FORBES: Health Benefits Experts Pen Open Letter To United Technologies: Try This Before Moving to Me
Dave Chase, FORBES Contributor
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A recent Washington Post article entitled “From Belief to Resentment in Indiana” pointed out another example of what has been fueling populist presidential campaigns. In this case, United Technologies UTX +0.18% has announced plans to move jobs to Mexico to save on employee costs (wages and benefits). Meanwhile, I have been doing site visits and interviews with business, municipal, education and union leaders in the DIY health reform movement. Forward-looking employers and unions consistently are saving 10% to 30%–$1,800 to $5,400–per employee on health benefits. Notably, they are doing this while improving access and health outcomes.
United Technologies has 70,000 employees and 85,000 family members receiving benefits. Using rough estimates, that means they are likely spending about $1.25 billion on health benefits for employees and their families. When I read the Washington Post article, I wondered what a benefits Dream Team–healthcare professionals who are acknowledged by their peers to be highly innovative–might determine that United Technologies could do, based on a review of their available plan details and what they submitted to the Business Roundtable.
Several members of the Dream Team were in attendance at the annual Florida Health Care Coalition (FLHCC) where I was asked to keynote the conference to highlight the the incredible things that have happened in Orlando, Kirkland, Tulsa, Pittsburgh and many other places. During the talk, I highlighted how one of the great myths that persists in healthcare is that employers can’t control health benefits costs other than with blunt instrument cuts. The FLHCC head, Karen van Caulil, also the chairman of the National Business Coalition on Health, is leading a revolution in Florida to show a better way. The event was appropriately held at the Rosen Shingle Creek Resort. Appropriate because Rosen is saving 55% per capita versus a typical employer, and these savings have given them a competitive advantage and made an amazing impact on their community.
The task I put to the Dream Team was to make the business case to United Technologies’ CEO and their union leaders about taking an alternative approach to closing the factory in Indiana. There is no doubt that there is a healthcare crisis. As they say in politics, a crisis is a terrible thing to waste. As we’ve seen in Pittsburgh, labor and management have put aside the tired old assumptions and recognized that they have a shared interest in getting healthcare costs under control.
The following are members of the health benefits “Dream Team” I assembled for this task who have each directly or indirectly contributed to the Health Rosetta blueprint for wise healthcare purchasing:
Tom Emerick has been a longtime benefits executive at large employers and co-author of Cracking Health Costs. Among his innovations was the creation of a Centers of Excellence for complex and high-cost procedures such as organ transplants, neurological surgery, etc. These outlier claims can represent a disproportionate share of employee healthcare costs. Once available only to the largest corporations, Edison Health makes this unique program available to any self-insured employer.
Brian Klepper was recently the CEO of the National Business Coalition on Health before becoming a founder of HealthValueDirect, which is assembling best-of-breed solutions for self-insured employers. He’s been a longtime prominent voice of practical health reform and has championed reform of flawed reimbursement schemes in DC and beyond.
Jim Millaway is a senior consultant with HUB International and innovation lead at The Zero Card. He was previously highlighted as one of America’s most innovative benefits leaders, in part due to his work productizing one of the first Transparent Medical Markets, which have solved healthcare’s most vexing problem.
Adam Russo is the cofounder of the Phia Group—a law firm dedicated to health plans. Few, if any, firms write more ERISA plans for employers. Russo speaks nationally as he highlights the many ways employers are needlessly squandering shareholder and employee resources.
Stan Schwartz, MD, has been medical director of the largest private medical clinic in Oklahoma as well as being the leader of WellOK, the business coalition on health for Oklahoma. Schwartz has also been a leader in the Comprehensive Primary Care initiative. He’s now chief science officer for The Zero Card.
Tim Thomas, R.Ph., is the president of Crystal Clear Rx, a pharmacy benefits consulting and research company. Crystal Clear Rx provides large and small self-insured employers, Taft Hartley Trusts and business coalitions with analytics and monitoring of their PBM relationships.
[Disclosure: As I've disclosed many times, the Health Rosetta is an open-source project that provides a reference model for how purchasers of healthcare should procure health services. In my role as managing partner of Healthfundr, a seed-stage venture fund, the Health Rosetta is the foundation of our investment thesis.]
Text of the open letter to United Technologies, their union leaders, employees and shareholders:
To the leaders and stakeholders in United Technologies, we draw on our collective 170+ years of experience as purchasers of healthcare services and advisors to employers and unions. As such, we fully empathize with the predicament healthcare has created for organizations such as United Technologies.
Dickens’ quote from the Tale of Two Cities is apt for healthcare today—
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair…
Today, we have a tale of two healthcare systems. The status quo healthcare system has done more to devastate the middle class and America than any other single thing. Those of us who are part of the Health Rosetta DIY health reform movement see what is possible when the full potential of all of the talent and resources of healthcare is pointed in the right direction. The impact is dramatic at the human level; however, we recognize we must all be mindful of the bottom line. Fortunately, the financial results make it a no-brainer to move into the next generation of health benefits.
From school districts to hoteliers to manufacturers to cities to unions in all parts of the country, the opportunity has been a game-changer. We recognize the pain our fellow citizens feel when a community like Huntington, Indiana, is going to potentially lose its largest employer. Because of this, we offer to offer our services to the community and workers in Huntington to have it become a demonstration project for the entirety of United Technologies.
With 155,000 covered lives (70,000 employees + 85,000 family members) the readily achievable savings from a next-generation benefits plan would translate into annual, recurring savings that far exceed the cost benefits of shifting production to Mexico. While some of United Technologies’ jobs can be shipped abroad, many can’t, so gaining the learnings from Huntington can be spread organization-wide. Based on our experience, we have seen employers implementing the approaches we recommend achieve $3,000 to $5,000 in annual, recurring cost savings per employee. For an organization with over 150,000 covered lives, implementing highly achievable health benefits optimization translates to well over $370 million savings per year if you assume a 10% savings Y1 and 20% Y2-Y10. Add in a 4% inflation factor and the savings program could potentially yield approximately $2.8 billion in the first decade.
We have seen some employers spend 50% less than the average employer; however, we have used 10-20% as a conservative starting point. Time and again, we have seen that it simply takes will and leadership from both labor and management to make it happen.
We stand ready to work with our fellow citizens to help turn this crisis into a great opportunity for both the community of Huntington and United Technologies. Please contact us.
Dr. Stan Schwartz
When another division of United Technologies announced it was moving jobs to Mexico, the presumptive Republican nominee had the following to say:
I’m going to tell the head of Carrier: “I hope you enjoy your stay in Mexico, folks. But every single unit that you make and send across our border, which now will be real, you’re going to pay a 35% tax.”
You have to take notice when a Republican nominee is talking seriously about increasing tariffs. It can’t be chalked up to just something that a candidate like Bernie Sanders might propose. One of the reasons companies have shifted jobs abroad due to healthcare costs is not only their heavy cost burden but their unpredictability. One doesn’t have to look any further than the current presidential campaign to see unpredictability in action. With Clinton moving to the left, Trump talking about slapping tariffs on foreign goods and Sanders railing against NAFTA, it would seem unwise to assume that the status quo on trade will persist.
Likewise, forward-looking organizations have proven that they not only can they get healthcare costs under control, they can turn them into a predictable expense. It’s only a matter of time before activist shareholders realize that corporations are failing in their fiduciary duties to manage what is typically their second biggest cost after wages (health benefits). There is an opportunity to get ahead of that. Times change and so should approaches to healthcare that have failed in the past. Let’s hope the United Technologies executives seize this incredible opportunity. It’s time they expected as high a performance out of the healthcare system as they do of the United Technologies workers.
As I speak around the country, there is a growing recognition that the U.S. has gone to war for a lot less than what healthcare has done to America. The insidious effects of healthcare’s hyperinflation has been a sneak attack. It’s interesting to see the awakening to the fact that there has been a redistribution “tax” from the middle class to special interests within healthcare. Forward-looking leaders in cities are realizing that the best way to combat this is by slashing healthcare costs by improving health benefits. As employers themselves struggle with constrained budgets, cities and counties are leading a metropolitan revolution that I describe in my talks as economic development 2.0–playing the healthcare card. As a small manufacturer in Oklahoma proved once again, healthcare’s biggest lie is that employers can’t do anything about healthcare costs.
Huntington mayor Brooks Fetters has on his campaign website economic development as the first priority he highlights. The opportunity for the leadership of the communities that are threatened by job losses is recognizing that the way out of this crisis isn’t with a right solution or a left solution, but an American solution. The fact is that mothers are the true foundation of health in this country–not special interests in healthcare. It’s powerful when the Mama Bear instinct kicks in for these mothers. Gallup Chairman Jim Clifton wrote about the fact that we’re in “World War III,” where healthcare is the biggest front in that war. The “Rosies” of this war realize they need to call and write their mayors and elected officials. Many of these Rosies are also business owners, HR leaders and civic leaders that can drive the change through their own actions. They aren’t willing to roll over to special interests threatening their businesses and families. They realize that special interests have intentionally made them feel powerless to solve what is actually quite solvable. Forward-looking mayors around the Midwest are the manufacturing bedrock of the country. The leadership opportunity for them couldn’t be more clear. The only question is which ones will step up.
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