5 Questions with David Contorno, President, Lake Norman Benefits
1. An employer comes to you and says, "David, I want to start from scratch and build a benefits portfolio the right way from the ground up." Where do you start?
WOW, this would be a DREAM! I think a lot of people would start by trying to understand the goals of the employer, but I am not sure that applies here. I think the goal is pretty universal…”We want to provide a comprehensive, cost effective and valued benefits package” would be the pretty standard reply. But clearly, these have not been the results of traditional efforts. So the employer needs to understand, that we MUST fundamentally change how their employees and families interact as consumers with the healthcare system. After all, if nothing changes, then nothing changes. And you CANNOT change the cost and quality of healthcare through insurance changes. We have proven that for decades. But you can, however, change the low quality and high cost of INSURANCE by changing the underlying cost and quality of care being received.
I often ask employers, “How can you expect me to bring in high quality, low cost insurance, when its paying for high cost and low quality care in the US?” So, what I really try to gauge is 1) what is the employer’s tolerance for driving fundamental change. 2) how do we best communicate that. (we can use the proverbial “carrot” or “stick”), and 3) what is the culture and tolerance for noise among the leaders. If the culture supports leading an initiative and gaining momentum and buy-in because the leaders of the company have proven time and time again that they drive change and innovation and despite some discomfort, come back out the other side with better results for all, the movement becomes much easier.
2. You recently went to DC along with multiple broker colleagues. What was your goal, and did you accomplish it?
I think deep down, every one of us hoped that in our meetings with our elected officials, one of them would have that “AHA!” moment and finally get it. But, that didn’t happen. I think we just need to beat the drum each year that we go to Capitol Hill, and we hope to move the needle, a millimeter at a time. We also look to protect some immediate initiatives in bills that we as an industry feel will do more harm then good. Unfortunately, everything we do in Washington has become a series of compromises, and almost every bit of good done comes with some bad. I think the goal at the end of the day is to have more checks in the plus column than the minus column.
3. You have advocated for a fundamental shift in how we think about healthcare and health insurance. Can you explain the difference in the two, and how should we evolve our thinking given the current landscape?
I think the first shift is SO simple, and frankly, I find so AGGRAVATING that we do it as a society. We need to understand that healthcare and health insurance are two COMPLETELY different things. I am not sure why we confuse the two in this space. United, BCBS, and CIGNA DO NOT provide healthcare. Doctors, hospitals, drug companies, they provide healthcare. The carriers help us PAY for it. We do not confuse Geico and Ford. They occupy completely different silos in our brain. And, we know that what Geico charges for insurance DOES NOT impact the price we pay when we buy a car. And, we also know the price we pay for a car DOES impact the price we pay to insure that. We basically see Geico as a reflection of the cost and quality of the car we drive combined with our individual risk as a driver based on driving history and other factors. So, why then do we not see health insurance as a reflection of the cost and quality of healthcare we receive, as well as our risk as a person?
While this is heavily oversimplified, and the carriers no doubt contributed, they are just the messenger, a reflection of the system they are paying for. But, yet we point the fingers at them, and even worse, we try to fix the problem through regulating, changing, and subsidizing insurance. That makes ABSOLUTELY NO SENSE. We need to change the cost and quality of care we consume (and even our personal health too), and then we can hold insurance accountable to those lower costs. We CANNOT do it the other way around. Imagine regulating Geico, Allstate, Nationwide or creating greater competition among them between different states, and expecting that to lower the price of the car at the dealership? CRAZY!
4. You recently said that a broker should be open and transparent about their revenue sources. We found this to be inspiring. Can you elaborate?
One of the main reasons our system is so broken is that it is built on a platform of “perverse incentives”. It starts within the actual healthcare system...there are incentives to do “more” because it brings in more revenue in our predominantly “fee-for-service” environment, and because of malpractice, many providers (erroneously) feel being more “defensive” in their practice better guards them against lawsuits. One thing that drives “more care” is providing lower quality care. Mistakes, redo’s and ineffective diagnostics lead to more care, which again, the providers benefit from. The carriers also benefit from more. Many consumers and employers feel the carriers are incentivized to controls costs. They believe, again erroneously, that the carriers profit is the difference in underlying medical and admin costs and the total premium paid.
Medical Loss Ratios (a provision of the Affordable Care Act) changed all this. If they control costs too much, they have to give a refund to employer and individuals. They are now locked in to small profit margin as a percent of total premium. So, when premium goes up, profit goes up. And, the only way for premium to go up is for the underlying medical costs go up. Again, backward incentives. So we circle to the broker…long paid a commission for our services, as an employer’s rates went up, so too did our revenue. If we delivered a 22% increase in premium, we got a 22% raise. Backwards. If our primary job is not to control those costs, I know what it is. We should get a 22% pay CUT. And while fee-based consulting has removed the incentive for higher rates to brokers, it has NOT put the incentive in place to lower costs. Performance-based consulting brings us as brokers/consultants to the same side of the table as the employer.
5. What's next, and who is driving it?
I think the mind shift referenced above, both among patients and employers, and in particular Washington, needs to come next. We cannot solve the problem until we identify what the real problem is. Once that mind shift occurs, answers start to become more apparent. Employers start to act in a completely different way (and finally start to meet their real Fiduciary Responsibility to plans). The actual tools to do enforce that change in mindset is not that hard. As for who is driving it, there is a small gaggle of consultants, doctors, pharmacists, TPAs, etc that are getting louder. One ecosystem trying to bring this all together is the Health Rosetta Institute. Through this, we are identifying key components and strategies that bring this all together in an effective, responsible and proven format. I am proud to be a part of it and anyone can find out more here.