Andy Neary explains why CFOs struggle with healthcare costs: insurers are misaligned by the Affordable Care Act's Medical Loss Ratio rule, the system still runs on fee-for-service, and medical ID cards work like unlimited credit cards. Anthem's stock jumped the day the rule passed.
Questions this video answers
2010
$56
$40,000
20–25%
Chapters
And here's the challenge every CFO faces today. Number one, health insurance companies are misaligned. And we know this because the Affordable Care act, right? In 2010, when it became law, we had this rule known as the medical loss ratio rule. And the medical loss ratio rule simply said for every dollar a carrier brings in, it has to spend a certain percentage on claims, right? If it spends anything less than that, they have to give money back. Now, back in the day, I don't know about you guys, I remember giving checks back. Ain't happening anymore. You know why carriers stopped caring? They said, hey, if we let claims go over that percentage, we don't have to give money back. And at that point, they stopped caring. And we all know this. We can validate it with stock prices, right? I know. Anybody see my video the other day about how to accurately show the stock Prices? Anthem was 56 bucks on March 23, 2010, the day the Affordable Care act came out yesterday, I think it closed at about 250, 260. They're doing pretty well. Second challenge you face is the healthcare system is misaligned, right? Most of the system today is still fee for service. They get paid for what they do to you and how much they do to you. They're arbitraging against you. Their wholesale cost is here, and they're charging you this. And you, Mr. CFO, Mrs. CFO, live in the world of arbitrage, and you're trying to do the opposite.
And then the third challenge you have is, I don't have it on me. Is the medical ID card. Every year you hand that medical ID card out, it is nothing more than an unlimited company credit card because you give your clients, your employees, excuse me, an access to a PPO network, and they can go wherever they want and spend whatever they want within that network. And here's the end result. Right now.
You think the only three ways you have been taught, the only three ways you can save health insurance costs today is by shopping the carriers, increasing deductibles and out of pocket limits, or just asking your employees to pay more. And here's the problem with that. Right now, your employees on average are making $40,000 a year. And with their deductible, their out of pocket, and their premium, that accounts for 20 to 25% of their growth. Take home.
