Ep#485 Health Plans for Small and Mid-Sized Businesses - John Clay | ShiftShapers

Speaker 1: 0:00

A common misconception is that solutions that are unusual or crafted are only for large groups. But what happens when you meet a broker who's got a bunch of small and mid-sized groups and wants to use those same solutions? We'll find out on this episode of Shift Shapers.

Speaker 2: 0:21

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 shifts. And now here's your host, david Saltzman.

Speaker 1: 0:43

And to help us answer that question, we've invited my buddy, john Clay, president at Better Source Benefits. John, great to finally have you on the podcast.

Speaker 3: 0:51

Dave, thank you for inviting me. I'm proud to be here.

Speaker 1: 0:55

Well, you know, we're glad to have your wisdom and you're going to share it with us. So let's start a little bit about your background, because everybody in this business has an interesting background story. How do you get to be doing what you're doing? Background, because everybody in this business has an interesting background story.

Speaker 3: 1:06

How do you get to be doing what you're doing? Well, it's like many people in the insurance industry, it was a last resort. I was in materials control, actually my first five years. With my degree in business. It was in supply chain management. So I was in manufacturing for the first five years of my career and that was during the big boom of the 80s. There was a lot of defense spending going on, ronald Reagan was president and people were making factory generated products across the country and a lot of them had military applications. So that was where I fit in and then that came to a close at the end of the 80s and downsizing. What have you happened? And I found myself looking for work. Have you happened? And I found myself looking for work and fortunately, I was put in with a major insurance company as a district rep, as a captive at Blue Cross, blue Shield of Kentucky, back when they were a mutual company owned by the policyholders.

Speaker 1: 2:23

And the rest is history. The rest is history, the rest is history. Let's talk a little bit about small and mid-sized groups, because, you know, you and I have seen each other at meetings where folks are talking about all these highfalutin solutions for larger groups, which the definition of large has certainly changed a lot since you and I got into the business, but it's still. There are some things you can do for a group of 30 or 40 or 50 that you can't do for a smaller group. What are the problems? The same in the small group market, or are they worse?

Speaker 3: 2:53

Well, of course they are. And they're worse because they're the underserved market. You know, we'll call it the invisible hand. If you consider the forgotten man and the invisible hand, the middle of America is built on entrepreneurship and many of those entrepreneurial types have begun their business as a two-person group or a five-person group and a lot of them don't reach 50 employees. A lot of them don't reach 50 employees and they do quite well, especially in these low, low lying areas. That, and what I mean by that is they fly under the radar. Now they don't have the solutions brought to them because they're not getting the kind of exposure to anything other than the status quo.

Speaker 3: 3:44

And you know, about seven years ago I was putting together my spreadsheet for yet another small group renewal and I had three options Blue Cross, united, humana and I, just like I, tapped out. I said I've had enough, there's got to be something else. And when you start to look at your career and I attended my first conference and I had an interview with a cameraman at the end of it he said if you could summarize your experience these last four days at the conference in one word, what would it be? I said shame. He's like cut. What are you talking about? I was like, yeah, I walked in here with 25 years experience, thinking I knew a lot of things about medical plans and how to handle client services and delivering value for employer groups and clients, and after four days of my initial Ascend conference, I learned how little I did know in the world.

Speaker 1: 5:03

Well, you know, I've always told my kids if you're the smartest person in the room, you're in the wrong room because there's always stuff to learn. So you know you shouldn't be hard on yourself about that. But every time I go to those meetings and I've been at this 42 years, now, 43 years I learn stuff and that's what keeps me doing. The podcast is I learn from guys like you and other folks who have different kinds of markets than I used to work in and have had to find creative solutions. I guess would you say that the difference between a humongous company and a small company is that if a humongous company overspends by 10% on their medical care, they can kind of swallow that, even though they shouldn't. But with a small company, if they overspend 10%, that may be the difference between making payroll and not making payroll.

Speaker 3: 5:49

Well, making payroll, not making payroll, is one thing, but what about taxes or vacations, or college tuition or any number of long laundry list of things that a small operator has to consider whenever they strap it on, you know, their seat belt and head to the office, because every day you've got the same set of circumstances on as much smaller scale. So, as you mentioned, the margin for error is critical, and you know, I would go there at these conferences and I'd say, well, all these folks were speaking from the stage and my comment was well, how low will you go? And they're like what are you talking about? And I'm like how small will you do these solutions? Well, you know, we don't go below 50. We don't go below 100. We won't do this for anything else. And so, fortunately, I've been able to find partners that will help us with groups down to five lives, that's awesome.

Speaker 1: 6:52

Now do you find yourself doing mostly level-funded stuff?

Speaker 3: 6:56

Yes, and that's the beauty of it, because level-funded can take two options You've got your max funded and your expected funded, or we offer a third option which is unfunded, which is essentially paying fixed costs and paying for claims as they come in.

Speaker 1: 7:18

That's interesting. Does that, does that scare initially? Does that scare some employers? Yes?

Speaker 3: 7:36

Of course, because it's something that is totally different conversation and managing claims and focusing on best health care outcomes for employees instead of selecting the less bad option from a spreadsheet.

Speaker 1: 7:54

And in Kentucky these days your spreadsheet is down to two less bad options. Right you got it.

Speaker 3: 7:59

We're down to Blue Cross and United and then we're seeing the backfield come in with a lot of level funded strategies.

Speaker 1: 8:07

Well, because there's a need for it, they've got to do something. The small employers are drowning and they know that they can't not offer insurance because they'll never attract and retain the employees they want. But how hard a discussion is it? And what's that conversation like, when you're working with a small employer who's only ever been fully insured and you're saying you know, there are some tools and techniques that you could use that might be a lot better for your company and your employees.

Speaker 3: 8:35

Well, it doesn't matter until it matters, and sometimes that's right off the bat, sometimes it's two, three, four years down the road because no one understands. Maybe I'm not presenting it the right way. You know the graphics. Sometimes you know in what business when you are procuring the cost of goods sold and this is putting on my material control, my materials management hat and what business do you pay retail for the products that go into your final product, your finished goods? And very seldom does anyone ever say we pay retail on everything to put our product together. They buy wholesale or they buy institutional pricing. So when you get into that model, you start looking at what they produce and what they generate. If you are not going to talk to them about something that they understand, you probably are talking to HR.

Speaker 1: 9:44

Don't even take me there. One of the reasons I love you is because you're a bad influence on me. But you know, I don't think that small employers, at least until maybe very recently, or smaller, midsize employers, have understood that there is another option for them, and I think the point that you just made for those listening who are maybe newer in their careers is of utmost importance, and that is that you have to talk to folks in a language and at a level they understand. So if you can make it, as you just did, analogous to their business or to business they understand, the light bulb must go on instantly. Do you see that?

Speaker 3: 10:26

Yeah, and the challenge has always become they have decided that healthcare is not something they can do anything about. The BUCAs have done a very clever job of creating this narrative that you must have them in order to be successful in managing your health care options for your employees, that without a traditional solution, you're probably not going to make it in business. If you don't have an ID card that says Blue Cross or United or Humana or Cigna or Aetna, then you probably don't have a health plan. We don't have insurance, and you know it's funny because as I move there are hamlets of people that understand business very well and in eastern Kentucky I can assure you they can do math and they know what two plus two is. And so when you start talking about benefits that actually impact their take-home pay and restore financial security to themselves and their family and are focused on best outcomes, you know anymore.

Speaker 3: 11:50

After about seven years of doing this, when I go into certain small towns in eastern Kentucky, it's not a big place and they'll say, aren't you the guy that has those health plans with zero deductible and no cost for CT scans or MRIs? And can I get my more expensive drugs for free through your plan? I want one of those. Are you the one that has the free CPAP machines? Yeah, I need one of those. I need to get on your plan.

Speaker 3: 12:29

So all of a sudden, you know the people that have seen the benefits of yesteryear with those traditional first-generation Blue Cross plans, let's call them. We all grew up with plans that had no deductible and 365 days in the semi-private accommodations and usual, customary and reasonable and things of that nature with a very low or no deductible or out-of-pocket, and those are the financial security that we grew up on. But as they pivoted away from that wholesome model of mutually owned company to a stock company, we've seen shelf designed by the health care providers in their stockholders' best interest, I might add. And so employees are suffering under the boot of being functionally uninsured when people have been telling them that a $3,000 deductible is good.

Speaker 1: 13:43

Yeah and it's just functionally uninsured is a great phrase for them and that's come up a few times, as we've done the podcast over the last few years, but that's I mean. I think that and I wonder if you agree, having having a three thousand dollar deductible and not and a card in your wallet but not feeling as though you can use it, is almost in some ways worse than not having insurance.

Speaker 3: 14:04

Well, that's what people do. Well, that's what people do. Again, I'm talking about some folks that have grown up and are pretty sharp. They would present and say I don't have insurance, rather than present with a $3,000 deductible, and they'll sign a piece of paper and say okay, thanks, your charges are no charge today.

Speaker 1: 14:27

Yeah, it's interesting. So once you start with the level-funded chassis, do you bring other solution providers in? Which ones do you bring in, and do you do it first year, or do you kind of give them a year to get their feet underneath them?

Speaker 3: 14:44

Well, dave, as you know me, I don't like to put a Band-Aid on. I just rip the Band-Aid off Because if you're going to move away from a traditional solution, I just go all in. And you know, because the Pareto principle is still alive and well, you've got 80% of your claims are coming, 20% of your people, so, on a five or ten person group, you do a lot of hand-holding with those, with those one or two or three people, and once they get it, then you're off to the races because everybody else, it's a water cooler conversation at that point and that, and they start having the conversation about hey, man, this thing's working, this thing's good, this is all right. And you know, gosh, we've got high touch, high contact medical management. We've got high touch, high contact partners that do the durable medical equipment delivery or the specialty drug delivery.

Speaker 3: 15:51

We take advantage of all these things that large corporations have been taking advantage of for years, but we put them in a small chassis. And I tell you, I've got a guy that moved off of a construction company. He had an employee with a high cost condition. He was a key employee. He could never have moved to an individual program and been able to afford the premium for his family, and so we put that in. We excluded a prescription drug. It's $150,000 a year of prescription drugs they're getting for free zero, and that's given him wings essentially to take off. He's got 30 employees now.

Speaker 1: 16:33

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Speaker 3: 17:58

You know, if there's a case study right there, I need to get busy and start writing it.

Speaker 1: 18:04

One of the things that you and I have both heard at some of the conferences that we've been at with folks who are innovating across all size groups is that, at the end of the day, what a patient wants is that one card experience and you alluded to it earlier about going in and just having a card that says Blue Cross or Humana or whatever on it. How do you go about presenting the bag of solutions as a cohesive whole and not as a bag of parts?

Speaker 3: 18:33

Well, I can't get. Sometimes I stumble on that one. Dave, this is the problem. When you go in there and you get down into the minutia. These employer groups do not want to know how the watch is built. They want to know if they can tell time. So you have to be very careful about what you're doing when you talk with these clients and prospects, because if you get out over your skis with the detail and the minutia then it's probably not a good fit for them and you know you just kind of have to bring them along a little bit at a time. Now, is that misleading? No, because you stay focused on the positive pursuit of change, or the pursuit of positive change, and you redirect them and say, look, this is going to work just fine. Yeah, we've got a little issue.

Speaker 3: 19:37

Now some people say well, you know we can't have this level of noise. Okay, and not everybody's happy, and I understand that. But what I've done is I've delivered the fiduciary side of their business. You know, transparency, quality and management that they've never had before. Now some people say I don't want to know about health care and if they're making money hand over fist or if they are a taxing district and they don't care because they're playing with other people's money. I get it, but you know it's funny on a fiscal court. They take bids on gravel and fuel to three or four decimal points because they're so good at buying stuff, but none of them know how much they spend on lisinopril or oxycodone or these prescription drugs.

Speaker 1: 20:42

That's part of the problem. We live and breathe this stuff and we sometimes forget that a guy or gal who's running a business spends an hour a year on this and hates it, right. And so while we're living in the middle of all of this minutiae to use your word it's a great word they're going okay, just fix the problem, just make it go away and give me something where I can say I've got a better health insurance plan than my competitors do. So you're right. So I guess what you're saying is when you're bringing them into the plan. Sometimes less is more when you're bringing them into the plan sometimes less is more.

Speaker 3: 21:20

That's right, and you know. What we also say is that anything that we tell you you can fact check with data. So if we come in and we say, look, you know you're going to, we forecast savings of half a million dollars or $250,000. And one of the beauties of beautiful things about being independent is that we can offer a solution and we can guarantee it. So if we do a consulting project and we say, hey, you know we're going to charge you to build a plan for you and we're going to guarantee our fee at 10X or 20X, that if we don't save 10 or 20 times our fee, we'll refund you our fee and the entire compensation for the for the year. Some people think that's a gimmick and they don't. They don't care to hear it. Others are like you're going to guarantee your fee. I'm like, yeah, I could do it every day. Why? Because I know the solutions and strategies that we implement work and I've got case studies and best practice examples to prove it.

Speaker 1: 22:29

So, as we wrap up here for the market you serve for the small and mid-sized market. What do the next few years look like? What do you see happening?

Speaker 3: 22:40

mid-sized market. What do the next few years look like? What do you see happening? Well, I think that you're going to find more and more employers are going to tap out of this traditional model, because we can't see them all number one. You've got a lot of pressure from the big box competitors who are focused on the status quo. You've got private equity that are seeing mergers and acquisitions in our business and the value of these smaller agencies are really seen in the size of their status quo book.

Speaker 3: 23:14

And because, what does that come with? Well, it comes with compensation, but it also comes with bonuses and overrides. They're very attractive to private equity because their ROI is driven by return of those big bonuses and overrides. So we're going to be out here fighting the good fight. It's a David versus Goliath kind of scene, kind of scene. And you know my job is to stop some of the strip mining of middle america that the big, big insurance has has done to our country. You know, and, and so we'll in the next five to seven years, I see that, uh, that being, you know we're our innovation is going to rule the day at some point, but it's going to have to rule the day with independence.

Speaker 1: 24:08

And that's a great place to end our conversation for today. John Clay, president of Better Source Benefits. John, thanks for spending some time sharing your expertise with our audience.

Speaker 3: 24:16

Well. David Saltzman, thank you for having me on your podcast today. I'm a big fan and have gotten great nuggets from you over the years and look forward to hearing this and many more to come.

Speaker 1: 24:30

The pleasure is all ours, John.

Speaker 2: 24:33

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