What the McKinsey Report on Healthcare Really Reveals

Unless you’ve been living under a rock for the past few weeks, you probably know that McKinsey & Company recently published a report titled “How US health care reform will affect employee benefits.” Amongst other findings, the study claims that 30% of employers polled plan to cut their group health care plans.

This has caused a stir throughout the political arena, as Republicans cite the report as evidence of the negative consequences of Health Care Reform, and Democrats blast McKinsey for not releasing their methodology. The real issue lies deeper, and is related to a topic about which I wrote about previously here on the Executive Street blog.

The Real Revelation

A June 24^th, 2011 editorial in the Wall Street Journal got me thinking about the root issue with the McKinsey report and most other media buzz about Health Care Reform. The editorial claims, “The furor says less about McKinsey than about the politically damaging reality of the new law.”  I’d go a different route.  I think the furor over the report reveals that across the board, decision makers don’t know anything (or at least enough) about Health Care Reform.

Upon release of the methodology, expert critics of the findings say that the survey was push polling, feeding questions to executives so as to cause them to give the right answer. Conversely, a Forbes blogger and many others feel that the survey was rigorous, prepared by a creditable research company.

A Distraction, Not a Solution

Talking about “Shutting up McKinsey” (as the recent Wall Street Journal editorial stated) is, like so many things in the discussion about health care reform, a distraction. Whether or not the McKinsey results are an accurate prediction of executive behavior, or if the survey did or did not meet the standards for academic rigor, might be newsworthy, but they miss the most important point. It is inconsequential until executives truly understand the implications of health care reform.

Our company works with senior executives every day to help them optimize their investments in employee benefits.  In doing so, we see that, across industries, regions and sizes of business, business leaders don’t have the most basic working knowledge about the new structures and incentives embedded in health care reform—and many don’t want to, as we mentioned in our last Vistage post when we referenced a survey that the WSJ’s CFO blog covered in May. That Journal article stated, “Of the 151 CFOs and executives of mid-sized companies… only 1 in 5 said they have actually given a great deal of thought to the health-care overhaul.” The backlash on the McKinsey report shows that statistic is probably accurate nationwide.

It is critical that executives do understand the implications of Health Care Reform in 2014 and beyond.  To quote the last paragraph of the now infamous McKinsey report:

Whether your company is poised to shift from employer-sponsored insurance or will continue to offer the same benefit package it does now, health care reform will change the economics of your workforce and benefits, as well as how your employees value coverage. Understanding these changes at a granular level will enable your company to gain or defend a competitive advantage in the increasingly dynamic market for talent [emphasis is mine].

Leading beyond 2014

It is irrelevant if McKinsey did or did not lead executives to a particular answer.  The fact remains that if you can be led, you don’t know enough.  If you want to know how your business (and your employees) will be impacted by health care reform, get some help. As Doug Elmendorf of the Congressional Budget Office testified before Congress on March 30, 2011, “Moreover, many of the effects of the legislation may not be felt for several years because it will take time for workers and employers to recognize and to adapt to the new incentives.” Leading employers will not be the last to know. If they are, they will no longer be leading employers.

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For more information about Health Care Reform or Dependent Eligibility Verification Audits, follow ContinuousHealth and Vistage member Eric Helman, CEO of ContinuousHealth, at @CHealthUpdate or visit www.continuoushealth.com. ContinuousHealth is an independent organization located in Atlanta Georgia that uses proprietary technology to help employers optimize their investments in employee benefits programs.  ContinuousHealth has performed over 250 Dependent Eligibility Verification projects. ContinuousHealth distributes its products through an exclusive network of certified Brokers and Consultants.

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