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The Hard Way

Prescott Pailet Benefits LP • Employee Benefits
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By Brian Anderson, Published 1/1/2009

Just get Kevin Pailet started on ideas for how Americans can improve the way they receive health care. Then sit back and listen.

Kevin M. Pailet, RHU, REBC, CBC, knows a thing or two about the market. He co-founded Prescott Pailet Benefits in 2006, and by focusing on the development of innovative solutions to the needs of employers and employees, the married father of two has created an agency that is a market leader for employee benefits in North Texas. The Dallas-Fort Worth area firm has more than 500 commercial accounts managed by a team of 28 employees. The firm has achieved elite status levels with almost every major insurance company and in 2007, PPB was ranked as the No. 1 producer in the southwest region by Principal and the No. 1 small business producer in DFW by Humana.

Pailet himself has has been a member of the Leading Producers Round Table of the National Association of Health Underwriters every year since 1996 and has earned the Golden Eagle Award (the highest award given by the LPRT) every year since 2002.

And while many brokers have shied away from consumer-driven health plans, Prescott Pailet has led the way. Nearly half of the firm’s clients offer an HSA, HRA, or medical bridge plan.
Pailet says the key to the company’s success in consumer-driven health care is by being more than just an order taker for clients.

“Too often we fail as brokers by taking the easy road and simply quoting plans similar to the current plan and/or acting as ‘order takers’ and simply quoting what the client asks us to,” Pailet says. “Brokering is a commodity sale. Those who act like ‘bidders’ will be treated like bidders and the clients will get the same result. Act as a professional and you’ll be treated like a professional. Act as a salesman and you’ll likely be treated like a salesman. We bring value to our clients by advising them as to the pros and cons of each plan and by recommending better solutions.”

This is done, Pailet says, by first putting yourself in the shoes of the consumer (the employee) and explaining the pros and cons of the plan from a layman’s perspective. “Step two is to get them focused on the total out-of-pocket cost (or potential total cost) of their health care consumption. By this I mean that they must focus on the premium as well as the out-of-pocket costs,” Pailet says. “The employer is typically focused primarily on the premium while the employee is typically focused on the deductible, co-pay, or some other out-of-pocket cost. They need to see the entire picture before they can make a cost/benefit analysis.”

A Closer Look

Pailet explains that an employee who goes to the doctor’s office twice year is often focused on the $30 co-pay vs. the $20 co-pay. The difference to them is only $20 per year. “What would happen if they became ill and had to go into the hospital? Under a traditional $1,000 deductible 80/20 plan with $2,000 of co-insurance they would be out-of-pocket $3,000 plus co-pay, which could be well over  $1,000 if they take multiple medications and/or need follow up physician or therapy visits. Co-pays sound great until you have to make a lot of them and then realize that they don’t accumulate towards your deductible or co-insurance limit. Most employees don’t realize that most traditional co-pay plans don’t have a real out-of-pocket because you must pay co-pays forever.”

Need a fourth medication? Pony up 12 more co-pays for the year. “Under the HDHP the employee is able to drastically reduce their out-of-pocket exposure to the larger claims. Assuming the employer will contribute the premium savings from the traditional plan into an HSA, this plan would be better for the majority of employees who don’t consume much healthcare and would be even better for those that consume the most healthcare,” Pailet says.

As far as the employer is concerned, Pailet says he often works to identify problems they may not be aware of. “For example, most employers are focused on the premium because it’s a big number to their bottom line and it’s tangible. We try to get them to focus on the total cost of offering benefits,” Pailet says, referring to the combination of premium, the loss of time for plan administration and communication, and the regulatory and legal risks associated with sponsoring a plan.

Changing Landscape

Plenty of promises were made during the recent presidential campaign. But given the current economic environment and all the other priority issues facing the new administration, Pailet says he can’t imagine health care reform being in the spotlight any time soon.

“I simply don’t see how government is in a position to pay more for this and/or place an additional financial burden on struggling employers. Therefore I don’t believe there will be any real movement on universal healthcare in the next legislative session,” Pailet says. “That being said, I do believe we’ll see movement towards uniform national standards as opposed to the current state-by-state standards.” He also expects a focus on mental health, pre-existing conditions, guarantee issue and community rating.

Pailet also says most of the national debate about universal health care has been misguided by talking about the “financing” of health care. “The cost is the cost, so changing the payer (government, private insurance, individual funds) isn’t the biggest issue,” Pailet says. “The current payment system rewards inefficient providers and punishes the most efficient. The physician that treats you with one X-ray and a lower-cost outpatient surgery is paid significantly less than the physician that orders multiple MRIs, performs a more extensive surgery, and then submits you to a physician-owned hospital.”

He admits that sometimes a patient really does need that extra MRI, a more complex surgery and the inpatient stay. “But independent studies consistently show that many providers are making decisions based on the level of reimbursement instead of the most cost-effective and/or efficient method. Then again, is it really the physician’s fault? They’re simply playing by the rules as they exist today,” Pailet says, clearly pessimistic about the status quo. “I do know that we must look well beyond the issues of ‘financing’ and focus more on efficiency, payment for outcomes instead of services, wellness, consumerism, and tort reform.”

Opportunity in Adversity

There is no easy fix for health care, and of course not for the struggling economy. But that certainly doesn’t mean it’s all doom and gloom for the benefits market. In fact, Pailet says the economy presents brokers with an incredible opportunity to grow their business.
“In the past many employers wouldn’t take the time to meet with us because it was just easier to focus on their business and take the 10 percent-plus increase. The economic environment has changed this behavior and they’re now more willing to take the time to consider other solutions,” Pailet says.

Additionally, he says, the “relationship” roadblock is coming down. “Many employers were using their P&C agent, life insurance agent, or their buddy as the broker. In the past it was very difficult to overcome this relationship regardless of price, value, and/or services,” Pailet says. “Again, the economic environment is causing many to reconsider. There is great opportunity out there now for professional health insurance brokers. We’re writing a lot of new business because we’re providing better solutions.”