[SOUND] Hi, we're here with Mark Gaunya, Mark is a Principal and Chief Innovation Officer at Barsalow Insurance and the Founder and CEO of Captivated Health, located here in Boston Massachusetts. Barsalow Insurance is highly regarded as a leading regional employee benefits brokerage and strategic advisory firm, serving employers and individuals. Captivated Health is an innovative solution designed to help middle market employers, and their employees and families to make health care better, by making it about them so that they can bend the health care trend. Hi Mark. >> Hi Rina. >> So, Mark and I have been friends for a long time and colleagues, we've worked together for probably more decades then we would like to admit to. >> Thank you. >> I wanted you to be here with us because we just had a lesson on the ACA and insurance, and how the ACA addresses some issues, but perhaps doesn't address others. So, just curious from your perspective and your client's perspective, how has the ACA changed employers' approach to insurance? >> So I think, first of all, thank you, it's very nice to be here with you. Always nice to be having a conversation with you about something we both care so passionately about, and that's making our health care easier and more affordable. So I'll start that as a backdrop to saying that, if you really look at the ACA, it was promoted as a health care law, the reality is, it was a health insurance reform law. Now that seems like a little thing, but it's not, it's not subtle. It's rather large. So, really what the ACA did is it changed the regulations of health insurance, which had a dramatic impact on the employer market with regard to the types of plans they offer, the types of resources that they provide, the financial investment they have to make, all the compliance and regulatory matters that they had to face. So when you really take a look at the way the ACA has impacted health care, it's really impacted health insurance more, in our estimation, than it's impacted healthcare. >> So let's talk about that a little bit further. Does that answer change if you're talking about a smaller employer versus a larger employer? Do larger employers even care about the ACA? >> They do care because there is a lot of additional cost in regulatory matters that they have to face. So, if you look at the way the ACA was constructed it did a lot of change in the individual marketplace and in the small group marketplace, or what we here in Massachusetts call them merged marketplace. For larger employers, they weren't impacted as much, but they were still impacted a great deal, with regard to the types of plans that they had to offer as an example, very rich benefits. Insurance plans that included a lot of things that those larger employers may not have included in their benefit plans. Taxes that came down in the form of the HIT tax, an example, the health insurance company tax. Many of the employers in the small or middle market were fully insured, and this tax was levied on them, so they had to figure out ways to kind of manage that cost impact. So a lot changes with regard to what employers had to offer, a lot of changes with regard to the compliance that they had to undertake to be in congruence with the law. And then also the downstream implications of their employees in terms of educating them about a lot of these changes. >> Mm-hm, so a lot of the responses that you gave there would seem to imply that there were added cost. >> Yes. >> To many employers. Any core savings that employers are seeing? >> Well it's interesting, because again, the law was promoted, and if we'll remember, the President at the time had talked to us about, that the average annual premium would decrease by $2500 a year. Unfortunately, the exact opposite has happened. Again, depending on what study you read, and I'm not going to sit here and quote studies, but actually cost have gone up an average of about $2500 per person, as opposed to going down $2500 per person. Why is that? Because the benefit plans that were put in place were very rich, we didn't really do much to attack the real problem of rising health insurance costs, and you've heard me say this probably a thousand times, that- >> But you should say it now. >> Health insurance is expensive because health care is expensive. And at the end of the day, this law didn't really address the underlying problem of rising health insurance costs, which is rising healthcare costs. >> So how are employers responding to this continued rise in health care costs? >> So, traditionally what employers have done to manage costs is they increase out of pocket cost sharing from their employees. So they raise deductibles, they introduce coinsurance, they increase copays, they water down the benefits. They also have been forced to decrease the amount that they contribute towards the cost of that insurance premium. So what I mean by that is the employer typically used to fund 80%, on average, of the premium for an annual cost of a health insurance plan, and they employees would pay 20%. We're now seeing that pushed down to 70%, 65%, in some cases even lower than that, even though there were requirements in the ACA in terms of what the employer was responsible for providing. So as an example, there was an income requirement that, when the law first came into place that an individual cannot be charged more than 9.5% of their income. It's indexed every year of it, but at the end of the day I'd started at 9.5%. So what did that force employers to do? It forced employers to offer health insurance plans that would comply with that requirement, but then also forced them to water down the benefits so that they could actually afford to put those health insurance plans in place. So that's a couple of things that had been done, other things that had been done is middle market employers are now pursuing self-insuring or partially self-insuring. They're leaving the insured, heavily regulated, heavy cost burden, fully insured market and moving towards the partially self-funded or self-insured market, which is traditionally where large employers have benefited. Now smaller employers are benefiting by actually understanding their risk, and then doing things to actually become better risk managers. So I think the biggest trend we've seen in our business, and how we fashioned it with our business, is we're really helping them understand that this is the second largest line item you have on your profit and loss statement, behind payroll. It grows four to five times faster than any other expense you have, so it eats margin, and whether you're a for profit or non for profit, you need margin to continue your operation. So, at the end of the day, they're forced to think about, well, how do I better manage this financial risk that I have, as opposed to offering a benefit that I use to attract and retain my employee population, which they still care about. They now have to say, okay, but I don't want to threaten the health, the financial health of my business. So you as an advisor, we as an advisor have to help them understand not only the rules and regulations, but also how they can help their employees and their dependents actually understand how to access health care in a more intelligent way. And if you look at our health care system, it's not the easiest, it's very complex, and so people need help navigating that. You probably understand this as well as anyone, there's an inverse correlation of health care cost and quality. Everything else we buy in life, typically speaking, if it's better it costs more. If you have a better car it costs more, a better house it costs more, a better outfit it costs more. Healthcare, that's not the case. In fact a lot of places that deliver a high cost care don't deliver a high quality care, which, it really is confusing to a lot of people. Well, it's more expensive, it must be better. >> Yep. That's not the case, understanding that it's really the contract that's negotiated between the health insurer and that provider entity, whatever it might be. And most folks really don't understand that because why? Our healthcare system is not transparent to them. >> So, I got two follow up questions to those. I want to go back to comment about middle market employers starting to self-insure. And we've talked in my course here about the need to have a large enough population in order to feel predictable and stable, and all that great actuarial stuff that I like to- >> [LAUGH] Get you all fired up. >> To get all excited about. >> So how do you help people move into the self-insurance world and not expose them to such risk that they financially are ruined? >> Sure. And I think that I will love to speak about that, that was actually the birthplace of this program, when you introduced me, called Captivated Health. Small employers, when I say small, less than 500 employees, are not what we consider in the the underwriting and actuarial world, credible. Meaning that their claims experience an an underwriter and actuary can't look at it and accurately predict what a particular year might look like. In turn, if that employer wanted to be self-insured, they're going to buy what's called the stop-loss insurance, to protect them for each individual they insure but also for overall, all the people they insure. When you can't accurately predict exposure, then you become very conservative a stop-loss carrier, which means you make the stop-loss insurance unaffordable, and therefore, those smaller, mid-market companies cannot move in that direction. Okay, so that's the problem, what do we do about it? What we do about it is what we did about it for our clients, we actually created a captive insurance arrangement. Now, captives have been around since the 1950s, they're not new. Most of the Fortune 500 companies have captive insurance arrangements and frankly I didn't even know they existed until six or seven years ago. They've traditionally been used in property, and causality, and workers' comp, not really used on health care side. But at the end of the day, what we found out is the captive insurance structure allows small and middle market employers, so between 50 and 500 employees traditionally, that's the sweet spot. Those employers now can self-insure on their own, but they also share risk and they also transfer risks. So the captive model, and people are in love with the captive model, I'm not, I kind of look at the captive model like a stadium. It's the game played in the stadium that really matters, not the insurance structure, not the structure right? So if you look at a captive, you retain the risk that's most predictable, you share the risk that's somewhat predictable but somewhat unpredictable, and then you transfer away the risk that's completely unpredictable. And so what it allows a 50 person company to do or 100 person company to do is to self-insure, but also to have what I call the captive insurance layer, I call it a volatility shock absorber. So, if you can imagine throwing a pebble into a pond, what happens with the energy of that pebble going through the water? It's dispersed across the entire population. So, similarly speaking with a captive, it allows a smaller, mid-market employer to actually, when they have claims that pop up that they didn't even see coming, it allows them to mitigate the financial impact of those claims by spreading it across the community. Everybody in the community pays into that middle layer, but no one really knows who's going to have a good year and who's going to have a bad year. But they all know, because they get educated, about once every four or five years or every five or six years, they're going to have a bad claim year. And when they do, they have the protection of that shared middle layer of risk. >> Gotcha. >> So that's really the structure of a captive, but the secret sauce the is risk management philosophy. How? Well, when I moved from the world of fully insured, where the carrier takes all the risk, they have all the data and they don't share it with the employer, so the employer has no idea what they're paying for. They're underwritten not only on their own risk but on the carrier's book of business risk, so a 50 person company may be paying 10% of what their employees actually spent, 90% comes from the pool that the health insurance carrier is managing. By moving into a captive, self-funded arrangement, they now get to see all the data, not who is claiming, but what types of claims are being generated. And then when they understand that, then they can start to act like risk managers, and say okay, we have a problem with diabetes, we need to put a diabetes medical management program in place, we needed the early intervention to avoid some of the really bad things that happen a result as a result of diabetes. We might see a situation, like we do a lot of work with schools, private schools, and we see that they're a very active population, so there are a lot of hip and knee replacements. Okay, well, if you know, there are a lot of hip and knee replacements, you can plug in chiropractic, acupuncture, massage therapy, those types of forms of modalities which are a lot less expensive than replacing your hip or replacing your knee. >> Right. >> But you're doing it scientifically because you're looking at the experience of that group and then being laser focused about the types of programs you can put in place. >> Okay, so let's so let's stay on that, so one of the things about the ACA that proponents, and and I think you would agree, as a benefit is that people cannot be denied coverage because they're sick. And so you just described employers now having data to be able to make new decisions. Is there a risk that they would turn around and not hire certain people or fire employees as a result of these conditions? because that would be something people would worry about. >> Absolutely, and I think, to be fair, the ACA, the two big things I think the ACA did that were very, there are actually three, but two big ones I think they did is first eliminating pre-existing conditions so everyone could get insurance. I've always thought that people should get it, they should just pay the risk that they present, but they shouldn't be turned away. So it really opened the door for uninsured people to get insurance. The second thing it did is it actually allowed people to keep their kids on their parents' plan until the age of 26, I still don't think a child is 26 years old but, we can debate that another time. I was married at 26 with a mortgage already. >> I hear you, I hear you. >> But, at the end of the day it helps those children get the coverage so they're not left out without health insurance which is a really big problem. The third thing I did, and we participate on this through the connector, is it allows an entity, a state-based entity, to help connect people with insurance who don't have that. So I think those things are really big. As it relates to your question, can employers turn people away? We still have protections through the ACA that prohibit that. We still have HIPAA confidentiality requirements, so I can't underwrite your risk and say, Rina, sorry you're not healthy enough, I am not employing you, or Rina, I'm going to kick you off the plan and you'll have to go to the connector, there are laws that prohibit that. >> Okay. >> And I think that's a good thing. >> Yep. >> All this allows the employer to do when they're self-insured is to understand the risk that's presented in totality, and then offer services, and programs, and support to those folks who can actually get better health care at a less expensive price. >> Right. That's the whole goal, make it more affordable and easier for people to access. >> That's great. So if you had a magic wand, you're on the Massachusetts Health Insurance Exchange, so that's called the connector, which you just referred to, and if the ACA were up for renovation, renewal with improvements, what are some of the things that you'd like to see changed or added at this point? >> So, I think for me, and I write about this, I speak about this, I blog about this, you name it, I feel like it's a responsibility, personally, that I have. I don't think we can change anything about the current structure unless we make the entire process visible to people. So transparency is a word that's thrown around, what does that mean? You actually heard me ask this at a connector board meeting, but I said name one service that we buy outside of health care, where you don't know the price and quality, or at least get access to that information before, that's the important word, before we buy it. >> Yep. >> Health care is the only one, yet it's the most important thing, our health is the most important thing that each one of us have. It makes no sense to me when I walk into a doctors office and when I ask my doctor, and I do it every year, how much is this service going to cost me today? He looks at me and laughs and says, Mark, why do you ask me that question every year? I'm like, because you should know the answer. But it depends who your insured by and it depends on the contract that insurer has with me. I'm like but doc whether I walk in with a blue card or I walk in with the red card the services the same. >> Yup. >> Why does it have to be different? because that's the way the service works. So if I had the way of a magic wand, I don't believe we can improve what we can't see and we can't measure. I mean I know this is not revolutionary, but at the end of the day, the current opaque process of billing and coding and that's really the evil doer, not the structure itself of billing and coding, I don't have any problem with that, it happens in every kind of business, but in every other kind of business it's transparent to the end user. If I buy a car, I know what it costs before I go buy it, and I make a determination about the quality of the car I'm going to buy and the price I'm going to buy to determine the value that I'm going to purchase, in healthcare that doesn't exist. So the coding and billing is done behind the scenes and we don't find out about that until after we buy the health care service. Well, how on earth are we going to solve the cost problem if people don't even know what something cost, or the quality of that service? So I really think if we start there as a foundation, if we were to make it the law of the land, that no matter where I go I can find out what is the quality of this service and what is the price of this service, so I can make an educated buying decision. I think that would be a great place to start. There are many other thing you could do relative to adjusting the ACA, but I would start there because I really don't see how adjusting existing algorithms is going to make a fundamental change. >> Okay. >> So that's what i would say about that. [MUSIC]
