Is The Group Plan Cracking

David 0:01

Is the traditional group health plan finally collapsing under its own weight as employees demand control, affordability, and peace of mind, and what replaces it if it does? We'll find out on this episode of Shift Shapers.

Announcer 0:16

Change either energizes or paralyzes. The choice is yours. This is the Shift Shapers Podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry's shift. And now, here's your host, David Staltzman.

David 0:33

And to help

Why Survey Employees For Signals

David 0:34

us understand all of this, we have invited Jack Hooper, founder and CEO of Take Command Health. Jack and his team are at the forefront of rethinking how employees employers rather deliver health benefits using data from their latest 2026 State of Employee Health Benefit Survey. And it challenges some of the long-held assumptions about group plans and explores the rise of individual coverage and HRAs. Welcome, Jack. Thanks for joining us.

SPEAKER_02 0:59

David, thank you so much for having me on, calling you back on. It's been a few years, but glad to be back.

David 1:05

Always great to connect with old friends. So let's start with the big picture. The survey says that traditional group health plan is breaking down. What are the clearest signals that you're seeing of that?

SPEAKER_02 1:18

It's a great question, David. And I think to set the stage for the audience of how we went about this survey, you know, we see a lot of groups and a lot of very established surveys, you know, Kaiser and others that go survey employers about benefits every year. And that's that's traditionally been our approach as well. This year, we thought it would be interesting. Hey, let's go interview or survey the employees and ask about how they feel about their health benefits and where things are going. And obviously at Take Command, we're we're an individual coverage HRA ICRA administrator, but we did not survey ICRA employees. So we we reached out far and wide into traditional employer groups that have traditional group health plans. And it was really interesting. And our our comment on, hey, the group plans and maybe time to rethink a lot of them come from not our own assessment and not talking to employers, but actually talking to employees who are looking for and demanding something

The Demand For Personal Control

SPEAKER_02 2:20

different.

David 2:21

So, like what data point jumped out at you the most? What really, you know, got you, got, got your got your attention?

SPEAKER_02 2:28

Hmm. I I thought the biggest thing that really stood out was that over half, uh, so 51%, and you may say, well, Jack, you're giving me 51%. That's not a huge stat, but compared to how we would have thought in in the past, it feels very high. 51% of employees want control over their own insurance. Uh, this is a big shift because I think the mindset among employers, especially HR benefit providers, have been well, hey, I the employer, I the benefit provider, my employees want me to control the insurance for them. And this was the highest number we've seen. Unfortunately, I don't have trend data in front of me, but I imagine the last few years it's it's really tripped up. And now we've flipped over half, more than half, want to control their own benefits.

David 3:16

Is that generational in part?

SPEAKER_02 3:19

It is. So when we when we pull back the survey results, uh, you know, I don't want to over stereotype on Gen Z. And our survey was not aimed at understanding, you know, different generation uh generational cuts. But when we when we look at the data and we sort it by age, we certainly saw a much higher percentage of younger employers, X Gen Z uh in particular, express that, hey, they want more control. Uh and I think that makes sense with how they they come into the workplace, right? And oftentimes they get to pick their computer or they uh pick where they want to work, you know, in this this day of of remote work. So they're they're used to picking things. Uh and so the idea of coming in and being told, well, hey, here's your benefit that we got you from this traditional group provider from Blue Cross or United, great, great companies, great benefits, but it kind of rubs Gen Z a little wrong. You know, they're not they're not used to being told, well, hey, here's what you get and be happy, we got it for you. They want some say.

David 4:22

So is it a tipping point or is it just a slow decline?

SPEAKER_02 4:28

I think what we're seeing is a slow decline in the preference for traditional group benefits. You know, they've been the mainstay of the benefit world for a long time. But what we're seeing over time is is a gradual shift away from that from employees that that want more control. And when we break it down, there's a few other statistics that were were interesting as well. It comes down to what insurance covers and and what it doesn't. You know, mental health was was cited among a lot of the employees of hey, I used to get coverage for uh therapists, uh, you know, for for mental health doctors and support. Now I don't. I wish my insurance covered that, and and it doesn't as much anymore. So we're seeing, I think, a gradual shift away from the traditional benefit model being the most desired by employees. Uh and it's driven by, I think, some of the demographics we

Cost Anxiety And What It Changes

SPEAKER_02 5:20

talked about as well as what's covered.

David 5:23

So let's talk a little bit about cost pressure. In the survey, 3.78% of employees are worried about rising health care costs. What does that level of concern mean and how does it show up in behavior?

SPEAKER_02 5:37

I think it it's it's changed the nature of benefits uh, you know, from being a really secondary or distant secondary. You know, when you think about total compensation for for an employee, right? You've got uh their salary, which which is first and foremost what's going to drive a job decision, uh, but then benefits is becoming an increasingly large part uh of that total compensation package. I think employers are seeing the dollars going into it or feeling the dollars going into it. And okay, when it was a small amount, great, my employer picked it out, I don't have to worry with the headache of it, you know, awesome. As costs are going up and things are getting more expensive, and that benefits are big health benefits in particular are becoming a larger percentage of that employee's comp, this idea of wanting more control is is increasingly taking hold.

David 6:35

Are employers underestimating, let's call it, this anxiety? Yes and no.

SPEAKER_02 6:44

Uh so I I one of the there's one of the big findings that we talked about from the survey was hey, employees want more control and more choice over the benefits. On the flip side, uh or related, they still said it's still benefits are still very important to their job choice. 54% said extremely important. Uh almost 40% said somewhat important. Uh that's still, you know, almost 95% of employees saying that benefits are very important. The question was, how important are health benefits when deciding whether to stay or leave at a job? So if you're an HR manager or employer, hey, having a benefit solution is important to recruiting and retaining your employees. But maybe shifting how you think about it instead of trying to do it in a one-size-fits-all approach, giving something that's more flexible.

David 7:37

Do you mean flexible in the core medical plan or flexible in voluntary benefits or both? That's a great question, David.

SPEAKER_02 7:45

Our our survey didn't go as deep into that, but really focus on hey, the question was who do you believe should control your health insurance choices? Only 12% said my employer. So those are the signals that it's like, oh my gosh, if uh for folks in HR or benefits that are thinking, we got a lot, we gotta figure the best health plan for my employees, you're doing a lot of work that employees aren't looking for you to do. Only 12% said my employer. 51% said me, the employee, 32% said uh a shared discussion between uh the me,

Why Individual Coverage Can Cost Less

SPEAKER_02 8:25

the employee, and my employer.

David 8:27

One of the things I found interesting is that you found that individual coverage often results in lower out-of-pocket costs. Why is that? Is it plan design or consumer choice or some other set of metrics?

SPEAKER_02 8:40

It's a great question, David. So when employers do move to an individual coverage HRA, uh, you know, a lot of the effort in helping design, hey, how's that reimbursement going to work? You know, the first move a lot of employers will make is say, well, hey, let's take the money I was putting into the group health plan and let's give that to the employees as reimbursement. And we see employees uh actually buy down metal tiers and buy down uh in network uh options as well. So it makes sense because if you're the employer, right, and you're trying to decide for all of your employees, whether you got 10 employees or 10,000, and if they're all in one location or scattered across the country, your best option as the employer is not to lock employees into a single HMO style plan. You've got to get the national PPO plan with the big network so that your employees, you know, can if you're making the choice, right? They've got to be able to go find their doctors and you want them to be happy. Well, those big national PPO plans are extremely expensive. And so maybe to continue to offer it, you've gone down over the years, you've gone from gold to silver to bronze, the deductibles had to go up a little bit so that you can continue offering a really broad network. What we see happen for employers that switch to an ICRA, the individual coverage HRA, now you're moving that decision point from the employer down to the employee. And they look at it and say, all right, I'm getting X number of dollars to go buy my health plan. And maybe they're hesitant about an HMO, but well, we live close to that hospital and all my doctors are in that network. It turns out individual employees are much more comfortable selecting an HMO than employers are. And it makes sense because you're not locking someone else into a certain network. You're just choosing the one that's most expedient for you. So we see that cost containment on the network. We also see significant cost containment with employees buying down meta levels. So, you know, employers will try to offer generous silver or gold plans, and they'll base their ICRA allowance, thinking that their employees will go buy a silver or gold plan. And then employees realize wait, I can go buy a bronze plan and have it 100% covered, or potentially even have a little bit of money left over for medical expenses. We see that draw to have that more customization. You know, we look at bronze as more likely to provide a customization opportunity as a real driving force.

David 11:13

Especially among younger people. So, you know, the conversation with advisors and employers for years has been numbers drive scale, scale drives a better bargaining position, et cetera. Are employers surprised when they start realizing that these individual coverage plans can reduce their overall costs?

SPEAKER_02 11:34

They are. And it's a little counterintuitive at first, but when you step back, it it makes sense. You know, so in most states, uh, you know, employers under 50 employees, they're gonna be in a community-rated risk pool. It really isn't most employers, we we see them at the old adage of, well, we gotta band together or we gotta go on the group plan to save money. And I get it, but the reality is if if you're five employees and you're trying to get with your neighbor to have 20 employees, like you're all in the same risk pool. It doesn't matter. In most states, uh employers over 50 are gonna go into their own, you know, they're gonna get become what's called a rated group, where insurance companies are gonna look at the experience or claims that that group has had and they're gonna set their own rates on it. Some states it's 100, most states it's 50. And that's a big move for employers, especially if they've grown into that range, because okay, they might have been going along at steady inflationary increases, and now all of a sudden they get a 20% increase or a 40% increase. And what's happening is they're crossing from that community-rated pool where their costs are based on the other small businesses around them, to now they're in their own pool. And the employ, excuse me, the health insurance company can look at that risk and decide, hey, this is higher than normal and we need to rate it up. Very rarely is it lower than normal and they rate it down. So employers think, oh, we've got to begin on this group plan because that's gonna help us with negotiation and leverage. The reality though is, you know, unless you're a Walmart or a Fortune 500 company, you know, most of the clients we see, you know, a 200 life nonprofit or a 150 life hospitality group or 300 life manufacturing firm, you know, those are sizable employers, but they're not gonna they're not gonna get the hospital to come negotiate and figure out different rates and and and coverage options. So they're kind of stuck in this this difficult place where they are subject to their own employees' like health risk. And a lot of times their own employees' dependence health risk. You know, it's a kid that needs something special or a spouse that's getting a therapy that that drives up costs for these group health plans. You know, versus in the in the ICRA space, you know, you're actually moving the way the ACA works, you're moving to a 20 million strong risk pool. You're back into that community-rated space. Uh, it feels counterintuitive to employers that are like, wait, I thought we were supposed to band together and get a better deal. Well, the best deal you can give your employees is join this 20 million person strong pool. And that's why we see costs so much more stable in the ACA than we do in the group market.

David 14:18

So if we flip to the other side and we look at the employer perspective, just under 6% say benefits

Risk Pools And The Scale Myth

David 14:25

drive job decisions. How do employers balance costs versus competitiveness? And are we kind of getting to a breaking point? Is that what this the overall view is here?

SPEAKER_02 14:37

Let me see, David. Can you I'm pulling up the I want to make sure I'm looking at the right number that you are. Can you say which one it was again?

David 14:46

Um I don't have the survey in front of me. Am I just going to a different question? Sure. Not a problem. So relative to cost, do you think that we're nearing a breaking point?

SPEAKER_02 14:57

I do. You know, I think uh what's what's really standing out um is again back to employees that we surveyed, how worried they are about about cost. Uh the question we asked was how worried about your health insurance costs rising in 2027? Uh about 35% said yes, very worried. 43% yes said yes, somewhat worried. So if you add that up, we're at about 77, 78% that are very or somewhat worried. And I think this is an opportunity, you know, for for employers or HR managers to realize, hey, that anxiety is out there. And I think employees, you know, the ones we talked to, they they signal the things that we see in the group market of, hey, I'm tired of constant, you know, and the way that shows up to the employee, right, is the deductible keeps going up or the metal level keeps going down. And so their out-of-pocket uh goes up and up and up every year. What we found, you know, with with ICRA is it's a really helpful reset. Now employees are able to see, you know, the actual full cost, but they're also able to control it and direct it where they need to. So we see employees less concerned in the ICRA construct because they know what they can spend and they know they've got more choice.

David 16:21

So what do you see smart employers starting to do?

SPEAKER_02 16:25

I think smart employers should be relieved by the survey that, hey, benefits still matter. I I think they should take note of some of the rising trends that, hey, more employee, more employees want control, more employees are worried about costs, and more employees want things that that maybe aren't covered by traditional group benefits. I think it's a great chance for employers to reevaluate. Hey, we've taken so much stress on ourselves to pick out this group plan every year and offer it to our employees. And it comes with great expense and great toll and mental energy. And maybe we don't need to do that anymore. You know, maybe we can just reimburse them and let them go get their own health plan.

David 17:11

You know, it's funny because my friend Mark often talks about employers' face we're taking the least worst renewal. It's nice for them, I guess, when they get out of that cycle. And if employees, especially the younger employees, are more comfortable selecting a plan that makes more sense for themselves and their family, it's a win-win, I guess, at the end of the day. Are you seeing a big impact of insurance stress? We mentioned mental health earlier. Is it is it a huge issue and is it being measured enough? And what role does it play in plan design?

SPEAKER_02 17:43

Hmm. I I you know it's interesting, David, because you you've you've been in this business a long time and there's a lot of really smart people that do really smart things, and then you say the word deductible to them and their eyes roll over and you know, and and they don't quite fully understand the factors at play. And it's easy to point fingers at insurance companies or hospitals or doctors or or policy when you know reality, if we step back of like, hey, yes, there's things that that make it complicated, but at the end of the day, insurance is simply, you know, money in from an insurance company's perspective is money in's gotta be slightly more than money out. And if we're having to spend on all these things, or kind of uh we look at the group plan construct as it's gotten more expensive, and we call it kind of peanut butter spread benefits over everybody. Well, it doesn't deliver quite what everyone exactly needs. There's a lot of money and it's all spread out. You know, looking at an ICRA or defined contribution arrangement takes all that peanut butter spread money and gives it to someone, and they can go get the health plan with their doctors and they can use their medical expenses. You know, maybe one family needs glasses and a certain prescription, you know, another one needs diabetes supplies, another family needs some sort of specialty care, but you can direct those dollars to exactly what's needed versus trying to spread it out and hope that everyone gets gets a little bit.

David 19:15

Well, and the and the feeling of the comfort level of feeling as though you have control, even if maybe it's only over certain aspects of the plan that you choose, that goes a long way to say, you know, I tailored this as much as I could for my family, a single single person versus a family with mom and dad and three kids and different needs, right? And we see this in a voluntary benefit selection. You know, we we kind of tailor to populations oftentimes the folks who are doing voluntary and who are really smart about it. And

How To Roll Out ICRA Well

David 19:45

yet we haven't done that so much in in the core medical side. And it it makes sense, I guess. So if if employers are aware of this and they start down this path to a defined contribution model, where do they where how do they start? And then where do you see that they usually get stuck? Because that's someplace that advisors need to know about.

SPEAKER_02 20:04

Great question. A great starting point if you're an employer or HR leader is hey, ask your broker, ask your consultant if you work with one. If not, so there's there's vendors like Take Command that that can help. You can also get some great, you know, kind of industry or agnostic information. There's a group called the HRA Council, HRAcouncil.org. It's it's a nonprofit that can help employers understand what their options are to explore to find contribution. Again, start with your broker or consultant. You can certainly reach out directly to Take Command or other ICRA vendors as well, or get kind of the third-party research information from uh HRAcouncil.org. And then, you know, it it really is about setting expectations and change management. Uh the best ICRAs are the ones where employers uh you know elect it in time, they're able to explain to employees and kind of work through a change management process. This is not part of this survey, but we know, we know just anecdotally, you know, employees love to complain about their insurance benefits. But then if you change it on them, they lose their mind, right? So you gotta walk them through this process. And what we find the best ones, you know, had have plenty of time to design a plan so they know it's gonna work well, communicate it to employees, and then work with a trusted vendor to help everyone feel like they're getting something more from this, versus the group plans going away, and now we're stuck, you know, shopping on public exchange or something like that.

David 21:37

You know, as as go ahead.

SPEAKER_02 21:41

I was gonna say, you know, those are the ones, you know, that that prepare and and implement it and walk through. Those are the ones that, you know, month two, three, five, ten, and you know, employees are singing the praises of the ICRA. And then you get to the renewal, like you mentioned, and you know, the employer realizes There's really nothing to do anymore. Uh we just adjust the contribution if we need to, or if we need to uh, you know, bump it a few percentage points or pull some some money back to save costs. Like you just make those adjustments, and then individuals will change their health plan if they didn't like it, or they'll renew it if they did like it. The ones that struggle are the ones that try to pretend ICRA is just like group. Uh, they try to roll it out and uh, you know, they try to control too much. Uh again, back to this kind of paternalistic, maternalistic sense that I think employers have. It'd be interesting to take this survey from the employer perspective and see, hey, who do you think should be in charge of benefits? My hunch is that way more than 50% would say uh the employer, and you know, very few would think the employee is. But we learned from this story, over half employees want to do it themselves. Uh, and so this is a great chance for employers to say, awesome, all right, hey, we're not gonna throw you the wolves, but here's a plan, here's how we're gonna do it. Uh, and and here you go. Uh, here's your money, go go get your health plan.

David 23:07

So our audience has a ton of advisors.

Advisor Myths And The Next Wave

David 23:10

What are they getting wrong about HRAs and individual coverage? What myths need to die? Great question.

SPEAKER_02 23:19

ICRA is a replacement for group health insurance, but it is not group health insurance. So if you're an advisor, you have a key role to play with ICRA, but you gotta throw group out the window and you gotta think about it totally different.

David 23:40

So were there any industry insights that surprised you? Like, is there any one particular sector that might be ahead of the curve or any sector that's in real trouble? Or is everybody kind of sinking at the same rate?

SPEAKER_02 23:57

Yeah, great, great question, David. You know, we we did break this survey into different industry segments, and there there was some variation. Uh, you know, we looked at the public sector, we looked at hospitality and tourism, uh, healthcare, uh, and education. By and large, a lot of the numbers and sentiments were were similar. You know, what what we've found is like, you know, the the approach is still the same of hey, you've got to uh communicate how ICRA works, you gotta communicate these these other things to make sure that it make sure that so let's look ahead.

David 24:36

We always like to end our our conversations by saying, you know, what does the future look like? If based on the survey and what you know you're seeing in the industry, if you look three or five years forward, what do benefits look like? Great question.

SPEAKER_02 24:50

I think we see benefits, you know, start to look more like Ks. I think we see, you know, we've seen this happen before in retirement. Group plans function really like pension plans. And there's still a role for pension plans. There'll still be a role for group health plans. But I think by and large you'll see more and more employers want to go with the defined contribution, you know, ICRA model of benefits. So I don't think it happens overnight. I don't think there's a magic wand or turning point, but I do think you're gonna gradually see more employers and not just small ones, more medium and large employers start to really explore ICRA and alternatives. And so a great, a great way if you're an advisor is you know, hey, be prepared. You can educate yourself at tradecouncil.org or reach out to us at Take Command. We have a lot of training courses and information that can help brokers and advisors prepare for this shift and figure out, hey, how to be a winner in it. I think the role of the broker and advisor is so crucial. You're in charge of helping advise employers and advise employees on local markets and plans. I think brokers that see themselves as well, I give value by helping employers shop every year for insurance. That's just gonna be exhausting. I think brokers and advisors that give value to their clients by helping them plan and prepare, and by helping them look at a three to five year horizon, those are gonna be the ones that really stand out in this new market.

David 26:29

You know, it's interesting because it is a change not unlike the larger groups, the 100 plus groups have gone through, where now there is tons of self-funding in groups where if I had gone to a stop loss carrier when I was running a TPA and asked them for a quote on a 150 live group, they would have thrown me out of the office and maybe not opened the door before they did that. So that's the top end of the market. The you know, the mid-sized to larger groups have changed a lot. And now it looks like some of the smaller groups are going to be inevitably changing as well to also to give in

Closing Takeaways And Where To Learn

David 27:00

to that pressure from employees who want to control have more control over what they do. Fascinating conversation. Jack Hooper, founder and CEO of Take Command Health. Jack, thanks for coming back on the podcast. We we've loved having you.

SPEAKER_02 27:13

David, thanks. Thanks for having me. Great to see you.

Announcer 27:17

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