Rather watch? Visit: https://www.everlongcaptive.com/podcast-ep1/


Hi there, welcome to the Everlong Edge podcast. I’m Doug Truax, founder and CEO of Everlong. Really happy to have you here today, I hope this podcast is super beneficial for you. The point of today’s podcast is to help you understand what’s going on in the captive space, give you some differentiators amongst the program managers, and really try to give you a good space to begin with, if you’re not really in tune with what’s going on in the captive space.

And then going forward, what we’re going to do is, have other additional topics, I’m actually going to be interviewing some of our clients, some of our brokers, things like that, to just be a resource for you to help you understand as a broker, and I know some employers will be watching too, but as a broker, to really get your head around what’s going on in the captive space and some of the differentiators.

To give you a quick background on me, I was a benefits broker, so just like you, I understand the need for client retention, and doing everything you can to reduce costs for your clients, and also the prospecting side of things as well. When I was a broker, I started off in one of the big, big agencies, and then I started my own agency. And I grew it, eventually sold it inside the agency, I started my first captive cell, which eventually became Everlong, spun it off. So, I’ve done the full life cycle of things in terms of, what it’s like to start an agency, grow it, cell it, all that stuff.

So again, I get the retention, and the prospecting side of things, and so the other side of my deal when I was a broker was that, I worked on some really big groups. So a lot of our clients were there 5,000, 8,000, 12,000 employees. And so I got to see in these fortunate 1000 companies that the differences in their benefit plan, versus, my group that had 150 employees, it just wasn’t the same thing. A lot of it did come down of leverage, their ability to get what they wanted from vendors and things like that.

But there were other nuances to it as well, and that’s what kind of drew me to this captive space is, how do you get the smaller employers together, so that you can get the same kind of leverage as fortunate 1000 folks have. And so that’s really the Genesis of why we’ve kind of re-imagined and redesigned this whole employer based healthcare piece to build these high-performance, health insurance captives, that are actually breaking with tradition. And so, when you think about tradition and where we are, the insurance industry is at a tipping point.

If you’re watching this now, you’re one of those brokers that’s been into disruption and trying to do things differently, but we all know that it’s not sustainable for the employers and their employees, we have to pay for this stuff, because it just keeps going up year over year. And there’s a lot of good stuff going on, but you have to get down to the heart of what is really going to help your clients going forward, because the employers obviously are getting more and more aggressive about trying to figure out the next best thing to do.

And so the reality is, if you don’t really position yourself, and your clients, you’ll be left behind here. And I think that a lot of brokers are understanding that, and this necessity now to do things differently, and be transparent, and be cost effective, is just growing and growing.

So, it’s really time to break free from what we’ve been doing, which is basically treading water, and your clients and the employers can recognize that, and get to a place where you’ve got the tools you need, and a sustainable foundation to do what’s necessary, this continuous innovation, so that you can be the broker that’s doing things differently for your clients, and getting them out of the situation they’re in.

So, to just back up real quick, I said I started the first cell back of my agency, so that was back in January, 2010. So I’ve been in this space a long time, we’ve been in this space a long time, and I’ve got a military background, so I’m a big in the military history, and we were trying to come up with a name for the cell, and we settled on the Longbow Employee Benefit captives. So that was the name of our very first sale way back in the day, and that’s because as everyone knows in the 14, 15 at the battle of Agincourt when King Henry the fifth, defeated a much larger French force at a greater distance using the longbow.

‘Cause up to that point, archery was basically crossbows and it was short range. And so the French were caught because, King Henry the fifth was at a standoff distance and he defeated them that way. And so, what they did is they basically took an existing technology, the crossbow, modified it, and it was a huge leap forward in warfare.

And so that’s what we’ve done here at Everlong, we’ve basically taken the current captive model that’s been out there in the business liability world for a very long time, and that’s like 80, 90 years on the PNC workers’ camp side. And we’ve changed some things, made some adjustments, moved it around a little bit, and we’ve come up with this new structure now that helps groups on the medical side. So that’s why I just want to get a little background there, and that’s really what we’ve done.

Technology has been around for a long time, modified it for the medical side and not the business side. And so, now to get into a little bit more granular of how this looks, and so we’ve got a graph here for you to look at and it’s kind of like, the progression of things,  everybody knows what fully-insured looks like, and what goes on there. And then you get to self-funding and you definitely get more transparency, but the next leap over is to not buy a fully-insured Stop Loss policy and curve it up, and put some of that premium and a captive, and get some money back on that. And that’s the basic financial gist of what’s going on behind the scenes.

So you have to put some collateral up because you’re the owner of your own insurance company, as an employer, but you can get some money back. But there’s a lot more that goes into it in terms of, what is actually happening inside the captive itself so that you can continue to save money as an employer, but that’s the kind of basic progression here of what’s going on. And I think this, this is way better than this because over here, yeah you’re self-funded, but you still buy this fully-insured Stop Loss premium policy, why wouldn’t you come over here and get some money back?

And so, that’s why we’re a majority of the groups that are in our captives were actually just coming from pure self-funding, because they recognize the CFO’s and CEO’s, they all recognize that, “Yeah, I’ve got this fully-insured Stop Loss policy, and I have some years where I have hardly any claims, and so I had all the premium went out the door. So, how do I get that back?” And so, it’s a simple thing for them to understand, but there is this other side of it and this is an important piece, we built this product and this system specifically for the courageous broker, and the courageous employer that is willing to buck the current system.

There’s a group of brokers and a group of employers that are definitely seeing, and the group is growing all the time, that a traditional way of doing this is failing, and that’s why we’ve created this better way to purchase health insurance. And so, the thing to keep in mind is, you have to first be a broker that’s into that, and then, we have to talk to you about being the employer that really wants to do something different. And when you go and do that, because there’s other things that are involved here besides just joining and getting a different Stop Loss policy, you have to be thinking differently as well. And so, when you do these different things that I’m going to talk about in a second, you get to this new place with your costs.

And so I wanted to talk for a second about this concept of stability, because that’s a word that’s really out there a lot in this captive space. And my argument as well, not all stability is equal, because you definitely want to get out of the place where you’re fully-insured and you’ve got the 25% increase, you don’t rely. And so, you’ll get to a better place when you sell fund for sure, but then, you’re still subject to a lot of swings in the Stop Loss premium. And so, what we’re at right now is, our groups across our captive cells are at about, a 3. 1% increase on the trend line for just the increase. And then, when you factor in the money they get back on the dividend, and you net it out against that current year’s premium, it’s actually a-6%.

So, that in itself is a really good place to be from a cost standpoint. And as far as I can tell, it’s hard to beat in the program management space, inside the captive industry, so I just want to draw your attention to that, that it’s not all equal. But the thing that we recognized early on is that, why would we have captive cells where some of the employers were buying organ transplant policies, and not having the organ transplants hit the captive at all, and others weren’t. And when the others weren’t, and they had organ transplants, you basically socialized the risk for that organ transplant across the other members, it just wasn’t fair.

 And so, long ago, we mandated that in every one of our cells, every employer has to purchase organ transplant coverage, and I think that is a huge reason why our costs are what they are. There’s a bunch of other reasons, but that’s a really big reason, and no one else is doing that. And so, that is part of the innovation and creating this high performance, health insurance captive space. And so, that’s one big differentiator, a couple other things that I think you should keep in mind.

And the reason I’m going over this too, just so you know, is I definitely sense in the brokerage community, there’s a need now to figure out, “Okay, well, who’s the best captive manager out there?” Because, as brokers, you’re trying to do the best thing for your clients and you can’t necessarily just be like, “Oh, I’m just going with these guys, and that’s all I’m ever going to do.”

Because you know that your employers are going to say, “Well, have you looked around?” Or there could be some other broker that’s working with somebody else and brings them in. I was a broker, so I understand you have to broaden your scope on this, so it really comes down to, how do you figure out who the best program manager is? Now, I’m going over some differentiators for us, and I think we’re the best, of course I’m biased, but I want you to listen to this, and come to your own conclusion, but I’m just going to talk you through some more things here.

So one of the things is, in all of our cells, we don’t allow more than 50 employers in them, and the reason for that is they all get to know each other, and they begin to feel a little positive peer pressure because, they don’t want to be the one doing less than the other guys for reducing costs. And so, they network with each other throughout the years, and as they’re getting to know each other, they’re improving their plans, they’re getting ideas from each other. The brokers inside those cells get to know each other, they’re helping each other, and it creates this kind of benevolent cycle of people wanting to do better and better.

So, we do some things on the back end financially to make sure it works, but there’s this front end piece where they all get to know each other, and it works. And I would say one thing too about this is that, like I said before, when I was a broker, I worked with really big companies, and I saw that by the time you got to 5,000, you got to 6,000 employees, something like that, my clients were getting to a place where they weren’t even buying Stop Loss anymore because actuarially, they knew exactly about where the claims are going to come in.

And so, when you have 50 groups together, that’s going to be 8, 9, 10,000 employees all in one spot. So it’s a myth that, you have to have a gazillion employees in the captive cell. You just don’t, because you get to certain places from an actuarial standpoint where it gets very certain, and then you get the benefit of knowing each other, you’re not just a face in a crowd, and you can work more on things as you go forward. So that’s a big differentiator for us as well. And then, so the other thing that you need to think through is, are you working with an independent kind of non-private equity owned, captive manager? I’m the owner of Everlong, I’m not going anywhere, I’m keeping it that way. If there’s other players involved, you don’t know what’s coming next.

And the other thing you got to consider, does your program manager work with multiple fronting carriers? We have multiple fronting carriers, multiple cells, multiple renewal dates, it gives you a lot of flexibility, but that multiple fronting carriers is a key piece. Because what you don’t want to have happen is, you end up working with a program manager that’s actually a carrier.

So if you’re working with the carrier, that claims to be the program manager, you’re pretty much stuck. You’re not going to go anywhere else because you can’t do it. You just have to pull a complete out of that captive if you want to get away from that carrier. So, there’s multiple things going on out there right now, but again, we were trying to build this thing from the beginning because, I am a benefits broker, there’s other people on staff that were benefits brokers, and we said, “How are we going to make this work for all the brokers out there, and what we know they want to do for their clients?”

As far as renewals go, you shouldn’t be worried at all about, what you’re going to do with this client or that client, for us, we have multiple renewal dates, it’s more comes down to, what does the client want to do going forward for their renewal date? And then we figure out, because we do have multiple cells, multiple front-end carriers, we can do a lot with that. And so, you don’t have to wait on this kind of stuff, you can dive into it today. If you have an employer that is thinking this way, and wants to go down this path, I think it’s better start now as opposed to later, so we can help you at any time with that.

Okay. Well, that’s it for today. Thanks so much for tuning in. So, stay tuned for our next episode of the Everlong Edge podcast, where we’re going to get into, “Now you know what’s going on”, let’s take it up a notch. And we’re going to get into some clients’ successes, how we put our skin in the game, on our guarantee. That simply can’t be matched by other captive program managers.

So a lot of nuances like that, the next time around, and again, looking forward to having some interviews, and just having more things on here that can help you really advance your captive knowledge. So again, thanks for tuning in, and look forward to seeing you next time.