Welcome to The Contrarian

By Andrew Cavenagh
April 29, 2022

Nothing kills the vibe of a cocktail party faster than a monologue about health insurance. At least, that’s what people keep telling me. At cocktail parties, mostly.

But what am I supposed to do, just not talk about health insurance?


That’s why we’re setting this blog up. I need a place to share the information I keep coming across and my commentary on it, and my friends and neighbors need some peace and quiet. I’ve had some things on my mind recently. Four things, to be precise. These are the biggest factors that are going to affect self-insured employers for at least the next year, and too many people are ignoring them at their own risk.

1. Talent Pool

Almost every employer is struggling to attract new talent, and the fierce competition among them has shifted the focus of benefits. Today, the need to both attract and retain outweighs conventional cost considerations. As an employer, you have to double down on what your employees really want: mental health, virtual care, flexible schedules, maternity benefits, infertility treatments, and the list goes on. If you think you can offer a health plan “benefit” with a $50,000 deductible, $500,000 out-of-pocket maximum, and minimal employer contribution, then you have a serious shock waiting for you sometime in the next year. Probably not just one, either. These luxe benefits aren’t going anywhere, either. Still, you have to focus on the basic economics of the situation. As employers are expected to deliver enhanced benefits and higher salaries, they need to look for ways to offset the increase in costs. Expect many organizations – especially the fully insured – to start looking for greater efficiency in paying for health benefits. This is going to spur demand for creative solutions like employee benefit captives, pharmacy benefit managers (PBMs), and level funding.

2. 2023 pricing

Just as no conversation with a Philly sports fan can go on too long without mentioning Santa, no discussion of healthcare or health insurance can afford to ignore upcoming price increases. I can say with certainty that health insurance costs will rise. What makes me so sure? Basic mathematics and a pair of open eyes. There are two big issues facing us right now that are going to have a material impact on 2023 prices, whether you’re fully insured or self-insured. The first one is inflation. Healthcare inflation has been clicking along at 5-8% over the last decade, with stop loss increasing two to three times due to leveraged trend (the phenomenon where large claims grow exponentially faster than the underlying claims). If we see increases in the underlying costs in healthcare, such as for medical devices, durable medical goods, and labor, then we can expect healthcare costs to increase. The second one is emerging gene therapy. We may see as many as ten new gene or CAR-T cell therapies hit the market in 2022 alone. They have incredible medical potential that may reduce costs in the long term, but the ironic part is that life-saving therapies come at heart-attack prices.

3. The Long Shadow of COVID-19

As the virus recedes, healthcare will gradually return to normal. But that means the costs of deferred elective medical procedures have to be absorbed into the healthcare system. (I don’t know about you, but I would have preferred it if my recent colonoscopy had actually been “elective.” I wasn’t the one making the choices there.) While there will be an increase in these more minor claims, we expect them to be offset by fewer catastrophic COVID-19 claims.

4. Consolidated Appropriations Act (CAA) of 2021

The Consolidated Appropriations Act of 2021 requires that brokers and consultants disclose any direct and indirect compensation they receive that is directly related to a health plan. The self-insured space is already so transparent that we aren’t expecting a dramatic impact. The ones who do have to worry are those in the fully insured market, especially when many brokers receive additional compensation (“overrides”) from insurance carriers. The CAA will hit a group I call the “knucklehead” insurance brokers. They’re the ones who are reading this and shedding a single tear over the fact that they won’t be able to collect two fees for the enormous task of updating a spreadsheet once a year, quoting exactly the same companies that all their competitors sell. Let me get you a tissue. Don’t get me wrong: if you have expertise, strategy, an ability to see the field, and are driving value, then you deserve to be well-compensated for it. You’re not the one I’m talking about. But if you’re just a glorified country club golf buddy with a spreadsheet in one hand and a bill in the other, then your time has come and gone. Smart employers want a thoughtful partner who is ready to roll up their sleeves and fight the good fight – and they are more than happy to pay for it.  

Phew. Thanks. I needed that. My next cocktail party is safe.

I’ll be back soon.

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