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By 2025, 38 Percent of State & Local Budgets will be Consumed by Healthcare

Do you ever wonder why so many of my blogs are about healthcare? It’s actually quite simple. The healthcare ‘problem’ is constant, unbridled, unsustainable, frustrating and largely because it is covered in green – money green.

The cost of healthcare has been, and continues to be, the bane of existence in our lives. It has become the new ‘weather’ in our discussions, as most everyone talks about it, but very little has been done to change it.

Another example of just how dangerous healthcare costs have become was recently reported by Fitch Ratings, a financial information services organization with operations in more than 30 countries. Their analysis states (suggests) that rising health insurance costs and retirement rates will increase budgetary pressure on U.S. state and local governments – which will adversely impact their financial ratings.

Developing their own 10-year scenario analysis for state and local budget allocations, Fitch assumed that healthcare and pension expenses would continue to grow rapidly while no policies would be implemented to offset this growth. From this, Fitch found that healthcare and social services would increase from annual budgets of 27.6 percent in 2005 to an estimated 38.3 percent by 2025. Consequently, budgets for state and local spending for education, transportation/public safety/environmental and housing would each decrease, largely due to being crowded-out by growing healthcare costs.

Inaction during this time (2018-2025) by local and state policymakers and administrators will only cause this problem to fester – the proverbial “can being kicked down the road” for later generations to tackle. State and local budgets cannot afford this to happen, not now, and certainly not in the future.

One need look no further than what is happening in our public-school systems here in Iowa and around the country. Paychecks for teachers have become skimpier, causing school teachers, students and supporters to strike. A recent story by Kaiser Health paints a very realistic picture of what Fitch’s findings reveal for our state and local communities in the months and years to come.

On top of the Fitch analysis, a PricewaterhouseCoopers report on employer-sponsored healthcare projects a six percent medical-cost growth in 2019. Although this growth rate is similar to the past five-year trend in medical cost growth, it nonetheless continues to exceed the annual consumer price index (CPI). This presents the “unsustainable” cost paradigm for consumers and employers who foot the majority of the medical bills through higher premiums, deductibles and charges. Having access to healthcare remains important, but so too, are controlling the cost of the care received. Healthcare prices are largely opaque, requiring a persistent push for price and outcome transparencies that have so far eluded the healthcare industry.

As far back as 442 B.C., Sophocles expressed the message don’t blame the person who brings bad news. With that said, hey, I’m only the messenger – don’t shoot me!

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The Iowa Employer Benefit Study© – An Iowa ‘Natural Resource’?

This week, Data Point Research (DPR), the research organization that I have partnered with for over 20 years, will send out the first invitations to Iowa employers to participate in this years’ Iowa Employer Benefits Study©. I’m looking forward to learning what this year’s findings will reveal to us – especially after taking a one-year sabbatical in 2017.

This study has become a two-decade ‘project’ for DPR and myself. In 1999, the first year of this study, I contacted Andrew Williams, president of DPR, to learn how we could conduct a randomized survey that would provide the necessary methodologies to reflect results of the entire employer community in Iowa. Taking this approach, we felt, was the safest and most efficient method to survey enough Iowa employers WITHOUT having to survey them all. DPR has proven to be a trusted partner to extract the benefits information. And, from this work, Iowa employers have come to depend on our annual results to benchmark their benefits with other similar employers.

Benchmarking our survey results continues to serve as a top tool used by leadership in Iowa organizations. It supports informed decision-making when identifying cost-effective employee benefits. Benchmarking helps:

  • Human Resource and finance leaders make benefit choices with confidence, and track progress over time based on using empirical evidence, rather than ‘gut feel’ or opinion.
  • Provide clear evidence of opportunities for employers to improve on cost-effective employee benefits, given the size and industry in which employers operate.
  • Place employers ahead of the pack on trends that develop in the Iowa marketplace.

The industries we track for employers are varied. Depending on the number of survey responses, the industries may include:

  • Overall – All industries combined
  • Finance, Insurance and Real Estate
  • Government and Public Education
  • Healthcare and Social Services
  • Manufacturing
  • Retail
  • Other Services
  • For-Profit only
  • Not-For-Profit
  • Government Only – Bargained
  • Non-Public – Bargained
  • Public Schools – Bargained
  • Trucking

We also distinguish results by employer-size (based on number of employees), because, after all, size does matter a great deal when it comes to breadth and scope of employee benefits.

The Iowa Study has been particularly relevant to Sue Bennett, compensation and benefits manager at Kirkwood Community College. Sue recently commented:

The Iowa Employer Benefits Study© has been extremely valuable over the years in reviewing the competitiveness of our employee benefits package. Other benefits studies provide data on a nationwide basis, but having data specific to Iowa is more useful. The most beneficial aspect of the survey is the ability to extract data based on industry type and size.

I have always believed in the importance of having empirical evidence to share with benefits consultants and their employer clients. Most recently, I received another ‘testimonial’ from John Monaghan, partner at PDCM Insurance, a Waterloo benefits consulting organization. Over the past decade, John has loyally applied our study results with his clients by using our benchmarking data to successfully guide them through the benefits decision-making strategies he employs.

If you are a benefits consultant or Human Resource professional, the Iowa Employer Benefits Study© should be considered one of Iowa’s best natural resources. For over 10 years, my clients have used the data in the study to develop benefit programs without guesswork. So often, benefit decisions that cost millions of dollars are made with a gut feel. This study provides the data to take the guesswork out and make sure every invested dollar counts. It provides the information to build a True benefits strategy.

John finished his comments with this:

My clients have made the adjustments to better attract and retain employees through the data provided by this study.

I am truly humbled by Sue and John’s comments. To me, ‘natural resources’ are items that people can use which come from the natural environment, such as oil, natural gas, other minerals, soil, forests and timber, etc.

When people, who are unfamiliar with my work, ask what I “do for a living,” I will sometimes jokingly tell them that I am both an “archaeologist and inventor.” They will then quizzically look at me and ask, “How so?” My response is simply, “I’m similar to an archaeologist because I dig for items that are not readily available for the public to find, and I’m like an inventor, because once this treasure has been found and exposed, I convert it into something usable for others.”

A natural resource for Iowa? I’m unsure about that, but my gloves are now back on my hands and I have begun the digging process to unearth the next treasures buried below the surface. Stay tuned as to what we may find!

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Iowa Employer Benefits Study© Returning in 2018

Many of you are aware that I took last year ‘off’ from conducting the annual Iowa Employer Benefits Study©, and instead, focused on how Iowan’s perceive the care they receive from Iowa caregivers – now known as the Iowa Patient Safety Study©. This off-the-road ‘excursion’ allowed me to focus on a subject (patient safety) that I’ve been keenly engaged in since the 1990s.

As a benefits consultant, employers would often ask me about what can be done to keep medical costs more affordable. Avoiding harmful medical errors was certainly one approach to help cross the cost ‘chasm,’ in addition to increasing the quality-of-care we all expect to receive, but often do not. Needless-to-say, we must not take our eyes off this ongoing public health crisis.

This year, we will undertake our 19th annual employer benefits study. Unlike previous surveys, where we have typically alternated years on surveying certain benefits (e.g. including group life, short-term and long-term disability coverages, but excluding paid time off and traditional leave components), we will include ALL key benefits offered by Iowa employers in the 2018 survey, including:

  • Group Life
  • Group Short-Term Disability
  • Group Long-Term Disability
  • Paid Time Off (PTO) and components
  • Traditional Leave components
  • Group Dental Coverage
  • Consumer-Driven Health Care components
  • Group Health Coverage
  • Do Employers Offer:
    • Health insurance for domestic partners
    • Retiree health insurance, pre-65 years
    • Retiree health insurance, 65+ years
    • Vision Coverage
    • Flextime
    • Employee premiums deducted pre-tax
    • Dependent care flexible spending account
    • Medical care flexible spending account
    • Wellness programs

As in the past, we plan to randomly survey at least 1,000 Iowa employers from a variety of sizes and industries. Doing so will allow us to benchmark employers against similar employers. As a side note, I was amazed at just how many employers reached out to me asking about the 2017 study and whether they could participate in the 2018 survey. This study appears to have a lasting presence and value for many Iowa employers!

If you happen to be an employer who was randomly-selected to participate in this year’s survey, we would greatly appreciate you taking the time to share your confidential data with us. Please know that your information will only be used on an aggregate basis and combined with data from other participating employers.

Though I was never really ‘gone’ from performing the benefit study, it is great to be ‘back’ working on a new survey that will provide insight on what changes have taken place since our last study in 2016.

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