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Challenging an entrenched industry business model, like the employer group health insurance market, is a massive but doable endeavor that is being driven by smaller but dynamic industry players. As large incumbent healthcare firms have little motivation to change when profits are at an all-time highs and business owners do not know of any other options, why break the mold? However entrepreneurial industry players have been emerging knowing there is a better way to create needed change. These innovators realize that business models and product innovation require the clarity of open-aperture vision, deep meaningful conversations with customers, a willingness to thoroughly rethink everything about the product and the marketplace, and, most importantly, a decisive and purposeful mindset to become a catalyst of change.
The employer group health insurance market is an excellent example of greatly needed business model and product innovation. Group health family premiums are one of the fastest growing costs of any industry in the U.S. and has increased 22% over the last five years and 54% over the last ten years. Adding to that is the outright dread of open enrollment where no one is happy about the ongoing increased expenses and unpopular plan changes required to just continue to offer what you have in the past, let alone introduce any new benefits or enhancements.
To provide an important case study on how to transform a well-established financial industry business model like group health insurance, we reached out to new Institute Founding Member, Steven Guilfoile, CEO of AffordaCare Insurance - one of the largest nationally recognized group health insurance agencies in the country. Over the last 14 years has been working hard to break the old employee benefits model and help business owners of all sizes take back control of their employee benefits programs. His passion comes from a determination to provide more value and tools to help position business owners to make smarter decisions about what they and their employees are getting for their money.
Hortz: What was your motivation in developing a new business model for group health plans? What aspects of the marketplace and group health plan structure were you specifically looking to change?
Guilfoile: The current state of the healthcare industry presents multiple challenges to companies nationwide that strive to offer excellent healthcare coverage to employees and their families at an affordable price. Per a Kaiser Family Foundation/HRET survey, health care premiums have risen significantly increasing 114% since 2000 for a typical family of four. Workforce health and productivity has decreased, resulting in more employee absences and poor performance. Add to that, new and changing regulations and taxes can often make it difficult to determine plan changes and what that means for employers and employee benefits. Executives end up using short-term, cost-mitigation tactics, such as reducing overall benefits, raising deductibles, and cutting budgets. As a result, we feel that healthcare itself is in peril.
Another big motivation for us was to be able to create a product and an experience that allows us to work with every single agent, broker, and employer in the small business group healthcare market. There is so much competition in the marketplace that creates unnecessary rifts between brokers and a negative environment for all parties including the clients themselves. After working for years for other agencies and seeing how both agents and clients were treated, I saw the need and value for the experience for both parties to be treated correctly and the ability to only add value and solve for solutions vs trying to sell only things that create a cost for employers. Our products allow us to work with not just insurance agents and brokers, but anyone in any sector and industry that markets to business owners of any size.
We are not selling a product that replaces or interferes with other brokers or companies that sell to the large employer market. We offer our add-on CHAMP healthcare plan as a way of only adding more value to their corporate clients through mutually beneficial relationships. The fact that we only do one niche of level-funding health plans allows this to be done with no conflict of interest. We developed a win-win approach to our partnerships where we find ways for our products to save enough money to entirely fund the cost for whatever service or products our partners are currently selling. This way it does not stop what they are doing, just adding a way in which they can offer more benefits to their business clients with no or low added cost.
Hortz: How did you go about developing your new group health model? What steps did you take and were involved in changing the old model?
Guilfoile: We strategically focused our thinking and development decisions around the two driving costs of group health insurance - the health of the group and how much they use the plan determined primarily by the claims that ultimately hit their account.
The first key decision was in thoroughly understanding and choosing the most beneficial group health plan structure. Most employers choose a Fully Insured Plan that is a guaranteed acceptance plan where all employees are approved to participate regardless of health. Unfortunately, by accepting everyone, the insurance company takes on a ”blind risk” that results in extremely high premium costs even with high deductibles. The other major option is choosing a Self-Insured Plan where employers operate and provide their own health plan as opposed to purchasing a fully-insured plan from an insurance carrier. However, self-insuring exposes the company to much larger risks in the event that more claims than expected must be paid.
We chose a third plan option of Level-Funding Plan which rests between fully insured and self-insured and offers the benefits of both insurance models with none of the risks. The “level” of level-funding refers to the fact that you self-insure but pay a level premium each month like any other plan which gives you a lower cost than a fully-funded plan with none of the risk of a self-insured plan. In the best-case scenario, after each year your insurance company will compare what you have paid for the actual claims and refund you any difference if you have paid in more than you spent. In the worst-case scenario, level-funded plans also come fully integrated with individual and group stop-loss insurance so you can rest easy that your employees will be protected.
Hortz: Can you tell us more about Level-funding plans and their benefits?
Guilfoile: Further addressing the second major health plan cost factor of the number of claims hitting the plan, we developed our CHAMP level-funding health plan as a totally separate bolt-on to the core medical plan that helps less claims hit their plan so they can get more money back and lower premiums up front. A portion of your monthly premiums are saved in a reserve account used to pay medical claims. By taking advantage of the rollover options for money left over in your claims fund at the end of a policy term, your company can even steadily reduce the cost of benefits in the future and in many cases the employer gets a check back each year from the insurance company; ultimately rewarding the group financially for the mutually aligned interest of a healthier population of employees.
We can put a level-funding plan in place by asking basic health questions upfront on the group versus going in “blind” as to current or past history of cancer, heart problems, organ transplants, upcoming surgeries, etc. The healthier the group the lower the cost for the medical plan. Rest assured 100% of all employees will be eligible for the same plan at the same price with no one being excluded or rated up. In the worst cases for unhealthier groups, the cost will be the same, never more.
One of the biggest causes for increasing renewals and responsible for billions a year is the tiny claims that all add up - every physical, primary care visit, urgent care, Rx, mental health visit, and so on. That is one of the most useful parts of the Champ Plan - the ability to completely offload all of the small and medium claims. Not only does every single employee get unlimited $0 co-pay coverage but every single dollar spent completely saves and mitigates all of those claims from ever touching their major medical part of their plan. Every dollar that can be avoided hitting your group's major medical is a dollar saved come renewal time.
In summary, you get the regular and predictable cost of a fully insured plan, but because you are actually also self-insured, you only end up paying for the healthcare costs actually incurred by your employees and fully protected in case claims are extremely high. Key perks include up to 40% in plan savings, all employees are eligible regardless of health including W2 workers, complete customization including a 100% exact copy of your existing plan if desired, monthly payments do not fluctuate based upon claims experience, and one-stop shop easy enrollment. Level-funded benefits are the missing piece of the puzzle that employers have been looking for.
Hortz: What are the key new design features you built into your CHAMP group health care plan and how do they address the industry challenges you wanted to change?
Guilfoile: Unlike other section 125 “cafeteria” retirement plans, the CHAMP plan acts in the exact way providing the same employer and employee tax benefits, however the benefits provided are entirely funded from those plan savings thus creating a NET profit for all parties involved and all the costs of the plan being absorbed by the previous tax savings. This can lead to increased payroll checks for employees.
All the plans we offer automatically include a PPO but you will also have access to also adding Reference Based Reimbursement (RBR) plans which are the way of the future in helping combat the rising cost of healthcare by paying hospitals what is fair and reasonable. RBR plans negotiate the payment for your services on your behalf generating significant discounts over and above what you would experience in a PPO. This allows you to still keep a network but have someone looking out for you to ensure your plan is paying the fair amount in claims for each procedure.
Due to all the structural cost savings we built into CHAMP, most of our plans have seen a fixed premium over the last 5 years versus having to deal with those inevitable price jumps every year. In fact, 90% of our clients have not ever seen a price increase and in many cases have actually seen their rates decrease each year without changing the coverage when both Champ and level funded plans are in place.
Through greater overall cost savings to the plan, you can experience better than industry trend renewal rates and lower monthly premiums.
Hortz: What technologies and modern health approaches are you employing and how are you applying them?
Guilfoile: Face scanning technology with your smartphone, telemedicine services, and our proprietary Life score that can detect health issues before they become health issues can save lives. One of the most fascinating tools clients get from us is the ability to scan their face with their smartphone. Since your skin is translucent, the app can read all of your vitals similar to a smart watch but with much more information.
The ability to “touch” a patient over the phone, give real time medical advice, and use predictive medical modeling to anticipate claims and serious medical events potentially years before they happen can also be the single most impactful long-term tool to save billions of dollars on claims before they ever happen.
Companies that have implemented wellness programs have averaged $700 in savings per year per employee.
Hortz: How do you go about customizing your CHAMP and major medical group plans to individual business needs?
Guilfoile: We have over 28,000 different levers to customize every single part of every plan to have coverage for every budget and provide businesses with a way to design and offer a comprehensive benefit for their group health insurance that meets their specific needs. This provides accessible price points for a startup or small business looking to offer affordable benefits to their employees with the best coverage money can buy.
As for CHAMP since the plan covers so many areas, we can customize their major medical coverage so they only need to pay for the coverage they do not already have that Champ is providing them, saving them a substantial amount of premiums while enhancing benefits tremendously.
Hortz: What type of business and strategic partners helped you build and implement your CHAMP group health plan?
Guilfoile: We have been fortunate to have some of the most impressive partners to help with the enormous growth we have been experiencing over the last decade. We developed a series of extremely strong partnerships with multiple health carriers, along with leading payroll, staffing, and PEO firms. Not to mention some of the greatest minds in tech and a very connected and experienced C-Suite that are all essential parts of this incredible machine.
Hortz: What best advice or recommendations can you offer advisors working in employer benefits marketplace on how to position these new options and benefits?
Guilfoile: There are 28.8 million small businesses in America. Shouldn't they have the same access to benefits that large corporations do? With level-funded plans and a correctly structured Section pre- and post-tax 125 elements, they can. AffordaCare Insurance is all about giving your business clients the health insurance they want, the way they want it. The freedom to choose any doctor and network they want. The flexibility to customize their plans with hundreds of companies. The piece of mind with locked-in prices for life.
Our advice to the best way to approach and start working with any employer is to give them something of value before asking for something in return. The best part about what we do is to be able to create an immediate net savings to the company first and allow their advisors to use these savings to help with other needs and services they are already consulting on. By doing so, no broker/advisor becomes competition and there is no company that is off limits that you cannot help.
For insurance and retirement plan advisors, adding the CHAMP plan and its savings may be able to help cover core major medical renewal increases while increasing their coverage from last year making them look like a hero. Also for anyone that sells a product/service to a business owner that is billed on a per employee per month amount, like payroll companies, CHAMP saves the business owner nearly $50 a month for every employee – a guaranteed fixed number forever that can effectively buy payroll for them for free and provide a net profit per employee per month that can be used to increase their take home pay.
We designed CHAMP to be our unique and innovative solution to complement any corporate health insurance plan while offering employees additional benefits at a zero-net cost. Whether a startup or a large enterprise, this scalable solution will benefit every employer and employee enrolled and makes this the ultimate win/win solution that every business needs right now.
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The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We operate as a business innovation platform and educational resource with FinTech and financial services firm members to openly share their unique perspectives and activities. The goal is to build awareness and stimulate open thought leadership discussions on new or evolving industry approaches and thinking to facilitate next-generation growth, differentiation, and unique client/community engagement strategies. The institute was launched with the support and foresight of our founding sponsors — Ultimus Fund Solutions, FLX Networks, TIFIN, NAIFA, NASDAQ, Advisorpedia, Pershing, Fidelity, Voya Financial, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines).