4 questions on the future of employer-sponsored healthcare

Employers are providing healthcare for a huge segment of Americans for better or for worse. We’ve talked a lot in this newsletter on both the positive and the negative, and recently cell and gene therapies that will impact employee health care costs. It may not be the bets system, but it’s the system we’ve got. So how do we make the best of it?

This past week, I sat down for an hour for a candid conversation with Personify Health’s Chris Michalak, who’s been involved in this world for several decades, both as an executive at Virgin Pulse (the company that merged with HealthComp to become Personify Health) and prior to that in benefits-related consulting. He’s also lived through the “Point Solutions” era, so he has seen a lot in the employer channel.

I had a lot of questions for him, both about the rise of new health insurance arrangements — ICHRAs, captive insurers and so on. I was also curious about what he’s hearing about specialty medications like GLP-1s, which are a pain point for employers given their cost, and whether he still sees potential for Point Solutions to sell into this channel. But I limited this discussion to just four for the purposes of brevity. I hope you enjoy the conversation as much as I did!

Second Opinion: It’s 2025, and medical costs continue to increase, making it more and more expensive for employers to provide high-quality healthcare. What do you see as the major factors keeping employers up at night?

CM: In my mind, it’s two things: Cost and complexity. Employers are simultaneously thinking about how to address costs, while also dealing with all this increasing complexity related to the treatments and conditions that employees are grappling with — and they have limited levers to pull. Once you approach high single-digit medical trend increases, like employers are today, that’s a big problem - and much of that is driven by specialty drugs inclusive of GLP-1s, as well as cell & gene therapies. I spend a lot of time talking with employers about how they are being creative by necessity. When the cost trend was in the single digits, some of it could get passed on to the individual or the company could bear it. Now, that’s changing. So the next few years are going to surface a lot of discussions around the tools, plan designs, networks, and other ways to control overall cost increases.

I also view Stop Loss as becoming a more important tool than ever before in the self-insured employer marketplace. At Personify, we already have two employees with serious blood-related conditions that will require expensive treatments. Those have to be considered in the realm of Stop Loss. Stop Loss carriers will have to value their risk appropriately, and there will be cost increases as a result, particularly as prices of specialty drugs keep increasing.

With the GLP-1s, I see employers taking different stances. Some are saying that they won’t cover them; while others have taken the technology and carved out the use of the drugs. Others are saying ‘yes in limited circumstances,’ with health coaching and other authorizations in place because we know that the drug is most effective when combined with behavioral modifications. Until we see these drugs going generic, every company will have to think about it and come up with a solution that works for them.

Back to the point about complexity, we should talk about the proliferation of Point Solutions. This has also become increasingly hard for employers and their employee members to navigate.

Second Opinion: You mentioned the complexity associated with Point Solutions. How are you seeing employers adapting to that? One trend I’ve seen, for instance, involves investing in their own data warehouse to be able to do deep analytical work internally…

CM: Employers are getting smarter about their data and companies like Artemis have made data warehousing an accessible science. Employers are using tools to better understand both utilization and ROI when it comes to the vendors they’re using. Some of the big categories that tend to be popular include mental health, MSK, diabetes and women’s health. But I see others, like caregiving, which is becoming a hotter area as more employees are managing the needs of both their kids and aging parents. Gut health is another developing category I’m keeping a close eye on. What we do know is that no two employers are the same, and their employees have their own set of unique needs.

Do I think we need more Point Solutions? I went to HLTH recently and met all these incredible people as I walked the halls, all trying to solve a single health care problem. For instance, I met a few companies selling MSK solutions into the employer, and another selling MSK-only navigation! My conclusion was that proliferation is not a good thing ultimately, as there’s already so much specialization in health care. Let's focus on getting support in the hands of people who need it. If I were starting out now, I think I’d go to the health plans and not the employers, given that a lot of the biggest problems have been solved by existing Point Solutions. To that end, I really like what some companies are doing — they don’t only go direct to the employer, but also sell into the health plans. So it’s available as an in-network benefit for that member, versus an additional sale when there’s already probably an existing women’s health vendor like Carrot, Kindbody, or Ovia Health.

Second Opinion: You mentioned creativity, so I’d love to hear more about all these transformative alternatives to the traditional health plans, inclusive of ideas like ICHRA that I’ve written about a lot. What are your thoughts?

CM: These days, employers aren’t automatically going to a BUCA. I see them getting more creative and saying: ‘What about an ICHRA plan, or a Pareto captive plan, a variable co-pay plan, a TPA…’ The question that employers are asking is how to manage the cost of care more effectively with the other options they have at their disposal. I’ve seen companies like Pareto (helps mid market employers move from fully-insured to self-insured) and Gravie (a health insurance marketplace that covers 100% of the costs for common healthcare services) have a lot of success. I’m also fascinated by the idea of behavioral change through a variable CoPay model (to lower the price of prescriptions) as well as reference-based pricing (a cost containment strategy where a health plan sets a maximum price they’ll pay, versus negotiating on a case-by-case basis). The TPA space is very exciting - where you can pick and choose the Stop Loss, PBM, network and plan design - and I think we’ll see more innovation there. It’s growing faster than the traditional self-insured PPO market.

I do believe we’ll see the most innovation from smaller employers who can be the most nimble about plan design, network choice, and so on. But some of the large employers are being innovators also. They are carving out slices of the population, say in this geography, and doing a direct contract with a health system and a navigation solution attached.

I see creativity in pockets, a lot of trial and error, and some early signs of success. Once you see these models start to be replicated, then you know they’re starting to work and it’s making a difference. All these companies are taking market share away from traditional players.

Second Opinion: Your company sits in the navigation space, so I’d love to ask you about one of my favorite topics: Marketing. How do we get employees more aware of the health benefits they have access to and availing themselves of these services?

CM: Recently, I’ve been having conversations with my team about the value of video-based content, and of getting inspiration from social media. There’s no reason why health information, including about benefits, couldn’t be more informative, entertaining and accessible. When I go to TikTok, I see fantastic health care content — but of course, to do that in a benefits context we’d need to ensure it’s rigorously evaluated and clinically checked. But I believe we can get there and create clinically correct and accessible content. I’m a huge proponent of the idea that we need far more health literacy. I believe that one major way to improve the system we have is through more informed consumers. We need to provide them with the tools to get smarter because they are already their own chief health procurement officers.

That’s it for this week’s edition. If you’re interested in sponsoring a future Second Opinion newsletter, don’t hesitate to reach out. Our model involves aligning on a topic of mutual interest, like the future of employer healthcare or the changing regulatory landscape related to AI. Thanks again to Personify Health for making this edition free for the S.O. community.