Interview, HSAs, Health Care Agent - Interview with Greg Datillo, Underwriter of the Year In Minnsota and Co-author of Why Health Care Costs So Much

Prelude: The time is long overdue to consider the role in health reform of agents, brokers, and third party administrators who grease the sleds and seek to make health care work from the bottom up. These agents, after all, sell the health care policies that most employed Americans use, and at their point of view is vital if we are to make health care work at the local employer level. Employers supply nearly half of health benefits for U.S. citizens.


Backdrop
Q: What is your official title?

A; Owner of Datillo Consulting and ClientServe.

Q: And what is the nature of that company?

A: We do employee benefits for employers, and we administer those benefits. I prefer to be called an agent, since the insurance company is the underwriter.
Q; Give us a little background of your education, where you live, and how you came to be who you are.

A: I have a family of three adult children, and the same spouse for 30 years who made me who I am. I went to the Univesity of Wisconsin Stout, and I earned my CFL (Certified Financial Planner) degree in 1986, and in 1992 I earned from the Wharton School of Business a degree as a Certified Employee Specialist and became a Fellow a year later, and I’ve been a Fellow ever since.

Q: What do you do in the course of your day?

A; My job is to insure the uninsured. Find people who don’t have insurance and make sure they get insurance. And I also want to make sure the doctors get re-imbursed at the private market rate rather than the low government-subsidized rate.

Point of View and Mindset

Q; You and your close associate, Dave Racer, a publisher and writer, recently published a book Why Health Care Costs so Much. The subtitle is The Solution : Consumers. From this I gather you favor a market-driven rather an government-driven solution. Would that be fair?

A: No doubt, no doubt.

Q: With that mindset, I’m sure you’re in synch with consumer-driven care, as manifested by health savings accounts linked to high deductible plans.

A; Yes, because it gets consumers engaged in communication with physicians. And it keeps physicians on their toes in regard to different options. To get from point A to point B, there is usually more than one way to get there. If consumers are given options, and picks their option, the chances for success are much greater because they think of it as their idea.

Presentations

Q. When you go into give a presentation, to whom do you present? Who is in the room – the employer and the employee?

A: Both.

Q: What do you tell them?

A: I give them a dual option. They can pick the traditional option, an HMO or PPOs, or they can consider high deductible plan , usually linked to a health savings account. It’s essential for the employees to feel they are part of the decision-making. Take it or leave it doesn’t work. It’s up to you – which way do you want to go is much better psychologically. America is a land that covets freedom of choice, and we give them a choice.

Track Record
Q: When you go out to sell an HSA with a high deductible, what’s your track record? And when they have it a year, do they return to it.

A; Right now, we have something between 120 and 130 employers with high deductible health plans. That’s out of 180, and we are now in our fifth year. And not one employers has ever gone back to the old traditional model When you offer it to an employer with less than 50 employees, after three years, nobody has ever returned to the old HMO or PPO.

The Right Way and The Wrong Way

Q; What is your secret?

A: There is right way of setting up these plans, and there’s a wrong way.

Q: What is the right way?

A; The right way is to tell the employee we don’t care if you take the traditional plan or the new plan. The payroll reduction to pay for the premium is exactly the same. Consumers can buy a $20 office visit plan with an 80/20 hospital component, or they can buy a $2500 deductible with 100% after that. Consumers invariably ask: Why would I buy a $2500 deductible plan? The reason is your employer is going to give you between $1000 and $1500 in your HSA account.

Q; Is it customary for the employer to chip for the deductible?

A: In all of our plans, yes. That’s the right way. The wrong way of doing it is to tell the employees you can take the HMO or PPO, and it’s going to cost you $50 a paycheck. Or you can take this high deductible , and it will only cost you $10 a paycheck. That’s wrong because the employee never puts $40 into their HSA.
We tell the employer to stay neutral but to put back the $40 into the employee’s HSA. If you pay the insurance company $100,000 for an HMO or PPO plan, you will save $40,000 with a high deductible. But instead of pocketing the $40,000, give it back to the employee in their HSA.

Reaction of Employer

Q: And what has been the reaction of the employer?

A: Usually when we start these things, the employer is neutral between the traditional and HSA plan. Let’s say the HMO costs $100,000, and the HSA plan costs $60,000. The employer is going to charge $20,000 to this employees. So if the premium is $100,000, and the employee gives $20,000 out of payroll reductions to the employer, the net cost to the employer is $80,000.

Now if the high deductible health plan cost $60,000, and the employee is still going to pay the same amount, the $20,000, the net cost to the employer is only $40,000, compared to the $80,000, we tell the employer to give $400,000 back to the employee so the employee see it as a pay raise instead of a pay decrease. So we tell the employer, don’t get greedy. Instead of paying the traditional plan for overutilization, give the money to the employee and let them spend it.

The Other Side of the Coin

Q: Let’s look at the other side of the coin – the critics’ side. The critics say what’s good for the employer is bad for the employee. It’s a win-lose because the employer is saving money, and the employee is having to spend hard-earned dollars out of pocket. But you say it’s a win-win.

A: It is a win-win because the employees determine what they want to do. If the employer does it the right way, the employee understands the high deductible health plan with the employee giving them cash in their health savings account.
It’s a much better solution because the employee now has control of the money and now they start asking what things cost. The employer understands now he is turning employees into consumers instead of entitled employees who think there’s an endless amount of health care that somebody else should pay for it.

You have to shift the employee mindset, and you do it with dollars. The whole mindset changes overnight. Employees will suddenly say when shopping for care. Wow! I didn’t know it costs this much. Wow! They start buying generics rather than brand names.

Q: Are employees willing consumers? Do they resent spending their own money?

A: No, because they see it is the employer’s money because the employer is putting money into their account. With the HSA plan, you’re better off because the maximum out of pocket is only $1250 because they employer is putting in the other $1250 – even if your operation or illness episode costs $50,000, or even $100,000.

HSA Critics

Q: Now let’s go into the more rarified, ethereal world of the policy wonk critics.
Let me sum up what they’re saying. I just read this in a recent Health Affairs article by Paul Ginzberg of the Center for Studying Health System Change and Jamie Robinson, a Professor of Health Policy at the University of California in Berkley. They say health savings accounts with high deductibles favor the healthy and the wealthy, are inadequate for those with chronic disease, cause ill patients to quickly wipe out their savings accounts, delay treatment because HSA-holders are reluctant to part with their own cash, motivate patients to forego preventive tests, and because of these factors and employee skepticism, the growth of HSAs has been “anemic.” What do you think about these policy elites? Are they living in a different world?

A: Look, Minnesota, a liberal state, has more HSAs per capita than any other state. Furthermore, because of reduced hospitalizations, nurses are being laid off. I think this is because people are becoming much better consumers. They are not rushing into the hospital like they did when they thought care was free. Further, Minnesotans are still in the top two in life expectancy. Minnesotans are now going to WalMarts and Target to get $4 prescriptions People who are criticizing HSAs may be influenced by those who have been price gouging consumers.

Q; I doubt that, and I don’t think you we can attribute that long life expectancy to HSAs, which are only five years old. Life expectancy is related to the culture, genes, and lifetime of behavior. It’s more likely critics deeply believe in health care as in entitlement. Other than getting rid of entitlement syndrome, what are you arguing?

Asking What Things Costs is a Powerful Antidote to Bringing Down Costs

A: All we’re asking is for people to ask: How much do things cost? You can’t judge quality until you know the cost. That’s what starts useful conversations with doctors when they ask: How much does this cost?

Q: For consumers, it’s not only what it costs in general. It’s what does it cost me?

A: Right, and asking those questions is how you create affordable health insurance. That’s how I would answer the critics – HSAs create affordable insurance by creating cost awareness among those spending their own money and the money of their employer . I have yet to see an employer or employees turn back the clock to traditional plans once they understand how fast the cost clock is ticking.

Chronic Disease

Q: Let’s take the example of diabetics. There are 20 million diabetics, and they spend three or four times more than non-diabetics. Do diabetics complain about HSAs?

A; I can tell you this. At our first meeting, we get 30% to 50% to sign up for the high deductible plan. The second year I say : Everybody who has an HSA please raise their hand and tell me if you are having trouble paying claims?
Seldom do I hear diabetics or others with chronic disease complain. With HSA Bank and other HSA companies, filing claims is all electronic. It’s easy. There’s no paper, no filing claims, no fuss.

I ask non-HSA workers to talk to HSA-holders, and before you know it, by the third year we have between 90% and 100% participating in the HSAs. I agree with the critics if HSAs are set up the wrong way, with employers not giving choice, or not contributing to HSAs for their employees, or not clearly explaining the options. But if you do it the right way, no one complains, not even those with chronic disease.

Little Appreciated HSA Realities

Q: Two things that’s generally not known or publicized, one, that is some 25% to 30% who sign up for HSAs were previously uninsured, that in five years, HSA plans and their variations – HRAs and cafeteria plans – have captured 20% of the employer market. Does that mirror your experience?

A: Yes, in diverse markets, too – Minnesota is number one, Louisiana is number two, and Washington, D.C. is number three. When people realize they are accumulating money by being cost-efficient, it catches on even faster. I did a group meeting last week, and the aggregate account balance was $4400 per employee in a blue collar manufacturing company in which the employer threw in ½ of the deductible.

I have yet to any single employer go back on the HSA to an HMO or PPO – not one. And that’s out of 120 to 130 employers. I have about 60 other employers with traditional plans.

Most of those previously uninsured come from the small market with 2 or 3 employees or among individuals , who suddenly realize they can afford the premiums. They quickly learn they can also now pay for their dental and eyeglasses thorough HSAs and a pre-tax basis.

The Government’s Role

Q; We’re now in the high season for health reform. As you know, the Obama administration has high hopes of transforming and reforming health care from on high. Is expanding the tentacles of government through passing SCHIP, shifting the unemployed and others to Medicaid, and having mandatory EMRs and a federal comparative effectiveness institute the way to go?

A; This massive stimulus package of $789 billion is a signal the administration wants to go to a European or Canadian type delivery system. With a stimulus package of nearly a trillion dollars and other programs costing an aggregate of more than $1 trillion, I simply don’t think there will be enough money left over for “sweeping reform.” Instead, I foresee massive micromanaging with consolidation of hospitals and other systems into monopolies.

Q; I understand your book Why Health Care Costs So Much, which emphasizes the role of the consumer, is just the first of a series of six books, with those to follow being on roles of Government, employees, health care provides, insurance companies, and the faith community. I will look forward to reading those. Thank you for your time.