worsen. And what may once have been a minor issue could now require more intensive (and pricier) care.
"Demand didn't decrease" during the pandemic, Marcus emphasized. "In fact, demand has only increased... And when you add on all that deferral, with demand still increasing and deferred care, what you now have are people saying there's doing to be explosive demand."
Healthcare Providers Recouping for Losses
Many providers had to slow care delivery (or shut down completely) for months as the US responded to the pandemic. For many, that meant taking a major financial hit.
To put it in perspective, hospitals are facing an approximate ~$100B deficit in 2021 due to the lingering effects of Covid. Now they're trying to make up for lost time by hiking up costs.
"Those three forces coming together," Marcus cautioned, "are driving many of the experts to say, 'we've got a problem.' And unless we get in front of it, we could see... truly a perfect storm of what we could see as some of the highest cost increases on record in the US healthcare system."
Four ways you can take action now
The right precautions can keep your employer sheltered from the storm. Here's what Marcus recommends HR leaders do to prepare.
1. Start now.
Take advantage of the calm before the storm. "Start early," Marcus affirmed. "I mean, start literally right now. Don't wait until September, October, November." By getting ahead of the curve, you'll have the leverage (and time) you need to negotiate and win your renewals.
2. Understand your employee population.
Taking stock of your employees' lifestyles and demographics may clue you in on what kinds of care they may need. "Really know your population and understand it," Marcus explained, "because then that enables you to start to say — given my unique situation, how do I seek out specific solutions?"
Your broker can help shed light onto your organization's needs. Start by asking your broker for data on your plan utilization, and use it to guide your healthcare plan design.
Plus, knowing your people is the first step towards selecting the right digital health solutions. With so health tech many options available, it can be easy to feel overwhelmed. But by combining your employee population know-how with your broker's support, you can feel confident in your tech selections.
3. Bid the market and ask.
As large and all-encompassing as the healthcare system is, you may assume that there is little room for negotiation with larger carriers. But Marcus emphasized that the tides are turning.
"The big carriers are having to be more competitive, because the competition between themselves is increasing. You're also starting to see some innovators appear that are challenging them. So there are more options in the market."
And if you play your cards right, these industry shake-ups could shake out in your favor. Do your research and approach your carrier with a willingness to negotiate. As Marcus says, "you've got to bid it out... If you don't ask for something, people won't give it to you."
4. Look at a higher performance funding structure.
Sometimes the best route forward is the road less traveled — and that could mean shifting your funding structure to a self-insured, captive, or gap funding model.
When making that decision, don't feel boxed in by your size, says Marcus. "A lot of the time you'll say, 'well, we're only 250 employees, we have this many people on our plan. I don't know that it works to go self-insured.' I'm going to tell you right now, I've seen groups move from — though it takes more effort, certainly — [they've seen] serious, serious benefits from that change."
Sure, it's a big change — but this year will likely bring big changes regardless. The best thing you can do for your employees is choose the best plan and structure for your organization.
And with the right broker, this transition can be relatively quick and painless. You've just got to ask for their help. (Speaking of asking... any way we can help?)
Weathering the storm
We won't lie to you. This year could be a doozy. But taking action now can help turn this renewal season from a stress to a success.
Watch the full interview with Marcus:
Have more questions Marcus didn't answer? Our team is here to help.