David 0:00

We hear an awful lot about transparency, and we've talked about it a lot on the program. The question is, where is it today, and where is it going to take us in the next decade? We'll find out on this episode of Shift Shapers.

SPEAKER_01 0:17

This is the Shift Shapers Podcast, connecting benefits advisors with thought leaders and entrepreneurs who are shaping the shifts in the industry. And now, here's your host, David Saltzman.

David 0:30

And to help us answer that question, we've invited Daniel Malin. Daniel is senior VP of broker relations at Payer Compass, and this is something on which he and his firm are laser focused. So hopefully we'll get some really good answers about where the transparency stuff is going to take us and not just the talk that we've had for the last 10 years. Welcome, Daniel. Hey, thank you very much, David.

SPEAKER_02 0:51

It's a pleasure to be here.

David 0:52

Thank you for joining us. So tell us just a little bit about your journey. How do you get to be doing what you're doing? Because we all have, in this business, we all have interesting backstories.

SPEAKER_02 1:01

Yeah, well, uh, I'm about to enjoy my 50th year in the business. I acquired my first insurance agency in 1973, spent the first 40 years being a property and casualty and bought and sold a bunch of agencies, started some from scratch, and also spent some time in large, large agencies. I worked for a bank holding company for a number of years and built an agency for them. And then, because through a series of events in 2012, I was invited to become the national sales director for a third-party administrator based in Kansas City doing small group level funded health plans. And in the course of that reality, we were taking what was a block of fully insured business. Understand in our business, you can be rendered irrelevant by the stroke of a pen. Well, here's a company that for 40 years had provided small group, fully insured plans, and the ACA basically made that impossible. They couldn't do it anymore. So they wanted to transition that block of business to level funding, and they had the stop loss. They had all the tools that they needed. They just now had to re-educate their broker force. And our broker force at that time, we had about 11,000 agents in our Rolodex, and a lot of those people have been doing fully insured plans. Now we come to self-funding and level-funded plans. We were doing level funded down to two lives in about 16 or 17 states. In about 2014, we started implementing reference-based pricing and with the idea of trying to save money. We were fairly successful. I spent eight years there, and the reference-based pricing worked really well for the first three or four years, and then we started getting disruption in the marketplace. And that disruption in the marketplace, in the course of my relationships across the United States, I had met Greg Everett, who was the president of the Payer Compass. He and I had done multiple presentations on reference-based pricing to various broker groups around the United States. And I went to see Greg in January of 2020 when I was in Dallas. And he offered right, I mean, basically said, Hey, Dan, we need someone who understands the broker world. Would you be interested in going to work for Payer Compass? And as a result, I did that. So the good news is I was excited to go to work for Payer Compass because I saw what they were doing. I understood that the market was shifting. Reference-based pricing needed some help. They had great technology. They had a vision about what it should look like. So the bad news was the week I went to work for them, we all got invaded by COVID. And so I fundamentally treaded water for a year while I was there. And obviously that impacted all of us. There was nothing we could do about it. And starting in, you know, after COVID kind of evaporated, now we are moving forward to promote reference-based pricing and also the power of transparency. And that's what we're really here to talk about. In September of last year, we were acquired by Zealous. And so now I'm Payer Compass is part of Zealous, and we can talk about what that means. So that's a little bit about my backstory. I've been married for almost 50 years. I have seven grandkids, about to have eight. I've been in this business, and it's never cost me a dime. So I'm very excited to be where we are and looking forward to our chat.

David 4:07

And for those of you who are watching this on video, we're recording this a couple of weeks before the Super Bowl. Dan is wearing his Kansas City Chiefs gear. So no question who he's rooting for, and we'll we'll see how that game comes out. But back to reality. I know that you take the view that there are doubters, protectors, and disruptors. Can you kind of tell us what those three classes of folks are and how one relates to the other, and then we can talk about how that plays into the scenario on transparency?

SPEAKER_02 4:33

Sure. So the scenario goes like this: we have disruptors, we have doubters, and we have protectors. And in the system of healthcare in America, we have those disruptors who are trying to find a new and better way to deliver healthcare in America, to finance it. And there's many, many, many multiple moving parts. But the disruptors are in the business of trying to find better solutions by reinventing the wheel. And the wonderful thing about America, entrepreneurs are all about disruption. So disruptors. And then we have the doubters. The doubters are the people that look at the system and know that it's broken, but are really not in a place either from a career position because of limitations that they have with their employment, you know, et cetera. They know it's broken, but they don't know what to do about it. And then the finally are the protectors. And the protectors are those people who are going to keep the status quo as long as they can because it benefits them. Okay. And they're going to protect their interest. And there's way more protectors than there are disruptors. And we're moving doubters into the disruption side slowly but surely. But the element of protectors in the world is far outnumbers the doubters and disruptors.

David 5:44

So how is transparency going to change that over the next 10 years?

SPEAKER_02 5:48

Well, that's a really great question. And what I believe, and this is, again, this is a Dan Malin belief, and it's in the context of knowing how things have changed over the years. The Affordable Care Act disrupted the world in 2012 to 2022 in that decade. So now we're looking at a new decade, 2023 to 2033. So this is not something that's going to happen in the next 25 minutes, but over the next decade, as more information goes to the marketplace, I'm an entrepreneur by nature, and I believe in the power of the marketplace. We all vote with our money. The quickest way to get people to change their behaviors is to get in their pocket. And what's happening in healthcare in America is we're getting deeper and deeper and deeper into people's pockets. Okay. Well, sooner or later, somebody's going to stand up and say, you know what? I'm tired of you put in my pocket. What can I do about it? So direct primary care. That is one. I have a direct primary care relationship with a physician. I pay $100 a month and I can see them 24-7. Totally transparent, higher quality, better care, immediate access. Okay. I don't get that in an insurance contract. All right. That's transparency. What's happening with direct primary care? We started to see it in 2016, 17, 18. Literally today and in the last, just in the last three or four weeks, I have seen direct primary care evolve. Okay. The other place that transparency is interesting is we do reference-based pricing. And there's a lot of people that still say, you know what, there's a lot of noise. What's happening and the noise is diminishing. Okay. Hospitals and facilities are recognizing that they're going to have to adopt some kind of a better reimbursement strategy. We are seeing hospitals and facilities make direct contracts with employer groups at a percentage of Medicare that makes sense to both parties. And then what the provider does is say, look, you come to us at 165% of Medicare, we'll waive the deductibles and co-pays. That way you take us out of the collections business. That helps the provider. Okay. At the same time, we've helped the employer and the employee. We have a case that we did a number of years ago that's got 500 employees in 550, 600 employees. We inserted direct primary care. The employees saved almost $600 a year on deductibles and co-pays by virtue of the fact they had a primary care physician they could call and talk to. Okay? You'd now have virtual care, but your virtual care is with the primary care physician. Reference-based pricing is now making things more transparent.

David 8:20

You know, it's interesting because a recurring theme, probably just in the last three or four months on the podcast, has been that you have the patient on one side of the equation and you have the physician on the other side of the equation, and you've got this huge gap in between them filled with people who, as you say, have their cold little fingers on your wallet. How do you shrink that, all those middlemen, out of the system? Will transparency alone do that?

SPEAKER_02 8:49

Ultimately, yes, but not immediately because, and here is something I learned in the business, and I'm going to back you up to the 70s, 80s, and 90s. We started in the 70s with no technology at all. And then in the 80s, we had massive computer systems. And insurance companies made massive investments in those insurance processes, and they built these rooms with lots of computers in them, blah, blah, blah. And pretty soon they had this legacy system, and the CFOs, everybody was invested in that legacy system. And all of a sudden, over here, we came up with laptops and desktops, which now network together did not need that infrastructure. Part of the challenge is the technology infrastructures that are currently in place today are so massive and convoluted that they're very ungainly. One of the things with Zealous and Payer Compass is that we're taking that and simplifying it by virtue of the advanced technology we have. One of the big challenges in the world right now is we have all these machine readable files out there. Who's going to aggregate them? There's lots of data. Okay. Well, guess what? We have the capacity to aggregate that data. Now, is the data accurate? That's a whole other conversation. But the more access we have to data, the better we can refine it. And eventually that data is going to be handed to the consumer, and they're going to be able to go and shop for a knee replacement, just like they shop for groceries. Okay? They're going to look at a quality metric, they're going to look at a cost metric, and their employer is going to give them an incentive to go to the highest quality, lowest cost provider. Now, is that going to happen in 2023? Nope, probably not. 24? Nope. But that's where we're headed. It may take another three to five to seven years to get there, but that's where this is going. That's what transparency is going to change in the marketplace.

David 10:38

How much of this do you think is going to be driven by some of the new rules around fiduciary liability for plan sponsors?

SPEAKER_02 10:43

Oh, the fiduciary liability is a loaded gun. And most people that are around it don't really kind of understand it. But where that's going to happen, and we have a situation right now, private equity company with a large employer, 500 lives, the equity company, for whatever reason, this organization goes bankrupt. They have collected monies from the employees to pay premium, and there's three or four million dollars of outstanding claims. And what we have now is the Department of Labor and Department of Justice, as well as the IRS and some other people, are looking at the private equity investors because they're the ones that are the plan sponsor. In other words, they're their president and the people they put in charge of that organization signed the plan sponsor documents. They're personally liable. Under the new regulations, there's personal liability. They can be sued. Class action lawsuits, they're subject to civil criminal penalties. Remember, I said civil and potentially criminal penalties, potentially criminal penalties. So the fiduciary liability, the Consolidated Appropriations Act in Section 201 expands the fiduciary responsibility of the plan sponsors to a point where they now have personal liability when they sign that plan sponsor document. What will happen is there are going to be test cases on certain situations, and the law, the attorneys are going to figure out that there's an opportunity to make money here, and they're going to go after plan sponsors who have not appropriately managed the assets of the welfare trust plan, the employee benefit plan that's self-funded.

unknown 12:20

Trevor Burrus, Jr.

David 12:21

Well, and even more pernicious is the fact that those are federal lawsuits because these are ERISA plans. This is not state stuff. Trevor Burrus, Jr. So it becomes not only a liability on the face, but it becomes extremely cost prohibitive to defend. And the federal lawsuits drag on forever and ever. Right. So, you know, at the end of the day, the medical liability may pale compared to what it costs to defend one of those lawsuits.

SPEAKER_02 12:44

Aaron Powell Well, one of the other pieces of this, and that is when the Consolidated Appropriations Act came out, and there were questions to the IRS, DOL, and Hot Consumer Services, can you please send us some guidance about how you're going to enforce this? And their answer was absolutely simple. Go back to the Pension Act, look at the guidance enforcement of the Pension Act. That's what we're going to use as the guidelines of how we're going to enforce this. So if you want to really ask the question about guidance and what kind of what kind of rules and regulations are going to follow to go after this, just go to the Pension Act and see what they did as the Securities Exchange Commission to go after plan sponsors under a 401k who did not manage the assets of that trust appropriately.

David 13:26

So Yeah, I was going to say that's the same advice that they gave people when we started farting around with 401ks was go back to ERISA and look at what it says because those are the regs we're going by. And it's what's bad for people who have fiduciary liability if they don't live up to it is that those cases are settled. There have been a gazillion cases, you know, under ERISA. And there's not questions now.

SPEAKER_02 13:47

Aaron Powell Well, there's court precedent. In other words, about 10% of laws in America are based on legislation, but the other 90% is case law. And there's plenty of case law around pensions. There's tons of case law around pensions.

David 14:00

Right. And that's a much higher hill. Yeah, there's no question about it. Trevor Burrus, Jr.

SPEAKER_02 14:04

Well, and there's more money involved in benefit plans than there is in pension plans.

David 14:08

Aaron Powell Oh, without question. So let's broaden the scope a little bit and talk about other folks who are going to be touched by transparency, and that's broker disclosure. How do you see that changing as we move forward in this new transparent universe?

SPEAKER_02 14:24

Well, it's interesting you ask about broker disclosure because one of the realities is we have brokers and we have healthcare advisors. If you transition to the consultative world, you realize that this is getting to be more and more complex all the time, and people are spending many, many more hours dealing with programs. So the broker's actually entitled to more revenue than they're probably getting paid. That's one comp. But the short answer is you you require to disclose all your compensation, whether it's direct or indirect compensation and how much you're making, and you have to do that right before you do it as you do the renewal. And there's a lot of brokers right now that are basically saying, you know, I I'm getting paid when I'm getting paid. Here it is, and you know, if you have a problem with it, let me know. Quite frankly, you know, the disclosures are not really being addressed across the board. At least I haven't seen it that way. What's interesting is we have a lot of agencies that make a lot of money on contingent income. We have agencies that make money on PBMs. We have there's little sources of revenue that come from lots of different places. And the question is, are they really disclosing everything that they're making? And the short answer is probably not. A more extensive question to that is what's the appropriate way to deal with it? I author a book on how to transition from commission to fee for services. I've been running insurance agencies for 50 years. I know what that looks like, and I know what I know how money is made. Selling insurance or running a business that sells insurance is two entirely different skill sets. Okay. I have run insurance agencies, I built them from scratch. I know what that looks like, and I know how important contingent revenue is, okay, to the overall profitability. But how do you disclose contingent revenue to your client and do it ethically, morally, and legally?

David 16:10

Well, you know, I think the answer to that is you have to be complete, you have to be transparent. And even when I was selling, back when I was a DI dork and I was selling individual DI and some other products, I always disclosed, even though I didn't have to, what I was being paid. And my answer to the client was if at any time you don't think I'm earning my keep, you let me know. Right. And I never had a problem. But it's a high hill for a lot of brokers to climb to. They just get nervous about, oh my God, what if they find out this? What if my answer is what if they find out and you haven't told them?

SPEAKER_02 16:40

So the real question is, if I'm going, and you just alluded to it, the core question is not what am I worth? What's my value proposition? And am I delivering value in direct correlation to what I'm getting paid? You know, there are employers that would look at you and say, you're making $30,000 of me. I haven't seen you except once in the last 12 months. I don't see what you're doing. You've worked 10 hours and made $30,000. I don't think that's worth it. And then you have the contrary to that, where you literally live with a client, you're in their office every three or four hours or days or weeks. You know, you see them 20 times or 30 times in a year, and you're making $6,000, and they go, How do you do that? You can't possibly make any money at $6,000 working for us. So there's the two ends of that reality. But unfortunately, there's a lot of people who are clipping their coupons in this business, and their job is to basically hang on to what they have, make sure the revenue doesn't leave, and make sure that if their client really knew what they were getting paid, they know that their client relationship would be in jeopardy.

David 17:41

We've got just about a minute left. The question we like to ask is where do you see life in the insurance world in the next five or ten years, or both?

SPEAKER_02 17:50

So three things. Number one is I get really excited about young people in the business because I believe you and I are basically about to retire, or if not close to it. These problems need another decade to be sorted through. So I'm excited when I see young people. The second thing is it's gonna be about data, data, data, technology, and communications. Data, technology, and education. And one of the realities of the new broker is the new broker is not going to be a salesperson or gonna be an educator. You have to leave salesmanship talks, leadership listens. Salesmanship solves problems, leaderships build value. Salesmanship is worried about the problem, leadership's worried about the people. And what I see is as the new generation of people come along, I'm excited because these people are committed to the idea, young people, that I want to make a better world by helping people better understand healthcare. And I now have these tools at my disposal. Challenge is they have to overcome old ideas and old concepts. It's going to take a while, it's not going to happen in the next 20 minutes. You know, the disruptors, the doubters, and the protectors. The disruptors will eventually start to gain traction. I'm seeing direct primary care explode across America. Okay. Reference-based pricing is getting more accepted. Direct contracts happening. If you look back seven years, it wasn't there. It's taken in, it's moving, it's moving, and it will get traction. You and I are going to sit on the sidelines in three years and go, yay, we're done. Thank you, David.

David 19:25

And that is a great place to end our conversation today. Daniel Malin, senior VP of Broker Relations at Payer Compass. Dan, thanks so much for sharing your expertise with our audience.

SPEAKER_02 19:34

Not a problem, it was a pleasure, David.

Announcer 19:37

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