Thought Leadership

Why is health insurance so hard for small businesses?

In a recent webinar, co-founders Ross Klosterman and Brodie Stone discussed the next six months for small businesses, the ways in which health insurance is hurting the people it is meant to serve, and how modern health plans can save both employers and their employees money while providing top care. 

Below is a transcript of the webinar, edited for clarity and length. 

Ross Klosterman:

I'm actually going to start off with a pretty sobering statistic. Most small businesses, 80%, think there's going to be a recession this year. It’s not surprising, given COVID-19, 10% inflation, and skyrocketing interest rates. That said, I know small business owners are tenacious and gritty. I'm the son of one such tenacious small business owner – my mother. 

The next six months are going to be critical to position your business to remain a viable entity and succeed. And it shouldn't be surprising that employees are going to increasingly demand better benefits to make up for what they might be losing elsewhere.

But with health insurance already such a large expense for both companies and their employees, what are you really able to do? Health insurance can take up 10 to 15% of operating expenses, 10% of an employee's income – and that’s before you factor in tax devoted to health insurance premiums. You're not really getting a lot for what you're paying for.

From what we're seeing from the current enrollment season, employers are now facing up to 45% premium increases, and a low end average of 10 to 15%. Despite this, deductibles, out-of-pocket max, and cost sharing is still increasing. But effectively there is a balance that shifts and when employees are left holding the bag again, it results not in employee shopping for care and healthcare costs getting lower, but an avoidance of care and over the long term, higher healthcare costs. It's a vicious circle that repeats year after year. And it's worked for the past decade because we started out at such a different place than where we're at today. But we're at this breaking point.

I pulled the following screenshot from Columbus, Ohio this morning. This is for statin, a commonly prescribed drug that should basically cost almost nothing. But you see here that there's a 10x difference in price depending on if you go to one pharmacy or another. Imagine you're going to the grocery store and you pulled two cans of beans off the shelf. One was $3 and one was $30. That would be unacceptable. 

The same thing happens with medical services, but it’s also how we're functionally able to do what we do. We exploit the pricing and quality variances or differences, that can vary much more than a pill that should be the same everywhere you go. People care if they go to a high quality physician, but a statin is a statin is a statin.

These are prices from Ohio today of a knee replacement. If you think about it on a high deductible plan, you're just going to hit your max out of pocket for each one of these three. If it’s $5,000, you’ll pay $5,000 no matter where you go and you really don't have objective quality data to help you make that decision. 

The magic is with us, we can tell you exactly what you're going to pay for any service ahead of time, not weeks or months later. All of this to say - for the first time, people can be actually incentivized to go to the high value doctor. Over time, that results in lower total cost to the plan – and when that happens, the plan can lower the premium.

Our plans have no deductibles. Co-Insurance does not exist. We have copays and a max out of pocket and that's it.

Ultimately, we’re looking to change the fact that today employers are effectively forced to choose between subpar or in some cases bad health plans that then result in employees having to sacrifice the care that they need. Something needs to change radically, and that's what we're trying to do. With that, I will hand it over to my co-founder Brodie.

Brodie Stone 

Thank you, Ross. The main theme that we hope to communicate is how all of this actually impacts your employees and just about everybody, because we all are interacting with the healthcare system. My goal today is to talk a little bit more about what we do to actually improve and solve these key issues that are facing employees as they navigate healthcare with their health insurance.

Like Ross described, premiums are skyrocketing – and even if there is a year where they haven’t, it's normally because of a big change in deductible or a very low utilization of the health insurance plan.  Employees that are struggling with chronic conditions are having a hard time affording the care they need. 

Small businesses with small HR teams aren’t necessarily resourced to build a health insurance plan from the ground up. And that's where we come in.

As a result, we have four pillars:

  1. Transparent costs. You normally have to wait 30 or 60 days – sometimes six months – before getting a bill in the mail. We designed our plan such that members can know their full out of pocket costs down on what they're going to spend before they go get the service that they need.
  1. Advanced primary care. We pull and integrate what we call advanced primary care directly into the core of our plan. What this means: you’re paying a primary care physician a monthly fee instead of them being reimbursed by insurance. As a result, these physicians normally can spend more time with their patients. They offer a wider range of services within their four walls. We encourage more than a yearly visit so members can be proactive with their health and have a doctor easily accessible. 
  1. Independent pharmacy benefits. Ross’s example with the statin shows how varied pharmacy prices can be. Right now pharmacy is 25 to 30% of total healthcare spend and is a key driver of premiums year over year.This is in part because the pharmacy benefit is normally tied to the insurer. We partner with an independent pharmacy that aligns themselves with members and is truly incentivized to lower costs. 
  1. Concierge member support. We have our own Member Navigation team. They're working day to day with our members to help them make decisions about their healthcare and see the providers they want to see. 

It’s important to us that small business owners are not feeling responsible for doing and understanding all the components of a health plan and managing it by themselves. We're your trusted partner throughout the year. We support members and employers, starting before the plan even goes live. And because of how our plans are designed, we can give in-depth reporting to employers. We can help them make decisions about coverage to add or take away, and to make sure the plan is optimized. 

Lastly, I want to share an example of a 75 person employer in Ohio. With a Poppins Health Plan, they were able to save more than $250,000. And in the first three months of the plan year, their members have saved more than $10,000 in out of pocket spend. We also were better able to engage their employees in the plan, especially folks that are chronically ill that have either been going to the wrong doctors or haven't seen one in years and actually get them accessible care. You don’t have to decide between taking care of your people or taking care of your business – it’s now possible to do both.  


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