The Other Golden Rule: He Who Has The Gold Makes The Rules

The current healthcare system is working, it’s just not working for employers and employees. If you’ve been to the hospital in recent years, you know exactly what I’m talking about. The costs are out of control. But with the ‘other Golden Rule’ hospitals can charge whatever they want – there are no laws, limits, or regulations to control their charges.

I was talking to a former hospital CEO recently, and their method of budgeting was to determine how much revenue they wanted to make the following year, and then have every department work through their own budget to accomplish the revenue objective.

The current healthcare and health insurance system is in fact working for those two industries, just not the consumer. Insurance companies want to tout their large PPO discounts in order to compete with one another. The problem is that hospitals and other medical providers simply raise their prices to offset these discounts. It’s funny money – smoke and mirrors; the discounts are so watered down with increased prices that they’re rather meaningless.

The healthcare and health insurance system is so misaligned it’s unbelievable. Then, enter an insurance broker who’s getting paid by an insurance company to sell their product to an employer which in turn is tied to healthcare providers that continue to increase their prices. Wait! What?

The real alignment starts with an employer being aligned with the needs of their employees – providing choice and less expensive programs and options. Next, alignment means that the employer (including HR) is aligned with a knowledgeable broker or consultant who’s not getting financially fed by an insurance company. Financial incentives to sell an insurance company’s product are very significant and are usually not disclosed. If the broker is aligned with an insurance company to sell their product (which is the predominate method today) then don’t expect costs to go down.

The broker and HR should be incentivized to bring real cost-effective solutions to the employer and employee. To the extent that they can cut costs – reward them in some fashion. Brokers should be paid on a fee basis, and a reasonable one at that, which requires full disclosure and transparency – no hidden direct or indirect commissions, fees, bonuses, or overrides. The recently enacted Consolidated Appropriations Act (CAA) requires this. It also requires plan fiduciaries to responsibly request the information from their broker or consultant.

Change must occur, and it begins with the employer and the broker getting on the same page. It can’t be simply going out every year and shopping for a new insurance company – that’s just the Definition Of Insanity. Employers must do their due diligence in selecting a broker or consultant in asking the right questions. The first question to ask is “how much of your revenue comes from insurance companies”? That’s enough to begin the conversation and understand if the broker wants to maintain the status quo.

There are plenty of other questions to ask, but the reality is employers don’t know what they don’t know. If you want to know what questions to ask, please reach out to me at

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Frank Stichter