David 0:00

As more and more advisors add self-funded plans to their portfolio of solutions, TPAs take on an ever more important role. And the question we're asking today is what are TPAs doing to help advisors build and operate better plans? We'll find out on this episode of Shift Shapers.

SPEAKER_02 0:21

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 0:34

And to help us answer that question, we are welcoming back Jay Kempton, president and CEO of the Kempton Group. Jay is a return guest from way back in episode 65 back in July 2015, when we both had less gray hair than we have today. And maybe some of the things we're going to talk about cause some of those gray hairs. You know, you never can't tell. Hi, Jay, how are you doing? I'm doing great, David. How are you? Not too bad. Thank you very much for asking. So, what kind of an increase in business are you seeing from the kind of corner that the industry's painted itself into?

SPEAKER_01 1:07

Well, you know, we're a pretty distinct flavor that was not universally sought after or expected, you know, back in 2015. We've certainly not a new TPA, but we had taken a hard turn back in 2013. So by 2015, we were out there on the cutting edge. But, you know, so far in 2023, to gauge from where we are now to where we were in 2015, we've probably tripled in size, which has been a wonderful thing. And, you know, like the old saying goes, we've kind of done it our way, meaning, you know, trying to forge new ground.

David 1:41

So I'm kind of asking this question halfway tongue in cheek, but there's a lot more advisors dealing in self-funded plans today, again, because there really is no place else left to go right now. Are they educated to the level they need to be? And if not, what are the big deficits that you're seeing that we could help with?

SPEAKER_01 2:00

That's a great question. The consultants that we see, they're not educated in the business of self-funding or ERISA, but they definitely are starting to hone in on the real problem, which is a great thing. We're seeing a lot more innovation, a lot more progressive thinking from the consultants. Interestingly enough, as we were talking before we were online, that a lot of consultants seem to be looking for third-party administrators that will just kind of you know accommodate anything and everything that they've got going on as far as you know, ideas. And I think that is a great thing. But I also think there's a place for knowledgeable TPAs that have been around that can also kind of keep them within the guardrails. Because the last thing that I ever want to see in this free market movement is for one of us to be made an example of by a regulator because we've stepped outside the lines.

David 2:56

Where do you find the largest deficits? I mean, if you're going to start helping to educate the advisor population writ large, I know there are advisors in our office who are aces on this stuff and who really understand it well because I've met them and they're friends of mine. But for the rest of folks who are maybe just dipping their toe in that deep end of the pool, where do you see the deficits and how would you educate them up?

SPEAKER_01 3:16

You know, we're seeing a fair amount that it has to do with just the basic tenants of ERISA. You know, what is the difference between a plan administrator and a third-party administrator or a claims administrator? What are the fiduciary requirements of a plan administrator? What are the appropriate use of plan assets and what are unappropriate uses? I always feel hemmed in by those regs. However, I'm certainly aware of them. And so uh those are some of the examples of some deficits that are out there. They're certainly not malicious, but they are based just in ignorance because it's just not talked about as much today as it was back in the old days.

David 3:57

You know, when you talk about fiduciary responsibilities, it's interesting. We had a chat with our buddy Adam Russo from the Fiat group uh, I don't know, 10, 12 episodes ago. And there's a whole different layer of liability now than there was even a year ago. Could you help explain that?

SPEAKER_01 4:13

Yeah, you know, what we're starting to see, and it's it's certainly not a good trend, you know, ERISA is getting chipped away at, and you know, ERISA provided some wonderful protections as long as you, you know, had your head on straight and you were upholding those fiduciary responsibilities. Now we're starting to see the original framework of ERISA starting to be chipped away. And some of those protections are actually starting to go away. We're seeing plan administrators and sometimes fiduciaries that are not traditional fiduciaries, but TPAs that have been deemed a fiduciary because they've exercised a little bit more discretion, maybe, than they should have. We're starting to see almost like a liberalization of who is seen as a responsible party under ERISA, which is a little concerning being a TPA.

David 5:04

Well, beyond the TPA, I mean, there's a new liability that's inured to the plan sponsors as well. There's personal liability now if the plan doesn't make great decisions, isn't there?

SPEAKER_01 5:13

Right. Yeah. And we're starting to see some ERISA liability starting to land on plan administrators and fiduciaries based on decisions that are very much seen as status quo decisions. For instance, engaging with a particular PPO network, even a maybe a carrier-based network that, you know, the old saying, David, you know, is that you know, you never get fired for recommending one of the right. Yeah. You never get fired for doing that. Well, now we're starting to see as well, you you're not necessarily getting fired, but you may end up going to jail because you've recommended a vendor that has not been taking care of business and has been maybe misleading or misusing plan assets. And the fiduciary simply was not aware of that exposure. They saw the big brand, they had a comfort level, but they just didn't understand. I'm struggling with using a word other than fraud, but the fraud that was really being perpetrated on the plan.

David 6:15

There are so many games, you know, your TPA, I'm a former TPA, granted different generations, but still, there's so much monkey shines, as my grandmother used to say, that goes on that it's almost impossible to find a vendor where if you dig long enough, there isn't some violation or other. And if once the plan sponsors find out that they have not only the fiduciary liability they've had for a long time, but they risk personal liability, do you see that having a chilling effect? Or are they gonna then turn back to their advisor and go after them?

SPEAKER_01 6:51

That's a great question. You know, I don't know that it has become as commonplace as it probably would need to for there to be some, you know, to be able to make a generalized statement of what's gonna happen. I I just they're very isolated now. But I'd rather have the audience focus on this, and that is, you know, when advisors or TPAs, you know, we're supposed to be the experts in the room, so that means we're gonna be the ones that are ultimately gonna be probably held responsible. I think what there is a real shortage of is backbone. And so if we do know about a vendor that is doing something that is untoward, maybe has misaligned incentives, as opposed to walking away from that vendor and denying them the business, we kind of say, well, the client wants it, or well, you know, and we're and we're kind of closing, we're kind of, you know, just closing our eyes and going ahead and moving forward. And that has two effects, right? I mean, not only does it expose the client and ourselves to this potential liability, but it also emboldens that vendor to continue the status quo. We're not appropriately sending signals to these vendors, or you know, do we want to get into the discussion about medical providers? Where we continue to use a good friend of ours, Matt Ort, he has a great line that is stop feeding the beast. You know, stop supporting and doing business with actors that are not doing things right or maybe making things worse.

David 8:26

Yeah, there's a lot out there to digest. And, you know, we're not seeing a lot of cases yet because the change in the law is relatively new. As you know, ERISA is a slow-moving beast most times. Department of Labor, different story, but ERISA itself, you know, kind of takes a while to permeate all out into the universe. Well, let's let's talk a little bit more about day-to-day brass tacks. I know one of the things that you believe is driving some of the problems is that patients aren't the ones making decisions. Correct. Give us your take on that.

SPEAKER_01 8:55

Yeah, you know, I was at the HCAA conference just last week with Dr. Smith, which I think you've had on podcasts a couple of times, and and our our speech was on medical liberty and patient autonomy. And it part of my conversation was uh I was relating a story about me and my daughter. We were my daughter needed a neurology consult. She's fine, but she needed a consult at a big hospital system. We're on a reference-based pricing plan, and so, you know, dad, she's 23. She wanted dad to come and have the financial conversation if there needed to be one. And the clerk, the intake clerk at the doctor's office, they were not interested in seeing me or my daughter as patients. Definitely not customers. We were simply a vehicle to deliver an insurance card. Being that we were RBP, you know, I told her from the very beginning, you know, hey, we're a price-sensitive and knowledgeable buyer. We want to have a conversation with being very polite, she would have none of that. She had no use for us other than we need your insurance card. She even went so far to tell me and my daughter that if we did not give her or she didn't even know what insurance we had. She didn't know if we were self-funded or anything else. She didn't care. But she said, if you don't supply me with your insurance card, that's actually, you're breaking the law. And I mean, that's what patients are up against. Not only are they not making the decisions, they're told at point of sale that they have no right to make a decision. I mean, I had never seen it that far that not only were they not, a lot of times the clerk might be ignorant of their pricing, so they can't have that discussion with you. But the fact that they would not even engage or see that we had standing to have the conversation was kind of a new low.

David 10:44

That's interesting. I'd not heard that one before. I've heard HIPAA described in ways that are absolutely not in the law or the regs by people who appear to be the authorities. And that's great until you tell them what you do, and then they kind of shrink down, you know, a little tiny bit. But you know, I remember my very first client in the insurance business back in 1981 was a hemoncologist, and he said something to me I've always remembered, and maybe this is where our conversation needs to go for a moment, which is how you accomplish this. He said, David, doctors will get off their pedestals when patients get off their knees. Amen. How do we get patients from where they are today? The case of you and your daughter, and you're more knowledgeable than the average bear. How do you get how do we get patients from where they are today to standing up and saying, uh-uh, I'm not the insurance card deliverer here. I'm the person who's receiving the services, and I'm going to make some decisions.

SPEAKER_01 11:38

Well, that's a loaded question, David, because I mean it's multifaceted. The very first thing that you have to do is you have to convince the patient that they're the buyer, that they have standing, that this is their role. Because right now, the status quo or the cartel out there has really, for probably a generation or two, has told that the patients they do not need to have those conversations. They don't have a right to have those conversations. So we've got to get them to see that they are the buyer. And what we tell to our participants in our TPA is listen, I can tell you that you're the buyer, and you may or may not believe me, but the hospital agrees that you're the buyer. And if you don't believe me, read the last page of that clipboard that they make you review and sign, the last page of the financial responsibility contract, which states that we don't care if you have insurance or not, whether your insurance pays or not, but you are the buyer and you're the responsible party. So the lawyers for the medical provider, they get the joke. They understand that the patient is ultimately the buyer, but everywhere else within the organization, they deny the sanctity of the buyer. So we got to get the patient to see themselves as the buyer, and then we have to give them the skills and the backbone. I don't know how to give them the backbone. I just don't. But to your point that doctors will get off their pedestal, if patients will get off their knees, that's 100% true. So when me and my daughter were there, we and we paid somewhat of a social price for this, but we did not proceed until they could provide somebody within that organization to tell us what this sucker was going to cost. Now, the price that we paid is when we went back to the we we finally got to the right person, you know, within the business office. But when we got back to the waiting room and we were sitting there, we were looked at in not a great way by every single patient that was in there. We had really stepped outside of the social norms that were expected. And, you know, I don't know. I don't know if I was not in the business that I'm in, I don't know whether I would do it again because of that. So it's a so it's a big problem for this entire society.

David 13:55

You know, it made sense, didn't make sense, but at least you could understand it when patients weren't using their own money. But with deductibles the way they are now and personal responsibility amounts, you know, total package the way they are now, I think most of us thought that that would start this change, and it just hasn't. And I at least I'm not seeing it.

SPEAKER_01 14:15

Well, I think an avenue to make this happen, to your point, the good news side of this, I think it's more about there are medical providers out there, whether they be hospital surgery centers or direct primary care facilities, that are gearing up and are expecting price-sensitive buyers to walk through their door. I think as we support and do more business with those types of facilities, and I'm talking to the TPAs and consultants out there and employers, the more we support those, the more financial pressure it will put on the bad actors. And they may not get reformed by patients, but they may get reformed, they may get some religion from their pocketbook.

David 14:56

Well, especially if you listen to some of the guests that we've had recently, there seems to be, geez, I can't call it a resurgence because it was once the norm, but you have to be at least as old in the business as I am to remember this of direct pay. Yeah. And, you know, once you're writing a check or using your credit card, then all of a sudden the OPM goes away, and you realize that you actually do have skin in the game. It doesn't show up nine invisible steps later when your employer gets a renewal and passes some more cost off to you. Maybe that's what it's going to take. You know, it's interesting. I had a somebody who had done some research on direct primary care practices, and the number they gave me was almost 90% of patients don't break a $5,000 threshold in a year, which you know. Everybody talks about the multi-gazillion dollar claims, but that's not really the animal. That's not really the issue. And and those of us who are or were in the TPA business, we don't see that many of those. We do see them sometimes. But not all that often, and that's that's what reinsurance is for. Before we run out of time, I want to talk to you about two other things. I know that you're big on direct contracting and also bundled health care. Talk about each of those, if you will, and how they play into the plans that you administer. Sure.

SPEAKER_01 16:05

Yeah, so I mean, we do have a few friends in the network business, but we watch those and curate those relationships very, very closely. And we also, whenever we're going to do business with a network, we make sure that that network does not prevent us from doing direct contracting. And if we can put together a better deal for our clients, that that client owns that relationship. I think that's probably key. Direct contracting doesn't mean direct with the TPA or direct with a consultant. It should be direct to buyer seller. And so that's now a contract that the employer owns. If they end up firing me as a TPA, they can take that contract with them to their next TPA. That's how direct contracting should work. We usually build based our direct contracting off of a percentage of Medicare. We can do a percentage of bill charges, whatever. But again, on the back end, we're always indexing everything to cash. That's self-funded plans, nothing but a glorified check-in account, so that's all that really matters. Bundling, though, is really where we see the power and the elegance. Bundling, as pioneered by you know, my good friend Dr. Keith Smith, it drives quality like none other. And it also provides a unit of care that is easily understood and it's easily compared. You know, No Surprises Act has provided all these machine readable files, you know, all of these things. But if somebody has access to all of that data and asks the question of their TPA or their consultant, what is it going to cost to have my ACL repaired at this hospital? It is still a monumental climb to be able to come up with a unit, you know, that again that can be purchased easily and compared easily. Bundling provides that. And it's bundling is a burden of the seller. And if I'm going to buy, I'm going to seek out that, you know, the analogy that I've used in the past is an iPhone. I don't know how many subcontractors Apple uses, you know, for the components that are in an iPhone, but there's probably a hell of a lot of them. And I know that if Apple did not bundle the price of that iPhone into an easily describable and easily comparable deal, I would never buy it. That's the burden of the seller to be able to come up with that. That's what we really need to see for medical providers that are wanting to do more direct care. That's what needs to happen.

David 18:34

And that's a good place to leave our conversation for today, Jay Kempton, president and CEO of the Kempton Group. Jay, thanks for sharing your wisdom with us. You bet, David.

Announcer 18:43

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