As health benefits have evolved over the last 32 years, Robert Dash of Key Financial Group has been in the thick of it — implementing employer health plans.
He started 32 years ago, when most companies still offered a base plan of Blue Cross for hospital expenses and Blue Shield for physician expenses in the hospital. As technology advanced, Blue Cross/Blue Shield added Rider J to cover the expenses of new tests and treatments, for example, radiation.
Eventually major medical was added to Blue Cross/Blue Shield coverage to reimburse for doctor visits and lab work done outside of hospitals. Employees were allowed to go to any doctor or hospital and would submit a claim form for reimbursement. The insurance company would reimburse according to a chart of “usual, customary, and reasonable charges” — still used today for out-of-network expenses; the doctor would then bill the patient for the remaining balance.
Over the last two decades managed care — whether in the form of HMOs, preferred provider organizations, or point of service plans — has largely replaced its predecessors. Managed care brought with it a significant change in the healthcare system. Physicians sign a contract with the insurance carriers requiring them to work within the plan design and accept the co-pay and the negotiated discounted rate as payment in full.
“It was the first link that connected the health insurance industry with the medical profession,” says Dash.
Dash is worried that managed care has completely disconnected consumers from the real costs of healthcare. When he asks people whether they know what a doctor charged for a particular service, they are clueless. All they seem to know about is the size of their co-pay, which is not all that surprising, since 92 percent of the claims filed in this country are filed in network and the individual is only responsible for the co-pay.
Dash will speak on “The Changing Face of Health Benefits,” for the New Jersey Society of Certified Public Accountants on Wednesday December 2, at 8:15 a.m. at the Holiday Inn, 195 Davidson Avenue, Somerset. Other speakers are Jack Hippen, vice president of sales for Total Administrative Services Corporation, and Lisa Otto, regional sales director in New Jersey and New York for the same company. Cost: $40. Visit www.njscpa.org.
What really interests Dash is how to run the system more efficiently, and he prefers a consumer-driven approach built on consumer awareness of healthcare costs.
“When, as a consumer, was the last time you bought any kind of product or purchased any service without knowing the price?” he asks. Furthermore, people usually do not buy something until they have competitively shopped enough to know they are getting a decent deal. But none of these basics apply in the managed care arena.
Although managed care did bring together the medical community and the health insurance industry, says Dash, what it has failed to accomplish is controlling and managing costs. In its place, particularly for small to mid-size businesses, he would like to see consumer-driven health plans that include health savings accounts or health reimbursement arrangements combined with high deductibles. These plans can reduce costs for business owners without necessarily raising them for employees. The components are twofold:
High deductibles. These reduce claims costs for the insurance company and premiums for the employer. Deductibles, says Dash, go back to the original intent of health insurance, which is coverage that protects employees and their families from catastrophic health costs. “A consumer-driven health plan is really one that operates like most insurance operates,” he says. “If you own a car, you have insurance with a deductible.”
The deductible, explains Dash, keeps smaller “nuisance claims” away from the carrier, which has to pay the same handling and processing expenses for any claim, regardless of size.
Because the deductible is set at a threshold where a statistically large number of people never exceed it, carriers have a reduced amount they have to pay out. These factors lower the cost to the carrier, which passes the savings on to the employer. This can reduce premiums by 25 to 40 percent in comparison to managed care.
Taxes. Using the tax code, employers can pay all or part of the employee’s deductible cost. The high deductible is great for the employer, who pays a reduced premium, and for the health insurance industry, which has reduced numbers of claims.
But what about the employee whose potential out-of-pocket exposure has gone way up? By complementing the high-deductible plan with one of two options under Section l05 of the tax code — either health savings accounts or health reimbursement arrangements — the employer can help pay for unreimbursed medical expenses including deductibles, premiums, and co-pays. Any money the employer contributes toward the employee’s unreimbursed expenses is tax free for the employer.
Section 105 offers two options for the employer. With a health savings account, the employee has an account similar to a 401k to which the employer contributes money. If employees get sick and incur expenses, their expenses will be reimbursed, but they get to keep whatever money they do not use for medical expenses.
The incentive for employees, says Dash, is to be more aware of costs and not to run to doctors unnecessarily. “We are trying to educate consumers to become more knowledgeable and conscious of costs and how to manage those costs as they relate to their own family and health,” he says.
The health reimbursement arrangement is a plan whereby the employer reimburses employees for unreimbursed medical expenses. Whether employers contribute all or just 80 percent of the deductible, they have reduced their fixed costs, which are the premiums, and recognize a potential cost, the amount of the reimbursement.
Dash recently created a health reimbursement account for a firm with 40 employees that reduced the employer’s gross costs by $104,000. Looking at the worst case scenario of reimbursing the entire deductible for every employee, the employer’s maximum liability was $48,000.
These plans, of course, need to be qualified plans, with appropriate documentation and government sign offs.
Dash comes from a blue collar background in Elizabeth. His father started off as a milkman, moving from Brooklyn to Elizabeth because Dash’s grandfather and uncle were in the same business. His father founded the Dash Box Company, which made and mended the wooden cases that housed glass milk bottles; Dash helped out in the business.
Eventually his father started to buy and manage property. “I attribute most of my success to my blue collar values: make more and spend less,” he says.
Dash saw himself as a street kid growing up, but at Thomas Jefferson High School, a public high school for boys, he was captain of the state champion football team. “Football kept me on straight and narrow,” he says. So did hard work — driving trucks, digging ditches, and unloading freight cars.
At the University of Connecticut, where Dash met his wife, he majored in psychology and minored in sociology. “In sales and marketing, I use psychology and sociology every day of my life,” he says. “I attribute my success in sales to my understanding of the human mind, how personalities are formed, and what made us the way we are.”
Dash and his wife have two children: Kevin, 25, who lives in Florida, and Nicole, 13.
What Dash describes as his first real job was as a management trainee at Allstate Insurance Company. Although it taught him lots of basic business skills, he could see that he was not meant for corporate life. Even a move to a new office in Long Island with a nice raise was not enough to change his mind.
One day when he was out on a job interview he was lost in the parking lot at Roosevelt Field, a big shopping mall in Garden City, and was approached by a couple of distinguished-looking men in three-piece suits. One of the men said to him, “You look lost. Are you looking for a job?”
“I was a young guy looking around for addresses,” Dash recalls, “and the next thing you know I was selling life insurance for Phoenix Mutual. I had never sold anything in my life.”
Dash stayed with Phoenix from 1977 to 1985. Realizing that he liked selling insurance and was good at it, he decided he did not want to be a career agent, but rather to meet and develop clients and find them the right carrier with the right product. He moved back to New Jersey and opened Robert Dash Insurance, which later became Key Financial.