The Employer Healthcare Trap (And How to Escape It)

Full Episode Transcript

Dan (00:05)
Welcome to another episode of Uninsured by Choice, the podcast where we help you navigate the healthcare system without insurance. I’m your host Dan, and we are brought to you by our sponsors. Zion HealthShare, a nonprofit medical cost sharing community that provides a better alternative to health insurance. And today I am joined Mark Messick. Mark is the marketing director for Common Care, a tech platform that helps employers structure and administer creative group health plans that expand employee choice beyond traditional insurance. A big advocate of taking responsibility for both your and your healthcare expenses. Been proudly uninsured for years and enjoys it probably a little too much when certain people get extremely triggered by that. Definitely been there and can relate to that as well. So Mark, thanks for being on and joining us today.

Mark Messick (00:52)
Yeah, of course. Happy to be here.

Dan (00:54)
Yeah, excellent. So let’s just dive right in. Something we’ve talked about in the past, is the uninsured part of the podcast name, Uninsured by Choice. We have not spent a lot of time talking about that by choice. And you had a really good insight on that as far as why so few people really can make that choice. So why don’t you elaborate a bit about that whole employer space and how that relates to how so many people get their coverage.

Mark Messick (01:19)
Yeah, absolutely. So I’m coming at this from maybe a little bit of a different angle than some of your previous guests, just because we work mostly in the employer space. We work with employer health plans, which is where a huge percentage of population currently gets their health coverage is through their employer.

And at most employers, do not have much of a choice at all in what their health coverage is. Maybe there’s a few different tiers they can pick from, they’re usually still limited one carrier, one type of coverage.

And so there really isn’t that much variety in what they can choose, it doesn’t take too long thinking about that to realize that’s kind of a problem. Cause even at a very small company, know, 10, 20 employees, you’re already going to have people who are ages, different family sizes, different health needs. And it just doesn’t make any sense at all to put all of those people with all those different backgrounds onto one kind of coverage.

And so a lot of what we do is employers take a step back and say, hold on, like, kind of painted ourselves into a corner here by just doing things the way that they’ve always been done. Let’s reevaluate and set up a health plan in a way where each employee can choose whatever coverage is best for them. And that’s going to look for someone young and single and never goes to the doctor and someone who’s, maybe aging or has a few kids or has some serious health conditions. And so we want everyone to be able to customize their health plan to that. That’s a growing movement. A lot of them employers are adopting it hasn’t been the status quo for a very long time.

Dan (02:51)
So I’m curious about that. Why has it not been the status quo? Why has way of doing things always been one size fits all approach? I guess it was kind of like post World War II that this concept of employer providing all these benefits really started to take it’s kind of always been this way. Why is that? If it’s not really a way or a great system, how did we get here?

Mark Messick (03:13)
Yeah, a good question. My answer will definitely be speculative in nature, during World War II and in the aftermath, that’s when employer-sponsored benefits really rose up and I believe the legend, that during World War employers some limitations put on them couldn’t raise wages for. But they still needed to recruit and hire. And so a clever workaround to that was offering other kinds of non-cash benefits, one of the big ones being health insurance. In the 1940s, health insurance looked a lot different than it does my understanding is that there were not that many carrier maybe only had one carrier covering your area. The genesis of this started not that much and as things progressed, we just kind of stayed in that rut of you just pick one carrier. Definitely is something to be said for it is administratively a lot easier, to just pick one carrier, you pay one invoice and you’re done.

Having multiple carriers, multiple selections, it definitely adds some administrative complexity. Nowadays with all of that is pretty easy away. It’s actually not that much more complicated to offer a plan that allows each employee to choose whatever they not that many decades ago wasn’t the case. So those are a few reasons that I think evolved the way that they did.

Dan (04:35)
Well, that’s pretty interesting because World War II ended about 80 years ago, I think. And we’re in 2026 using a legacy benefit system that was designed for a specific use case of wage or whatever was going on, wage. And I’m sure there was some reason at the time for that. And there was a reason employers got into this whole racket of benefits and health insurance and the fact that we still have that same system when so much has changed, both on the carrier side, plan coverage types, information. So much that has changed. And yet here we are still stuck in this old way of doing things. So what is the solution? How would an employer come to terms I don’t have to do things the way they’ve always been done. Suppose I’m an employer, I have employees or I’m an HR leader and I have the benefits of several people I kind of oversee or. What could I do maybe could start providing some choice to the employees? It might be administratively a little more my administer that. Yes, we understand. It be a lot more? Would it be fairly straightforward to do? What would be the steps that we would look at there?

Mark Messick (05:41)
It’s a good I don’t want this to turn into a big pitch for common care and what we do, but I will say that I think that we have made it very administer one of these employee choice plans compared to the traditional. The decision that needs to be made is whether you think it’s a good strategy or not. If you think it’s a good strategy, the barriers to entry are quite. And the reason that I said in some ways it’s easier is because currently, the owner, the HR person, has to complete and impossible task, which is go out and find one solution that is going to keep as many people as possible happy at your company. And it’s like, couldn’t even keep everyone with the menu for the company barbecue. Of course you can’t keep everyone happy by picking one health plan for with this broad range of needs.

It’s outside of the of what most business people and HR people are good at. They don’t do this for their entire career and profession most of the your time and resources would be better focused on basically anything else at your company, making it a better company, providing a better working opportunity for your.

So all you really need to do is set a and then get out of the way let your employees decide. They already know what they want. They can go and it from a menu of nice options. So that’s why I say that in some ways it’s easier is now no longer having to be in the driver’s seat on a mission that is impossible to the satisfaction of all of your employees. You can instead open up the all of your employees a plate, and then let them go and serve they please.

Dan (07:20)
I love that kind of imagery there where it’s more of this cafeteria what works for love to talk I’ve read a bit about and I know a little bit I’m sure lot of the listeners probably know a little bit about this, but one mechanism for be an ICRA, one mechanism that would be available to a business owner. So for those who might not be familiar with what that is, whether they’re business owner or employee that maybe wants to ask a business owner or their employer about this, you walk through what that is and how that might fit into this strategy of maybe starting to offer a little bit of choice?

Mark Messick (07:52)
To do that. Start with a preface, which is that I kind of hate ICRA think that they can be a useful but pretend to be the entire solution when they’re give the illusion of more choice. And yeah, now you can choose between Blue Cross and United. That’s it’s actually not even that great because you’re still limited to pretty terrible options for most of your employees more choice when all of the options still kind of is only so much progress. My little beef with that being said, can be a very useful compliance especially for larger employers who have to meet certain conditions under the ICRAs can help check some boxes.

What’s a lot more useful vehicle is actually a cafeteria it doesn’t constrain funds the IRS came out and said a few years ago, hey, you need to meet certain criteria when you offer a group health need to offer plans that these benchmarks.

Up to this point, you’ve only been able to buy one group policy to do now, we would consider that these requirements have been met if you simply reimburse your employees for purchasing their own individual. So ICRAs are a legal route where employees can purchase their own coverage and be reimbursed by the employer. So it does give individual choice.

Issue with ICRAs is that still limit employees to just ACA regulated plans, the big box carrier plans still kind of so you’ve given employees more choice, but they’re still limited to not the best options for a lot of.

Dan (09:30)
Okay, I understand now that that’s making sense. So what an ICRA is doing is saying of a one size fits all insurance plan for the employer, making bunch of other insurance plans available to you as employees, but we’re still only working insurance plans. So for example, my employer said, hey, we’re gonna have an ICRA we’ll reimburse you for plan you want to go get and I join a health share or I want to get an indemnity plan or I want to do a DPC membership or something like ICRA cannot reimburse me for that. There’s no legal there with the IRS for that.

So is there an account type, a fund of any kind where an employer say, hey, you want to go the uninsurance route? That’s great. That’s what we can do for you for that. Or is that, does that not even exist? Is that something we need to be looking at from a regulatory standpoint to added into so to speak?

Mark Messick (10:20)
So you definitely can do that, exactly what you’re do give up some which is usually a pretty good trade-off.

Utilizing a cafeteria alongside an employers and employees can actually have the best of both worlds. The ICRA some compliance boxes and says, you know, we’re offering coverage that meets these requirements.

They shouldn’t put all of that money in the ICRA because as soon as the money goes into the it is trapped there. It can only go to the designated insurance. Instead, what they should do is put the a cafeteria which is absolutely named. It allows employees to choose from a menu of different options, including the cash home as a taxable bonus. And so from the cafeteria plan, you can route it towards things and vision. So pre-tax benefits, you can route it towards a 401k. Can take it home as a taxable bonus. And when you do that, when you take it home, you can use it on health shares and some of these alternative options. And so when you that you are paying on the funds versus if if you routed it towards a traditional insurance option it would be pre-tax the vast majority of the time the savings of going towards something like health care is going to be outweighed by whatever small tax advantage you’re giving up.

Dan (11:38)
Okay, so cafeteria plan, me through what that is. Is that the official name or is that just the sort of common term used or is that the official name of something that an employer could go say they have a broker right now, could they say, hey, broker, I’m interested in the cafeteria plan. What could we do there? Is that something that’s just available right now widely for people?

Mark Messick (11:58)
Yeah, so cafeteria plan is synonymous with section 125 the tax is the portion of the tax code that just says that the IRS says we would allow these things. Employers can contribute funds and employees can also contribute funds to a cafeteria plan via salary they want to contribute more of their own money, can. Employers and employees can towards whatever options have been set up within the cafeteria plan or the Section 125 plan. So yeah, these are standard industry terms that you could go and ask someone about. I will say that a lot of people are not that with how they’re arranging Section 125 and ICRAs. Most people are not allowing their employees to go and purchase health shares, and if they are, they’re doing it slightly illegally.

But there definitely is a compliant way to you know line up all of your ducks and have the best of both worlds where you can meet all of the compliance and also allow your employees access to these awesome off marketplace off ACA options.

Dan (13:05)
And see, that’s what we’re about is being uninsured by choice. So the ICRA on its maybe gives you the choice, but not the uninsurance uninsurance alone choice doesn’t really work on that end. Talking about trying to make a hybrid there.

Mark Messick (13:12)
Let’s go. Yeah, I mean, you always opt out of your employer health plan, but then you’re foregoing some of your compensation effectively, right? Like they were going to contribute 400 bucks a month to your insurance. If you opt out of that you just gave $4,800 this year the employer would have paid towards a benefit for you. So under the traditional option, you’re right, it kind of locks you in where it’s use it or lose so most people don’t go this route uninsured because they don’t want to give up money that they can only use in this one silo.

Dan (13:48)
And that makes sense. HSAs are very similar where there’s employers that will contribute to your HSA, is fine and great because we all incur health expenses throughout the year. That’s pretty, pretty normal. Maybe not, hundreds of thousands of dollars, but hundreds of dollars, know, urgent care, whatever wellness visits, stuff like that. Makes sense. If you get a significant portion of your salary into an HSA, it’s just there and it can only be used for health expenses. I think a lot of people don’t really understand that about an HSA.

They think that it’s money or whatever. And yeah, it can be if it’s an employer contribution, but it is limited to types of expenses, just like this ICRA is limited to certain types uses. So it’s always going to be better on the choice get money in the most flexible way, I guess you could say that you can kind of use it in a range of options. So previously when we were talking, you mentioned that people kind of fall into one of three walk us through those three buckets, kind of what type of people fall in those and what options are best for them. I think that’ll help people understand why this choice is so necessary because different categories of people with totally needs.

Mark Messick (14:51)
Yeah, absolutely. So having choice is great. But it is a little bit of a double edged as soon as you have choice, you have to think hard and make a decision. It’s always difficult, especially in seems to be designed to be especially complex. And so everyone knows kind of the panic of going to healthcare.gov or talking to a broker, putting your phone number into a website promising quotes for health insurance, and then getting 13,000 calls from people all across the country. Like it is not a fun journey to determine what kind of health coverage to have for yourself, whether you’re going through one of these, ICRA slash cafeteria plan, sponsored options, or you’re just an individual and you’re just totally on your own, separate from any employer plan. In both cases, it can be a nightmare to determine what health coverage is best for your family. And most people end up just getting frustrated at some point and throwing a dart in the dark and picking whatever plan based on whatever kind of limited criteria they had arrived at. And very few people are very confident they have made a good decision. There’s a lot of just kind of like, yeah, I I went with it, but who knows if this was good or not.

Most people actually think that wasn’t good. Most people hate their health plans, is my experience in having lots of these conversations. All of that to say, one of the big things that we do as we help employers implement this is meet with employees one-on-one to help them determine what health coverage is right for you. Built some really advanced analysis tools that run hundreds of thousands of simulations each individual household to do the math and figure out which plans are likely to keep their costs the lowest over a long time horizon as we’ve done that some trends have everyone is going to fall into one of three buckets or categories for what kind of health coverage is best for you so bucket number one you have a large premium tax a large ACA you do and you can get traditional Blue Cross or United plan for free or close to free, it’s hard to complain too much about. We can complain a lot about quality of the coverage, networks, the bloodthirsty insurance companies. Still plenty to complain about, but from a dollars and cents perspective, or close to free is pretty good.

So that’s bucket number one. If you have a large premium tax credit or ACA subsidy might as well use it. Bucket number two is you don’t have a tax credit and you’re relatively main use for health insurance is just in case an emergency happens, know, something unexpected and you probably have some routine healthcare expenses as well, the occasional specialist visit and maybe some generic meds, you know, normal average. Bucket number two people are almost always going to want to go with a health share, go with a non-insurance alternative. For a whole host of reasons that we can get into, health shares are way more financially sensible most people who don’t have extreme healthcare shares work a lot more like car insurance or a lot more like health insurance used to in 1945. Is very different from how insurance works today and that is a good thing. Insurance today, health insurance today, is terrible for a lot of. Bucket number three is that you don’t have a tax and have severe health needs, ongoing health and you’re consuming 20, 30, $40,000 a year worth of healthcare expenses. If that’s you, then you probably still want to be on a traditional insurance plan. It’s going to be very expensive because all of the traditional insurance plans without a tax credit are very expensive.

They will cover you from day one, even with pre-existing conditions. If you pay $20,000 a year for your coverage, but you’re consuming $40,000 a year in healthcare, then that’s a good deal for you and you should do until the system implodes, you know. So that’s, those are the three categories that we see people fall into. Everyone listening to this, you know what category you fall into pretty easily just a quick description. And that gives you a pretty good idea of what kind of or alternative you should seek out.

Dan (19:08)
Yeah, I think when we look at just sheer numbers that first bucket of people who can get a free or nearly free, just highly subsidized on the marketplace, that’s going to be individuals who are making something in the vicinity of 75,000 or less and married filing jointly those people that are, in that hundred thousand to hundred twenty thousand range. So if that’s you, then then yeah, you be able to get a pretty heavily subsidized plan.

If you lot less than that, I believe they have you Medicaid or some other kind of government program. And if you make a lot more, then yeah, obviously you get any kind of subsidy. So there’s that sweet spot. And then on that third bucket, you’re talking about high of folks. I think the last stat I read was, quote me on this accurate, about 10 % Americans will actually meet their on any given year on average. Lot of deductibles now are higher, 5,000 to 10,000 or something like that. So the people who are doing really high utilization, it’s not a huge chunk of the population. It does happen people and it’s not necessarily the same people. It’s not the same 10 % every that middle bucket there of people who are just looking for something that’s in case of an emergency, in case of some big catastrophe, I get a heart attack, I’m in the ER for something, I get hurt hiking and break my leg and have to get some quick surgery. That’s gonna be most are gonna fall in category. And for them, saying health care is probably going to serve a little better than the other options, because you’ve just run the math on it. Isn’t necessarily talking about what quality of this or that, you’re just looking at dollars and cents and saying, look, from a dollars and cents perspective, this is just going to work the best.

Mark Messick (20:45)
Yeah, yeah, once we get into quality health shares, I’ll say that not all health shares are created equal, but if you take the best health shares, through the roof compared to most people’s experience with traditional insurance. But yeah, just from a dollars and cents perspective, health shares for the vast majority of the population are going to win. And yeah, also don’t quote me on this. I wish I could remember the exact number, but it’s something like 5 % of the population consumes 90 % of the right? You have that Pareto distribution. So most people are not the. If you’re not the 5%, you probably don’t want to be on traditional insurance because traditional health insurance, in my opinion, isn’t even real insurance. It’s because if you think about insurance, think about other kinds of insurance like car insurance or home insurance, you almost never use it. You only use it when something really terrible happens. And so it’s a low monthly cost that you pay to insure yourself against an unlikely but large catastrophic expense.

Health insurance used to work that way, you know, in 1945. Now it works in almost exactly the opposite way where you pay a huge monthly something that covers flu shots and generic medications and all of these extremely inexpensive transactions. You might think initially it’s like, well, that kind of sounds like a good thing to have something that covers more. Like, is that such a bad thing? But the answer is yes, it absolutely is. Because any time you have middleman as a part of a transaction, that transaction is going to grow.

It’s always going to be cheaper to pay your mechanic to do your oil change than it is to pay GEICO to pay your mechanic to do your oil change. The exact same thing is true with health insurance, magnified for a lot of different reasons that we can get into, but health insurance inflates the cost of healthcare. You don’t want it covering all of these small, inexpensive transactions. Health insurance would be way better if it only covered the big, bad medical expenses. And if you almost never used it, just like you almost never use your car insurance home insurance, because then the monthly cost would come way down. You can pay out of pocket for your flu shots and your checkups and all of super inexpensive things, no problem. Over a year, over 10 years, over a hundred years, the math is very sound. Most people will come out way ahead with an approach like that. Health shares just happen fit that almost perfectly. Are for those large catastrophic. They don’t cover as much of the, you know, kind of routine generic stuff, depending on, what exact plan you get.

We often recommend ones that don’t cover as much of that routine stuff because you can pay for that very inexpensively out of pocket and save your health share for just the big bad medical bills.

There are a lot of reasons why traditional health insurance doesn’t operate like real insurance. And health shares, even though they’re explicitly not insurance, they actually work a lot more like health insurance used to work back in the day.

Dan (23:50)
If only there was only one middleman in your scenario there. Health insurance has got a trillion siphoning at every transaction. It has to along the way this just mess. But to your health share lot more like health insurance used to it also costs a less like health insurance used to. I remember even just when I had to start adulting.

About 20 years ago and get my own insurance I was married in 2008 and when we got our first together, I think it was about $300 a and it was a if I remember right a night. You’ll never find anything close to that was just in I think me if I’m wrong. Was it the Affordable Care Act that required all insurance to be more, you’re describing, comprehensive and less catastrophic only? That a of a recent.

Mark Messick (24:44)
Legally, yes. Of the legal you could foresee people want more things to be covered. They want less responsibility. Want to outsource their responsibility to some larger organization or institution and would love to just have things handed to them on a silver platter. And so the consumer demand for more things to be covered, I think, has always been there. It’s steadily crept up since the 1940s. Then the cemented it a legal standpoint have to cover from day one for pre-existing conditions. And there’s a schedule of essential health benefits that insurers have to cover no annual or lifetime dollar limits, and there’s a schedule of preventive care that has to be covered with no cost are some of the big legal innovations that the ACA mandated.

Dan (25:34)
So when we’re talking about cost of going with a health share or some other using talked in the past about cost, if you the cost to get the coverage or access it, the participation costs, and that would be in insurance terms, your premium or in your health share terms, your. And then there’s the utilization cost, what it costs to use. And with insurance, you have these $5,000, $10,000 deductible plans, you have to spend whole lot before the insurance will do anything for both instances, insurance is quite a bit more expensive. Even if you have a fully subsidized plan and you get legit plan, might cost that participation and that access to coverage, could still end up costing you a whole lot more the event that you actually have to use it for some sort significant expense if I’m understanding that right.

Mark Messick (26:25)
That’s exactly right. Are two numbers to compare when you’re trying to pick a coverage for yourself. There’s guaranteed monthly and there’s your potential out-of-pocket. And you want to find whatever option is going to best straddle the line and both of those numbers, when you total them together, the. And the crazy thing is the very low monthly higher out-of-pocket cost tend to be the best option over the long run for most you’re a very high utilizer, even then though, especially if you’re going with traditional insurance, people get raked over the coals by thinking a low deductible gold plan is better than a high deductible bronze plan just because psychology of like gold is better than bronze and low deductible that seems better when we run the simulations and we do the.

And you can even just back of the napkin do it really quick. Have a friend wife is on some crazy specialty medications. Every year hit their out of pocket max first week of the consumes between three hundred and seven hundred thousand dollars a year in health care expenses. So very, very like outlier edge case, high utilization. They’ve been low deductible gold plan for a long time. And he was to leave his employer actually because he was getting it through his employer and he’s like this is the best health insurance we we ran the numbers and it is much cheaper for them to get a high deductible bronze plan. Even though know they’re gonna hit their out-of-pocket max at the beginning of the year, and even though the out-of-pocket max is higher on the bronze plan, it’s still cheaper because the premiums on the bronze plan are so much less than on the gold plan. Companies are and I think they make a lot of money off of people who get gold plans.

You can always run the numbers for yourself. This hard and fast rule, but it’s a pretty good general rule of thumb. Lower guaranteed cost, higher out of pocket cost tends to perform better.

Dan (28:20)
Right. Cause that’s the guaranteed versus the potential. You know, you’re paying the premium. You don’t know if you’ll hit that deductible or, the IUA in the case of a, of a health.

Mark Messick (28:28)
Even if you do, it’s still often cheaper.

Dan (28:31)
For sure. So the last thing I wanted to ask about is familiar with Common Care and the tool that you’ve built about helping people cost of plans. And like you talk about, it’s not just the the longer. What would this cost based on your consumption of health what we’ve talked about, who would this apply to? Would it be I’m the self-employed individual who doesn’t have an employer and I’m looking for something, I would go to Common Care to find something, or I’m the employer looking at options to provide my employees, I’m gonna go to Common Care to evaluate those options, is it all of the above? Who is it kind of geared towards?

Mark Messick (29:08)
We’ve built everything that we employers and employees, but incidentally, some of the tools are super helpful for individuals and we’ve chosen to just make those publicly accessible and free. So for any individual, can go to commoncare.org slash marketplace get access to all of our tools completely free, no login or anything. You can just use it.

Dan (29:27)
How would someone reach out or they found this helpful or interesting? Pretty much anyone can go to commoncare.org and that’s, is that going to be the best way to get in touch and connect?

Mark Messick (29:38)
Yep, yep, go to commoncare.org and if you go to commoncare.org slash marketplace, that’s specifically the tool that will be most useful for most people.

Dan (29:47)
Those individuals. That’s super helpful. Mark, really appreciate you taking the time to meet with us and enlighten me. I found that very interesting. I’m always learning every time I talk to someone. So for being with us. And anyone wants to reach out again, you’re fairly active on LinkedIn. They could find you there as well.

Mark Messick (30:05)
Yeah, for sure.

Dan (30:06)
Thanks for coming on the show and see you all next time.

Mark Messick (30:09)
Awesome, thank you.

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