Category: Insights

Business Lexington – July, 2023 – John Clay, BetterSourceBenefits

Breaking Through The Benefits Status Quo

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In the 1990s, while working as a benefi ts advisor for Blue Cross Blue Shield of Kentucky, John Clay realized he could do more to help his customers. Over the course of the decade, Blue Cross Blue Shield of Kentucky eventually transformed to become Anthem Blue Cross Blue Shield, transitioning from a mutual company owned by policyholders to a publicly traded company owned by stockholders. 

This change didn’t sit well with Clay. Feeling unsatisfied with simply working out renewal programs with a limited number of insurance companies, Clay joined a “mastermind group” of advisors from across the country who were dedicated to making a difference in the lives of employers and employees.

“I already had a background in inventory control and material management. So, we started managing the healthcare supply chain,” Clay said. “We put our custom-designed plans that were in the best interest of employers and their employees in a fiduciary or legal and ethical way.” 

In 2000, Clay, who graduated from the University of Kentucky Gatton College of Business with a degree in supply chain management, founded Better Source Benefits, a boutique healthcare benefits agency based in Somerset. Better Source Benefits operates throughout Kentucky, Ohio, Tennessee, and New York. His clients range from companies with as few as 100 employees to those with as many as 5,000 employees. 

Clay primarily serves the construction, energy, and manufacturing industries, as well as nonprofit organizations such as city and county governments. 

Clay prefers to be known as a strategy expert rather than a consultant, believing that companies need targeted strategies to break free from the status quo of rising premiums and diluted healthcare options found in many employee benefit plans. 

“Better healthcare outcomes with less risk and lower prices are what companies need,” Clay said. 

Three insurance companies dominate Kentucky’s healthcare benefit marketplace: Anthem, United Healthcare, and Humana. Recently, Humana announced its withdrawal from the Employer Group Commercial Medical Products business in the state. Clay urges CEOs and CFOs to take a more active role in selecting employee benefit plans rather than leaving it solely to the human resources director. He highlights this scenario in his book, “Breaking Through The Status Quo.” 

According to Clay, the average business owner is often uninvolved in benefit sales conversations. And while the CFOs focus on the profit and loss statement, they rarely discuss the strategic aspects of benefits plans with the HR director. As a result, the cost of available plans continues to rise, but the CFO may not recognize opportunities for improvement. 

Clay refers to this situation as the Status Quo scenario. 

In “Breaking Through The Status Quo,” author John Clay outlines alternatives to the rising premiums and diluted healthcare options found in many employee benefit plans. 

Clay said that inflation is also among the greatest challenges facing the employee benefits market in 2023. Healthcare inflation has consistently outpaced general inflation over the past 50 years, making it difficult for the employers to meet the growing demands of employees seeking more robust benefits packages, he said. 

Additionally, the employee benefits marketplace faces challenges related to the lingering economic effects of COVID-19, increased usage of prescription drugs, mental health and substance abuse issues, and advancements in medical treatments and technology. 

All of these factors lead to higher cost and diminished benefits for employees, Clay said. 

“The term Affordable Care Act is a misnomer because it is anything but,” he said. “Look at the minimum wage for some people. It may be $15 an hour or about $31,000 a year. If their insurance deductible is $3,000, that’s about 10% of their gross wages and their out-of-pocket could be $5,500 to $8,000. Then they are functionally uninsured with many of the “off the shelf” ACA plans unless they have subsidies.”

Clay cites a recent survey that found more than half of the respondents said they could not afford a $400 emergency room charge or any other kind of financial emergency. Few could afford a catastrophic event. 

“You have a huge percentage of the population with medical debt.” Clay said. “Better Source Benefits is focused on reducing or eliminating medical debt through employee plan design and solid supply chain management.” BL



OPTIONS INSTEAD OF AN INCREASE… Claim your 30 minutes with John Clay and learn what solutions your company is eligible for in Q4/2023


First Year With A Self-Funded Healthcare Plan: What To Expect, How To Prepare

Recognizing that you are into a Strategic vs Transactional solution means positive change is around the corner.

While self-funding a medical plan is (almost) always a wise financial decision, it does present challenges and new opportunities to direct the course your plan will take.

Read More

How Insurance Companies Hide Profits

Fully insured health insurance companies and HMOs are exceptional at playing Hide and Seek, with profit margins hidden in the premiums. Besides the guaranteed profit margins of the Affordable Care Act (15-20% of premiums) , its new extra charges and taxes, you have to look really hard to find out where the contingency margins are hiding in the premium calculations – especially when you consider that there is very limited transparency in the actual healthcare renewal calculations. 

Ask yourself – did your employees’ good health and low healthcare utilization send a surplus to your corporate bottom line or to the insurance companies’?

So, where are the good profit margin hiding places in the fully insured premiums? 

Let’s take a peek at the ones hiding inside the employer-paid healthcare premiums – For starters, try looking at these little gems:

  • pooling charges, 
  • These are premiums for Stop Loss Insurance that your insurance company buys from its own reserves
  • Industry Loads on the risk factors
  • These are up charges for your type of industry, created by actuaries that work for  the insurance company
  • medical claims trend factors,
  • These are made up numbers that justify the need ofr more revenue, just like any other business plan 
  • demographic load factors, 
  • These are up charges for your employee mix, created by actuaries that work for  the insurance company
  • pharmacy claims trend factors
  • Drugs Companies adjust their pricing twice per year.  They add and they subtract from these depending on how their drug list is performing to their business plan
  • or the capitation trend factors. 
  • This are charges for fixed cost items like mental health, organ transplants and other bundled medical care that rarely are used but always seem to have an increase

Wait! There is more…

Of course, there are more profit margin hiding places in the retention factors, IBNR reserve,(IBNR, we call it “Incurred But Not Really”) some still use terms like 

  • Rate stabilization reserve,
  • More of your money they keep to offset claims 
  • pending claim reserve 
  • More of your money to hedge against something that might happen
  • and the earned interest rate assumptions built into reserves.
  • That earned interest is never not enough to move the needle for your benefit

Don’t limit yourself playing Hide and Seek with your local fully insured health insurance company or HMO, because the game is rigged against you as long as there’s no financial transparency, profits can be hidden, your company’s good claims subsidize bad risks and you have no way of being rewarded for good claims.

Hiding an elephant in the room has never been easier. But I can make sure it’s not hidden in your healthcare plan.

Don’t postpone your free one-on-one session. Summer is the right season to start.

Click here to arrange a one-on-one meeting with John Clay >>


Mid-Year Employee Motivation

As we reach the halfway point in the year, you may be seeing signs of your team starting to flag. 

Whether it is caused by internal or external factors is irrelevant. The real question is how do you lift your workers out of the mid-year blues? 

There are a few methods available that can break the monotony and inject fresh impetus into your company’s efforts…

With Great Resignation and talent shortage on the market that happened less than a year ago, it’s especially important to make sure your company doesn’t have extra expenses on new talent acquisition, etc. 

SHRM, The Society for Human Resource Management reported that on average it costs a company 6 to 9 months of an employee’s salary to replace him or her. For an employee making $80,000 per year, that comes out to $30,000-$45,000 in recruiting and training costs. 

There are a couple of other numbers that you should consider. 

According to Zippia – The Career Expert agency that performs research – U.S. workers have an average tenure of about 4.1 years with a single employer.

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Activating Healthcare Equity

It is spring and the Oak tree Helicopters are back and into my pool here in Kentucky, and buddy it is a pain to clean those out of the skimmer. As I was busy doing it, a great analogy came to mind…

Not only do most employers swim in polluted healthcare pools, but they choose to! So when did it all go wrong? How did Fully Insured carriers hypnotize the entire market into believing that choosing the “least bad increase” is a win? And most importantly – how did they turn it into the only available option?

In these series of articles and videos I tend to debunk the myth of healthcare, and give employers and their teams a chance to get measurable, predictable, and repeatable results from their healthcare plan.

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Running Finance as a Profit Center

Over ninety percent of the country uses some form of health insurance. As a business owner, you could be mistaken into thinking that it is always a high-value proposition. More and more people are complaining every year about health insurance. Why is that, and what can you do about it?

Let’s talk about what needs to happen to improve healthcare and its associated costs.

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Do You Have the Right Healthcare Partner?

The responsibility of the business owner to its team is a massive undertaking. They have family members, hardships, and expectations, like their staff. As a business owner, you understand both weights. The former is that your organization can actually afford health insurance. The latter, how crucial it is to have accessible, solid coverage for your team.

Employers everywhere are paying more out of pocket for healthcare because of their lack of a proper healthcare partner. Healthcare partners lead by example and strive to empower all businesses. They are at the helm of providing person-centered care and clinical support through health insurance.

If you’re wondering how to choose a healthcare partner and how to save money on healthcare partners, we’ve got you covered.

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Full Transparency: The after effects of switching health plans

Truth is, not all stories have happy endings. Sadly, bad outcomes are completely avoidable but happen anyway. In our spirit of candor (we wouldn’t want it any other way) we decided to share a bit of the less fun side of group medical plans. 

The city of Corbin, Kentucky has been a “WOW” client of ours for some time now, and with great success – we’ve slashed out-of-pocket costs and shown Big Checks that demonstrate how we saved them around $200k per year on their total healthcare spend. Recently, the city commission selected Anthem BlueCross Blue Shield to take over as the medical insurance provider for city employees for the fiscal year 2022. As you know, not all medical plans have a member’s best interest in mind. To that note, it was recently published that the city will receive its first health insurance rate increase in 5 years;

“The city will pay a monthly rate of $32,029, or $384,348 annually. Family plans will see a slight increase in costs for those employees who wish to add someone to their insurance plans. Sams said this would be the first health insurance rate increase in five years.”

The people of Corbin are some of the best, hardworking people around. They deserve the best healthcare options at a price that’s affordable. The main takeaway: Not all medical insurance plans are created equal. In fact, many medical insurance plans have one goal in mind; to increase profits for their shareholders at the expense of their “plan members”. The secondary takeaway; factors outside an adviser’s span of control may lose a long-term client.  Just observing life here and I remain grateful for the time I was able to help the taxpayers of Corbin and their employees.

Pro Tip: Education is a continual process, custom plans require more ongoing education than “off-the-rack” solutions.  Reporting alone is not enough, always be educating your clients.

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Employee Benefits Costs Affect on PPP Forgiveness

Back in March of 2020, Congress passed the Paycheck Protection Program Act (PPP). Initial reports indicated that about 700,000 businesses were approved by July 6, 2020. It’s now time to start thinking about how to apply for forgiveness. As long as you meet certain spending requirements it shouldn’t be too much of an issue. Let’s look at the facts surrounding where your employee’s benefits fit into that equation.

The Goal of the Paycheck Protection Program (PPP)

The initial PPP set aside a maximum of $349 billion for forgivable loans. The goal was to help small businesses pay employees in the wake of the COVID-19 pandemic.

Details on PPP Eligiblity 

Business owners with up to 500 employees are eligible to apply for this loan. They may use the initial PPP or First Draw PPP loans for the following:

  • Payroll costs
  • Employee benefits including health and retirement compensation
  • Mortgage interest
  • Rent
  • Worker protection costs associated with COVID-19
  • Utilities
  • Certain supplier costs
  • Certain expenses for operations
  • Damage due to looting or vandalism during 2020 that was not insured

The PPP capped the payroll expenses at $100,000 on an annualized basis per employee. Maximum loan amounts can’t exceed the average payroll cost for two months plus 25 percent and the total loan cap is $10 million.

PPP Forgiveness Rules

The First Draw PPP has several rules governing who meets eligibility requirements for forgiveness. Here is a quick rundown of a few of those requirements:

  • Self-employed, sole proprietors, independent contractors
  • Small business meeting the SBA size standards
  • NAICS businesses with a code beginning with 72 and more than one location and less than 500 workers per site
  • 501(c)(3) non-profits, 502(c)(19) veteran companies, or tribal business concerns
  • They must have no more than 500 employees unless they must meet SBA industry size rules.
  • You may meet Second Draw PPP loan eligibility if you received a First Draw PPP. The first loan must be fully spent on authorized expenses.

Specific employee benefits play a part in the calculation of PPP loan forgiveness. The PPP Loan Forgiveness application has three lines addressing worker compensation.

Line 6

Employers enter the total amount paid for employee health insurance. This includes the contribution to employer-sponsored group health and self-insured plans. Don’t include pre-tax or after-tax payments made by employees.

Line 7

This line documents the total employer contribution for employee retirement plans. Pre-tax or after-tax payments by employees are excluded.

Retirement benefits include match, cash balance plan, and profit-sharing contributions. Remember that the PPP Forgiveness’ requires employers to use 75 percent of the loan for payroll. Compensation for retirement isn’t included in this 75 percent.

Line 8

Enter the total paid for employer state and local taxes. This includes charges for employee compensation such as state unemployment insurance tax. You don’t need to include taxes withheld from the worker’s earnings.

PPP Loan Forgiveness Deadline

While eligible businesses have until March 31, 2021, to apply for the First Draw PPP and the application window for the Second Draw PPP loan was between January 13 and March 31, 2021, forgiveness deadlines are more of a moving target. According to the SBA, “A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan.” In other words, it depends on when you got your money. The only other note is that if you do not apply for forgiveness within 10 months you will need to start making payments on the loan.