April 20, 2005: Distribution Channel Commentary (DCC) # 76


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  2. "Government cannot make man richer, but it can make him poorer."
          Ludwig von Mises

    "If there is one thing most tragic about the ideas promoted by the advocates of national health care, it is that they keep going around in circles, always starting and ending at the same place: more government regulation. Germany began its "sickness fund" for all documented citizens in 1833. When it became clear the money needed to pay for medical care was finite but the demand for "free" medical care was infinite, government authorities admitted they could no longer afford to meet the demand. To keep the promise alive, governments increased taxes, assessed fees, required employers to pay a share of the cost, and created a plan for rationing care. Today, the negative consequences are legendary. Germany's government-run health care system is running an annual deficit of $3.9 billion (Ä3 billion)."
    Excerpted from: "Plodding Along A Cul-de-Sac" by Conrad Meier published in Health Care News 3-1-05 at this link:

    "Our Age of Anxiety is, in great part, the result of trying to do today's jobs with yesterday's tools."       Marshall McLuhan

    "Out of intense complexities, intense simplicities emerge." Winston Churchill

    "Nowhere is seminal, prime-mover thinking needed than in the healthcare arena, the costs of which are eating our national lunch and making our major businesses internationally uncompetitive. It is all too clear that we are spending too much time and money on curing illnesses, and hardly an iota on prevention. We are building healthcare policies based on a shallow reading of the data. An enormous number of health problems in the U.S. stem, not from Mother Nature, but from flaws in our society that can be remedied. So the litany of suggestions we are hearing about how to repair or improve our healthcare system is almost totally irrelevant. We need some irreverent data analysis that shows where public health spending could make gigantic differences in our lives and pocketbooks by simply not letting illness happen and changing some of our self-defeating habits."
    William Dunk (my neighbor) from his weekly newsletter at:


If, gentle reader, you have not caught my recent writings on health insurance, you might go to our web site at www.merrifield.com and click on the new "Wellness/HSAs" tab under which we have double posted links to all such material. In the meantime, some readers have been responding with great points and shared experiences. Here are a few:

Reader Comment: "HSAs are the latest gimmick trumpeted by the health insurance companies, now that "managed care" has fizzled as Ďthe cureí for our healthcare woesÖHSAs are not a cure for our total health care mess."

My Response: Agreed that HSAs are not a cure for the total health care mess. Iíll leave transformational, utopian health care solutions to the policy wonks. But, right now health insurance costs have been rising at double-digit rates for the past 6 years with no relief in sight! GM, Ford and other bigs, including the Armed Services, are going down, because of un-funded health care liabilities. What can a small (service) business in the private sector pragmatically do to survive and get a strategic edge?

If you are a service business, your edge comes from the quality, consistency and flexibility of your service delivered by best, retained people. If you want to attract and retain best people, then you have to pay up and address their health needs. I think that you can use HSAs as a key component of a high performance service culture as well as a short-term, health insurance cost-trimming tool. For more on how to do this, see our articles 5.15 Ė 5.17.

Reader Comment: "Bruce, I think employees are very conditioned to think small co-pays and many of them will not easily get or necessarily like the way HSAs work; this is a big paradigm shift."

My Response: No argument about these good points. I have dedicated 8 annotated slides to these challenges in my slide show entitled: "The Revolutionary Potential of Health Savings Accounts" at this link: http://www.merrifield.com/articles/RevolutionaryPotentialof%20HSAs.pdf.

Check out slides 13 to 22 for answers on the how toís for overcoming the concerns above. If it were easy for everyone to use HSAs to gain strategic advantage, then there would be no strategic advantage. Most companies will eventually go to HSAs, because all insurance plans will eventually have high enough deductibles to qualify for HSAs as insurance costs continue to rise. But, how many CEOs will get a positive opportunity vision for a high performance service culture in which HSAs is a key component for growing both the wealth and the health of employees? Do you think that most will, instead, have a staff person continue to shop for best prices on traditional plans each year and then evolve into HSAs for reactive reasons instead of proactive, culture changing reasons?

Reader Comment: "Iím a bit cynical about how any formal wellness program might work, because of a big failure to get my employees who smoke to quit. I did the hard and soft math with them for the total cost to them for smoking, and then offered weekly bonus money for every week that they didnít smoke. Everyone eventually went back to smoking. If the CEO is a good role model for healthy practices, shows personal concern in helping people quit what they know they should and canít get results, then what can? Most people just arenít going to change their bad health habits."

My Response: Right again! Only 5% of alcoholics go into spontaneous remission in a given year. Only 4% of heavy people successfully lose weight and keep it off. But, what about the reasonably healthy people? What if most responded to a wellness program and got 10 to 20% more fit? Wouldnít their increased -energy, pride, and appreciation for the company and can do spirit for tackling change - all go up? The concept of "appreciative inquiry" suggests that we not waste time trying to solve chronic problems, but rather we focus on what is going best and do it even better. If some of the chronic health cases want to nibble at the wellness programs offerings, then thatís gravy. The bigger issues are:

  • How do we create a healthy culture?
  • How do we better attract and retain healthy, self-responsible people?
  • How can we create more change energy within the people who can make change happen for our company, so the rest of the people can go along for the ride and be pulled through their work day?
  • How can our wellness and health insurance offerings be a turn on to the healthy prospective employee and a turn off to the closet, chronic health case?

The companies that figure out the answers to these questions and implement them will have a big competitive advantage in our increasing disastrous health care climate.

Reader Comment: "As a young, fast growing company, we had not yet been offering any health insurance or 401K retirement options. I, as the owner, realized that I could cover my family for catastrophic medical problems with a "health savings account" and put just over $5000 per year into a tax-free savings account. The total tax advantages of HSAs are better than both IRAs and 401Ks, and Iím sleeping easier even though I have a second teenage son now driving around town late on Saturday nights. I shared my research on HSAs with my 15 employees; offered to put a $500 bonus contribution into all new HSAs; and 8 of us now have them. It can be a great employee benefit tool for any company that either has no insurance or is getting ready to drop the health insurance that they might have had, because it has gotten to expensive."

My Response: HSAs are especially useful for companies with no insurance or those who can no longer afford traditional lower-deductible, co-pay plans. The observations about 401Ks are true too. About a third of all employees in the US who could contribute to 401Ks donít, even though many employers offer some matching contribution incentive. For employees with incomes less than $30,000, the non-participation rate climbs to 59%! If they donít contribute, then the top of the payroll canít contribute much either. For companies with many lower salaried employees, HSAs could kill two birds with one account: tax-free savings for retirement that can be tapped for medical emergencies tax-free at any time before or after retirement.


I was privileged to be a resource for a tele-conference seminar on 4/19/05, which was sponsored by a trade association. An insurance broker went first to discuss trends in insurance and the details of HSAs. I went second to talk about what you can see in our posted slide show on this topic. But, the subscribers were, I suspect, overwhelmingly staff people in charge of insurance shopping and administration, because all of the questions were technical details about HSAs. There was not one strategically oriented question about the whyís and howís of how do we start to move towards a healthier, high performance work force and culture.

In the past week, newspapers have had daily articles about the deflation in American wages due to Asian competition and critical inflation in rising health care costs. These are two huge environmental factors that demand innovative responses that must be woven into new competitive visions for how small businesses can attract and keep best people, compete and succeed. To wring our hands and claim to be victims of these forces and the vague notion that "a lot of our employees are not going to like any changes in health care" is not the answer. And, we canít expect any near term "solutions" coming from the government. If anything the Bush Administration is very committed to passing more legislation that will make HSAs more effective.

Instead of being victims of circumstances, what can we do to proactively turn negatives into strategic positives? If all employees are concerned about and value health insurance, what can we do to pass through our total spending on health insurance to the employees? This will give them the chance to save some of it for themselves while they get the choice, control and convenience that they personally want in health care?

If some employees donít want to be responsible for improving their health and wealth and want some paternalistic employer to take care of these matters for them, do we want to work hard to please and retain these people or hire more like them? The health insurance costs per employee have gotten too high for it to not be a - hiring, wellness and change energy - strategic issue.


Captains in charge of investigating the potential of HSAs and/or corporate wellness programs for small business have started to contact me. One client, who read our article on corporate wellness programs (#5.16), was keen to know more about "healthy hydration" and best pedometers. So, we prepared some exhibits for them, which we have posted under our "Wellness/HSAs" tab. http://merrifield.com/HSA%5Fwellness/.

If you are interested, they are entitled:

  • Whatís the Best Pedometer to Buy for Wellness Programs?
  • Healthy Hydration Facts and Guidelines
  • Why Drink Alkaline, Ionized Water?
  • The Total "Detox Path" Starts With "Healthy Hydration"

In the April 7th issue of the NY Times, there was a summary of two surveys of small business operators by Union Bank and American Express on how businesses were keeping costs down. The article is no longer freely accessible, but here is an excerpt from it, followed by some comments:

"Two dark clouds are hanging over the otherwise sunny small-business world - soaring health insurance premiums and increased competition from China. To keep expenses down, only half of the businesses surveyed by Union Bank provided health benefits, and of those, about 20 percent had shifted more of the cost to employees last year. The American Express poll also found employers transferring costs to workers; the proportion that offered paid vacation fell to 52%, from 56% in 2004; the portion that offered paid holidays fell to 50%, from 57% and the number that provided 401K plans fell to 20% from 28%."


  • The definition of "small business" can vary, but typically it is 0 to 50 employees, but the smaller the average participant in these surveys, the more financially fragile they tend to be.
  • As jobs go to Asia where wages are much less and benefits are non-existent, there is deflation in total compensation in similar jobs here in the US. Unless businesses reinvent how they do old activities or find new needs and fill them profitably, they will not have much luck trying to reactively cut their people costs to regain prosperity.
  • Almost every small business can re-conceptualize their business around the insightful opportunities that come from analyzing customer profitability ranking reports. For clients that have used and applied our DVD-based training program "High Performance Ideas for All (employees)", it is not uncommon for them to double their sales with only half of their existing customers while increasing profits 4 to 10 fold while also increasing personnel productivity by 30 to 100%.
  • Companies need to develop new value-added propositions for the right customers and execute with employees whose hearts, minds and wallets are tied into the new visions rather than cutting costs and driving their best employees to some other company.


Thatís all for this edition!


Bruce Merrifield