Future Shock and Healthcare: What Leading CEOs Are Thinking

The pace of change in the US healthcare system reminds me of a seminal book, Future Shock, which defined a psychological state in which people get “disoriented” because of “too much change in a short a period of time”.  The situation is exacerbated by what the author, Alvin Toffler, called “information overload”, a term that was used for the first time in that book. Toffler is one of the few futurists who actually seems to have been able to predict the future----at least in the health care space. With the health insurance exchanges opening for business in October of this year, employer fines and individual mandates hitting next January, and the pace of hospital and doctor consolidation exceeding anything we have seen before, separating the “signal from the noise” in the overload of information out there is critical---both to rational planning and to staying “oriented” (another word for sane).

The ability to synthesize large amounts of information and detect and act on the “signal” is a core skill of successful CEO’s. I recently completed my annual round of C-suite reviews with Equity Healthcare companies and met with the CEO’s and CFO’s of over thirty firms. Although companies differ by industry segment, culture and size, certain over-riding themes emerged:

Attracting the best employees – the strongest theme was the extent to which labor competitiveness issues, i.e., recruiting and retaining the most talented employees, are driving health benefit decisions. Although labor competitiveness has always been the basis for why employers cover health benefits, the degree of concern and attention to this issue surprised me. The scarcity of employees who are qualified for the complex, demanding and increasingly technical jobs that give employers competitive advantage has increased significantly. It seems as if the flaws of our educational system are trumping concerns about the failings of our healthcare system, at least in the short run. Leaders were very risk averse when it came to any radical change that could dissuade a talented employee from coming to the firm. As one CEO put it, “in the arena of health benefits for employees and their families, I want to be a settler not a pioneer.”

Insurance exchanges – the CEO’s were less aware than I would have thought about the details of the public exchanges, but what they did know about their scope and governance made them cautious and skeptical. While no one ruled out this option for the future, they were aware that 2017 was the earliest they could make a company-wide decision and felt that five years in the course of running a company is “like a lifetime” (or at least the lifetime of a CEO---a story in the Wall Street Journal last Fall indicated that the average tenure of a Fortune 500 CEO is 4.6 years). There was slightly more interest in privately-sponsored exchanges, although no CEO wanted to be the first among their competitors to make the move to a defined contribution approach, due to the aforementioned labor competitiveness concerns. When I would bring up what Darden Restaurants and Sears Holdings were doing, the EH CEO’s were interested but concerned about getting too far ahead of the peers in their particular industry.

Consumerism/Accountability & Rising Costs – this theme resonated as well and leaders felt more confident in making moves in this area that might not be “employee pleasers”. CEO’s felt that being effective sponsors of health benefits meant moving away from the old paradigm of “we as employer pay 80%, you as employee pay 20%, and we really don’t want to be involved much further” to one which encourages employees to be as proactive in their health choices as they are with all of their other personal decisions.  The new paradigm can be summarized by quoting a few of the comments I heard: “employees need to be much more involved in and accountable for their health decisions and it will take a combination of more financial ‘skin in the game’ and more information about prices to make this happen”; “why is health the only form of insurance in which risks don’t get reflected in premiums; if I smoke, I pay more for life insurance; if I get in accidents, I pay more for auto insurance. But in health care no matter what choices people make, they pay the same as everyone else”; “It’s not fair to employees who are accountable for their health decisions to not pay less than those that aren’t.” While companies are on different parts of a glide path to this new approach, everyone is focused on accelerating their efforts to get there.

Part-Time Workers – most companies have either part-time and/or seasonal employees and are looking closely at the 30 hour rule.  The extra healthcare costs and administrative burden involved in covering what for some companies represents several times the number of employees they are currently covering is presenting very significant pressures on profitability. However, it is turning out to be more difficult than expected to adapt established work processes to a pre-set number of hours. Many customers are comfortable with workers with whom they have long-standing relationships and don’t want to deal with a new person for an hour or two; other jobs would have poorer quality outcomes if they were done by two people instead of a single one. The brokers and consultants are working this issue diligently.

What are the takeaways from this “voice of the customer”? First, it was continued support for the fact that for the group of large employers that are currently self-insured, any big move to private and public exchanges is a ways away. Second, it was affirmation that Equity Healthcare’s strategic direction, developed from listening to the Employer Advisory Group and all of you, is on the right track. At EH our focus is primarily twofold: one, to be the leader in providing practical solutions to help bridge the change between the old paradigm of ‘paternalistic’ health benefits to the new one characterized by personal accountability; and two, to further customize and ultimately transform the care management done by the vendors. With a new team taking shape and forty terrific companies now part of EH, we see  a lot of opportunity to stay ‘oriented’ amidst the overload and significantly improve on our already strong results in health improvement and cost control.