Recently I’ve been thinking about an old business adage that businesses can compete on price, service, or quality and that they have to pick two out of the three. To make this adage come alive think about buying a watch at three different places.
Walmart – If I need to buy a watch for my 10 year old son, I’m going to start with Walmart. I want the lowest priced product that is convenient (service) for me to pickup. I am not worried about the quality of the watch.
Amazon – If I need a watch for myself, then I’m probably going to buy it on Amazon. It’s not very convenient as I can’t try it on and I have to wait for it to come in the mail. However, I’m willing to give up some convenience to get a higher quality watch at a lower price.
Tiffany’s – If I need to buy a watch for my wife, then I’m probably going to buy it at some place like Tiffany’s. I want the highest quality watch that is the most convenient and has the best service. I’m not worried about the price of the watch (or at least I shouldn’t be…).
So how does this tie into employee benefits? Well, I think all of us are trying to buy our employee benefits from Tiffany’s. Think of a fully-insured PPO plan. These plans are very convenient for employees and employers to use and they continue to push to have a very broad network that in theory includes all of the highest quality facilities and doctors. These plans are usually sold by publicly traded insurance brokers. And all of the players (medical providers, insurance carriers, brokers) all get paid very well and the prices continue to rise. If price is not an issue for employers/employees then these really are the best plans.
Recently I’ve been learning a lot about agencies that I’ll call next generation advisors. These advisors are doing some amazing things to lower the overall price of healthcare insurance while keeping the quality high. The downside is that these plans are not very convenient for employers and employees. Most of the time the employers have to switch brokers as well as learn about new ways to pay for heath care insurance (unbundled plans). Employees may have to go to different doctors, or pay for things in a different way like on a HSA plan. Again there is nothing better or worse than the Tiffany’s plan. It’s just different. Some employers this will resonate with and some it won’t.
The last area, or say the Walmart plan of employee benefits, I’ve yet to find. This would be a really low cost plan that is very convenient for employers and employees but low quality. Maybe a minimal essential coverage plan would fall into this category. Again, no one should knock these plans. For the right employers/employees they could be exactly the plan that they need/want.
For those that negotiate employee benefits for your company, this should help. First you need to pick two out of the three areas that are most important for you (price, service, quality). And make sure that you’re picking based on the overall company and employees and not just for your personal position. Next you need to align yourself with the right broker/advisor to help. You can evaluate your current broker/advisor by the plans that they are presenting. If they just bring fully-insured PPO plans that keep going up in cost then you’re most likely aligned with a Tiffany’s type broker. Which may be fine. But if you want a low cost high quality plan then it’s time to find another broker/advisor. You’ll be amazed at the options that will be presented to you that you haven’t seen from your Tiffany’s broker/advisor.
Personally, I’m an Amazon type guy. I’m willing to give up a little convenience to have high quality low priced products. The result for the employee plans that I’ve worked on are that they are priced lower now than they were even 8 years ago and they are still using the same high quality networks that everyone else is using.
If you want to learn how I did it, and how I can help you replicate what I’ve done, please reach out to me at [email protected] or by visiting me on my webpage at summitpathgroup.com