Intermediary Agents Need To Take Up Slack In Healthcare

They Can Play a Role in Controlling Spiraling Costs
By Michael Turpin

For veterans of the healthcare industry, the current debate over the future of the Affordable Care Act – and proposed changes that would fundamentally alter Medicaid and individual market exchanges – is a frustrating battle of ideologies with the future of healthcare at risk. Our debate over who should be eligible for expanded coverage and how we reform reimbursement is often laced with self-preservation, which in our case means preserving an employer-sponsored system that is riddled with inequities, opacity, dubious middlemen and weak public and private sector fiduciary oversight. Those who provide, pay for and/or consume healthcare are drowning under rising per capita costs while many in the middle of these transactions grow fat.

            As brokers, consultants and advisors, we have to face an inconvenient truth: We have presided over and benefited from a system in crisis. Not everyone believes our industry’s purpose is noble or necessary.

            Health system stakeholders long to deal directly with employers. Many professional benefits managers hate being on the end of the latest pitch from their advisor  to sell a project or broker to hawk a new product to increase commission income. In the digital age, there is a heavy bias in favor of disintermediation and the elimination of distribution costs that are often not easily rationalized.

            In the last two decades, ineffective regulatory and advisory oversight of the financial and healthcare industries has allowed abuses to take place in the form of mergers and protected opacity in pricing.

            Sentinels – insurers, brokers and other intermediaries – often take the position that things could have been a lot worse had they not provided oversight of procurement and payment. Yet, it feels like the cop who is asking to be congratulated because only half the suspects got away.

            It’s actually hard to find a healthcare stakeholder who does not feel disabused for the role they play in this broken system. Everyone has a chip on their shoulder.

            Doctors routinely waive out-of-network, out-of-pocket and steer patients to outpatient clinics and/or in office therapies to maximize reimbursement. Not-for-profit hospitals and outpatient clinics purchase drugs under special non-profit 340B provisions, affording them steep discounts from drug manufacturers and then significantly inflate pricing to patients while pocketing the difference. Reserves at many non-profit insurers are as high as 400% of required capital reserves — and growing again. Pharmaceutical benefit managers ( PBMs ) who engage in opaque pricing, formulary manipulation and contractual games of semantics to maximize their share of profit from drugs they neither produce nor consume.

            Employers are often more focused on avoiding disruption than acting as responsible fiduciaries to drive market reforms. By abdicating to their insurers or a less than qualified advisor, employers have failed to drive fundamental market reforms that would otherwise slow or reverse the inevitable march toward a single payer system as a means to escape the unsustainable consumption and financing of healthcare.

            The role of benefits and risk advisor is that of a physician. The Hippocratic Oath of “first do no harm” should apply to everything that we do. To successfully eliminate egregious pricing, non transparent business practices, waste, fraud and declining public health by structuring a thoughtful plan of health and benefits for any employer is to serve a nobler purpose. We need to have a major voice about national reform and not only take an interest when our own industry is at risk.

            Across a 35-year career, I’ve witnessed countless acts of self-interest and unselfish service. It comes down to incentives, the culture of the firm and its people. When I meet a prospective employer paying $750,000 for healthcare advisory services to a life agent when $200,000 is adequate to cover my services, I resist the temptation to shadow price the compensation arrangement that is tantamount to highway robbery.

            We are the last line of defense in the fourth quarter of healthcare in America. It’s even odds that within a decade we will have a single-payer system as a result of runaway health care inflation and the lack of private sector appetite to drive market-based reforms.  If the pie shrinks, everyone’s share gets smaller. In a time where firms are looking to give 10%-15% ROE to investors, low single-digit organic growth means consolidation and job losses to increase economies and reductions in expenses (which are largely comprised of human capital). In the end, being liked could cost you your job. Being tougher with all stakeholders could end up saving your own skin.

            The most valuable person in this frenetic landscape of self-preservation is the objective agent, broker or consultant. To be guided by a higher purpose and to understand every dollar saved and excessive dollar of margin eliminated is a job saved, a bonus rewarded or an investment in capital equipment and improved earnings for clients.


Michael Turpin is a former health insurance and benefits executive. A version of this article originally appeared at The Health Care Blog.