Fighting for your healthcare funds: third-party administrators and other members of the self-insured benefits industry claim they are in a war for their very existence. Their enemy—the dreaded BUCAS and the government. Their hope of survival—your self-funded healthcare benefits dollars. Are they worth it?

Risk & Insurance, Oct 1, 2007 by Matthew Brodsky

But employers realize merely griping about these increases won't cut it. They must learn how to cope.

Dr. Ronald Leopold, a high-energy speaker, occupational medicine physician and industry leader for MetLife Institutional Business, says he's hearing employers say, "We can't keep doing things the same way."

"The employer, they're sort of waking up to, 'Oh my god, we're just going to live with this forever,' " says Shawn Jenkins, CEO and president of BenefitsFocus. "The days of just stamping yes to the renewal ... are gone."

Jenkins, who operates out of Charleston, S.C., yet without the sweet-tea drawl you might expect, has had contact with dozens of insurers and thousands of employees through his benefits software firm.

His point is clear this new state of mind puts employers in the drivers' seat. Employers won't find any easy answers for prices--not like the "90s with the HMOs--so they have to get creative.

"I think employers are just going to have to shop," he says. "It's just a more aggressive marketplace out there."

As for employers' benefits consultants, brokers and agents--they'll have a "real interesting five years ahead of them," he adds.

One such broker, Bill Sharon at Aon, says that employers are pulling two levers in the marketplace to cope. The one is pricing. Bigger discounts drive employers to the biggest health insurers and networks, which with their competitive advantages can get (or at least promise) lower discounts on claims.

The second lever, Sharon says, is consumerism. "The consumer-driven movement is here to stay," he says.

Jenkins equates it to the move from pensions to 401(k) plans from the 1980s to 2000. "We see a continued movement for employers to begin to kind of pull back the curtain for employees and say, 'Here's what things really cost, here's some tools, here's some help in managing it, here's some advisors,'" he says, "'but basically we're not going to just give you one health plan every year and eat the costs.'"

We're talking new transparency in provider pricing and quality, online tools to help employees pick plans, new investments in health savings accounts. But said another way, we're talking cost-shifting. It's leading toward the employer just saying, "Here's a set amount of money for your health benefits. Spend it as you please."

This cost-shifting isn't that new. "That really rolls us back to the '50s and '60s," says SIIA's Kinder. "The old days were real simple." Way back when, says Kinder, such defined-benefit plans were called "base plus major medical plans."

Some employers seem to be reaching for this second lever because of frustration with the first. They aren't able to get the price reductions they want from big insurers and provider networks, says John Zuback, CEO of VIIAD, a vendor that offers network management platforms.

Employer frustration with lever No. 2 is also building. After all, encouraging employees to be consumers of healthcare could come back to bite employers in the rump--as top employees shop around for new bosses with better benefits.