Our Founder and President, Nate Randall, had the opportunity to speak with BenefitsPRO for a profile titled "How brokers can design workplace benefits to address cost concerns and employee needs". In the interview, he discusses his time running Global Benefits and Employee Experience at Tesla Motors and provides insights into how the employee benefits space is changing.
“At this point in my career, I want to be able to influence the benefits industry in ways that provide more value to everyone—employers, workers and their families,” he said.
Today’s landscape has the potential to empower consumers while radically changing the way we envision and leverage employee benefits. Government regulation, spiraling healthcare costs unattached to outcomes, big data, and a massive new generation joining the workforce are the four main factors driving the future of non-wage compensation. That future begins today. With careful consideration of these four factors, a new generation of healthy consumers is within reach.
#1 Regulation and the ACA
The passing of the Affordable Care Act (ACA) in 2010 already feels light years away in some respects. In the brief time since, millions of Americans have taken advantage of the new baselines that the ACA set for medical insurance carriers. These include eliminating pre-existing condition and lifetime maximum clauses, covering preventive services, providing more options for coverage, and helping us get the most from our premium dollars by requiring that insurance companies spend the majority of dollars collected on health-related expenditures, rather than overhead costs like administrative, marketing, or cushy employee and client retreats.
Though the ACA is far from flawless or complete, even those politically opposed to the Act would have a hard time denying the fact that millions of Americans have gained more choice in insurance options through the creation of exchanges. More than 12.7 million are now covered on public exchanges while another eight million enjoy coverage under a private exchange.
These numbers will continue to grow as innovative companies leverage the individual insurance market to offer additional choices to workers at better price points than they can obtain independently. This vastly expanded network means more Americans have the freedom to choose the price, insurance carrier and coverage level that best suits their needs.
All of that said, the ACA has not significantly reduced health care costs, which remain onerous and excessive. The lack of meaningful change in cost since the implementation of the ACA is worthy of additional debate. For me, it’s best highlighted in a recent Kaiser Family Foundation 2015 Employer Health Benefits Survey:
Most market fundamentals have stayed consistent with prior trends, suggesting that the implementation has not caused significant disruption for most market participants. Premiums for single and family coverage increased by 4% in 2015, continuing a fairly long period (2005 to 2015) where annual premium growth has averaged about 5%. The percentage of employers offering coverage (57%) is similar to recent years, as is the percentage of workers in offering firms covered by their own employer (63%).
Clearly, there’s still work to be done on the ACA, but it’s lasting baseline requirements have set a new foundation that’s here to stay.
#2 The disconnect between health care costs and quality
Let’s talk about the outrageous price tags for health care services in this country. It’s no secret that our health care costs are the highest in the developed world. We spend $8,713 annually in health care for each US resident, ahead of the number two country (Switzerland) by a whopping 40 percent and over 2.5 times that of the average developed nation. Most shockingly — and counter to some of the rhetoric you might hear during this campaign season — we spend more in public health dollars per citizen than all other countries on the list except Norway and the Netherlands. In fact, our public health spending alone would cover the entire public and private health spend per capita for countries like Australia, Japan, Ireland, Finland, France and many more.
Surely, we must have better health care, health technology and patient outcomes if we pay that much, you ask? Unfortunately, we don’t. A study by the influential medical journal The BMJ highlights some our issues. It concluded that medical error is the third leading cause of death in the nation — responsible for 251,000 deaths per year. That’s more than suicide (41,000), firearms (31,000) and motor vehicle deaths (31,000) combined. In my own research on the topic, I was astonished to discover that the highest rated hospital for safety in my home state of California achieved a paltry 69 out of 100 successful outcomes. Simply put, we overpay for care that is at best mediocre, often unsafe, and at worst deadly.
The health care industry is in need of fundamental change and there’s a real opportunity to disrupt the existing status quo. Increasing investment in smart people and companies trying to solve this cost/quality disconnect are evidenced where I live in Silicon Valley. Rock Health shows us that $8.8B (yes, that’s billion) has been invested in digital health over the last two years alone. You can bet your bottom dollar that these investments will drive big changes to the system in the coming years, just as they have fostered and developed nascent technologies in other sectors. Investors, employers and consumers alike are seeking answers to gain positive health outcomes that are less costly, more efficient and ethically-driven.
#3 Medicare claims data
When CMS released Medicare claims data for the first time, it was a move of unprecedented transparency and a huge win for entrepreneurs and data scientists looking for a way to help solve the cost, value and quality dilemma. The data contains information on services and procedures provided by over 986,000 physicians and health care professionals. This offers us insight and comparisons of physicians, specialties, locations, types of medical services and procedures delivered, payment and submitted charges, and more.
Why is this a game changer? In today’s society, data is king. It is already sparking a tidal wave of innovation and transparency within health care and insurance. Tools, technologies, apps, quality metrics and accountability for doctors and medical facilities are fast on the way.
#4 A new generation joins the workforce
We’ve gone over three of the biggest things that will usher in a new era of benefits, but the single most influential factor is the changing workforce and the introduction of Millennials. Much has been written about Millennials, but regardless of anecdotes, we certainly cannot ignore the numbers. Ninety-two million strong, they outnumber all previous generations, including baby boomers.
Goldman Sachs created a great infographic that dives into the details of this new workforce. Among the highlights for me are the trend towards delaying major life events, including marriage, buying a car, and becoming homeowners. Millennials tend to focus on access, rather than ownership (think Uber and AirBnB). Take note. Uniquely, they have less spending power compared to their parents, thanks in large part to massive student-debt — a staggering 43 percent of 25 year olds have student debt at a mean balance of over $20,900, according to the Federal Reserve.
Another key takeaway for those of us in benefits is how this generation views health and wellness. Unlike prior generations, who typically focus on the absence of disease and illness when defining health, Millennials spotlight eating right, exercising and limiting or abstaining from smoking and alcohol consumption as their definition of health.
The Goldman report defines another aspect that Millennials both expect and utilize, which is starting to have a huge impact on employee benefits:
Millennials have come of age during a time of technological change, globalization and economic disruption. That’s given them a different set of behaviors and experiences than their parents. They’re also the first generation of digital natives, and their affinity for technology helps shape how they shop. They are used to instant access to price comparisons, product information and peer reviews.
Today’s antiquated and clunky experience with benefits systems and the health care infrastructure remains frustrating and non-intuitive — two adjectives that are decisively incompatible with the needs and expectations of Millennials. While other industries have quickly moved beyond hard copies and filing systems to make access quicker and more efficient, our industry is in dire need of a 21st century makeover.
Beyond all of this, the changing generational needs of our workforce are not met by the existing benefits paradigm. Employers pay copious amounts of money for medical benefits that most of their healthy, young employees will not take advantage of anytime soon. Yet, those same employees often have little-to-no access to benefits that would make a meaningful impact on their lives, such as reducing their student debt or obtaining loans. This signals a shift to us in the benefits world towards benefits dollars that are driven by the consumer, rather than the company.
Tackling today’s problems with tomorrow in mind
Insurance companies and the ACA provide only part of the solution to finance our expensive, low-performing and antiquated health care system. How long will modern consumers put up with an experience so out of step with every other aspect of their daily lives?
The spotlight is shifting squarely onto the underlying cost of care and lack of quality that erodes American spending power, savings and economy. Coupling newly freed data with technologies and innovation that meet the needs and expectations of a new workforce generation will change the way health care and benefits are consumed, paid for and delivered.
It’s time for a fresh look at how we spend our health care dollars while giving the workforce freedom to choose a more personalized approach is the benefits of tomorrow — and that starts today.
This article was originally published on BenefitsPRO
Throughout my career, I’ve had the good fortune to work for a variety of industry leading organizations from stratospheric startup Tesla Motors to Fortune 100s Safeway and Washington Mutual. I planted myself knee-deep in managing, analyzing, and creating everything related to employee benefits and have learned more than a few finer points along the way. The common thread across these three companies was a genuine desire and drive to apply innovative, forward thinking approaches to change and improve the way employee benefits are delivered. I’ve reflected on my experiences to give you three take-aways that helped these companies make the biggest impact possible with their benefits and employee experience programs.
Lesson #1: Innovation isn’t easy
Much has been written about long work hours. Stories abound of people sleeping in their cars or under their desks and subsisting on top ramen and frozen vegetables. That might exist for you at some point along the path, but that’s not the type of innovative environment that I’m talking about here. I am talking about an atmosphere that applies a conscious drive for change which can lead to meaningful acceptance of new ideas.
Whether you’re rethinking the value of the way health insurance is delivered to families or trying to disrupt a 100-year old automotive industry, mindfully striving for innovation isn’t cakewalk. That’s because us humans are programmed not to like change and for many, working through innovation doesn’t come naturally. It takes a laser-focused and cognizant decision to examine the way things are traditionally or typically done. To do that, you’ll need to gather data, build a team, prove a case, influence, iterate, fail and, to achieve success, you’ll need to do all of these things quickly with minimal errors and missteps.
In my experience, it all comes down to the team that you surround yourself with. When hiring or building your team, I always advise to think creatively about your problems and look for passion in those you recruit. More important than having “done it before” is an intense drive to solve problems and an underlying interest in the core subject. Early in my career at Tesla, an HR manager said to me, “there are three reasons people come to Tesla. Either they are passionate about cars, passionate about the environment, or passionate about their chosen profession. And, Tesla is the best place in the world to be for all three of those things.” Notice there is nothing about money, benefits or perks. That brings me to the second lesson I’ve learned....
Lesson #2: Top talent doesn’t care about perks (until you take them away)
Rarely do candidates and their families make the decision to change their lives- in some cases moving across the country or world- because of the benefits and perks you offer. Attracting top talent is about storytelling. It’s about having a mission and purpose that a person (and their family) can identify with through their hard work. I have literally witnessed thousands of people join a common mission early on with little more than unlimited cereal and coffee being offered as the perk. And this was in the geographic backyard of arguably the most intense company perk culture on the planet in Silicon Valley. At the end of the day, people want to feel like they are contributing to something bigger than themselves.
Don’t get me wrong, I don’t mean to imply employees don’t care about the benefits offered to them. They must be satisfied knowing that the basics- Health, Disability, Life Insurance, and Retirement- are covered. But in my experience, top talent doesn’t make the decision to join a company because of free lunches and massages on Wednesdays. Keeping that in mind, it is extremely important to construct benefits and perks with care and thought. Once implemented, any experienced HR manager will tell you their sad tale of trying to take something away that people are accustomed to.
It’s also imperative to align benefits with perks. Trust me, employees notice if either appears alien to the company culture and mission. I learned this lesson at Safeway during a program that linked the amount of premium a person paid for health insurance to their biometric measures like blood pressure and cholesterol. Employees scratched their heads wondering why the company cafeteria featured cheap burgers and sodas in comparison to the healthy but pricey salad bar if poor eating habits could potentially equate to higher health insurance premiums. To promote the healthy lunch options, we had to align its costs with the culture we were trying to foster.
Silicon Valley has become legend for perks and what many of my colleagues across the country consider frivolous and extravagant benefits. While I agree that many of the Valley’s largest and most iconic brands along with many wannabe-cool-kids are foolishly wasting time, resources, and money on programs that really do not serve any identifiable goal, I will argue that offering smartly aligned, personalized benefits and perks are the wave of the future. And that brings me to my third and final take-away...
Lesson #3: Let the people choose
We have a lot of choice in our lives. We choose the items, price points, and brands to put into our carts when shopping at Safeway. Every Tesla purchase is made to order, built to the specific requirements of the buyer. Google organizes information to make it individualized and useful. Amazon provides a personalized online shopping experience. Uber and AirBnB tap into excess individual capacity in existing systems to create value. We all have different needs, priorities, family situations, and interests, so is it so difficult to offer benefits that can be personalized, too?
The traditional way of offering limited-choice employee benefits and perks for everyone (ie. group benefits) is outdated and bloated with waste. Upwards of 30% of compensation costs are funneled to these traditional benefits and American companies spend over a trillion and a half dollars on these inefficient benefits per year. That’s Trillion with a T. And that doesn’t even include any so-called perks. In my own research, most employers are paying anywhere from $7k to $25k per year for a single traditional benefits package. That’s a huge hunk of change and much of those benefits will never be used by the individual if it doesn’t apply to their situation or they find no personal value in it.
Instead of these antiquated and engorged traditional benefits, smart people are creating systems and methods whereby employees can build personalized benefits packages that meet individual needs and circumstances. Giving people the choice and ability to craft what they need can and will make a real difference in people’s daily lives. Adoption by forward-leaning employers along with regulatory cooperation will finally result in a system for employee benefits and perks that is modern, flexible and valued. A system that looks like the rest of our world... personalized.
This article was originally published at BenefitsPRO
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