Rather watch? Visit: https://www.everlongcaptive.com/podcast-ep2/


Hi there. Welcome to the Everlong Edge Podcast. I’m Doug Truax, founder and CEO of Everlong. Thanks for joining this week, hopefully you saw last week where I really covered some basics of the Captive Space. Help you understand what’s going on in general. Perhaps you already did get it, and you got a little bit more out of that.

This week, I really want to dive into some more specifics, pieces of the puzzle, and shine a greater light on a better way for you and your clients going forward. Before I get into the specifics, I wanted to cover one thing in particular, and that is basically that, the reason we’re doing all this, is because the costs are just too high.

The thing we talk about internally a lot is the employees, right? What’s the impact on the employees? You think about where we’ve been. Basically, the health insurance carriers have been making a lot of money. If you look at the S and P 500 over the last 10, 15 years and see how the health insurance carriers did compare to the average, it’s really pretty crazy.

Hospital systems are the same, and it’s kind of been this weird cycle over really, I would say 25-30 years, where the hospitals are charging way too much. We’ve all seen the reference-based price piece, and it actually comes down quite a bit, and then pay a percentage on that and everything. So you see, we’ve all been appalled at different times, but we all see though that, the cost at the hospitals, they’re just way too high.

The health insurance carriers, they have no problem at times paying those high claims because they can turn around and say, “Well, we got to raise the premiums, look at all this money going out the door.” And then, there’s been times where some brokers, not the brokers probably watching this, but some brokers have been like, “Hey, this is great. The premiums went up, so did my compensation.” And so, we had this really vicious cycle that was going on and the cost had just continued to escalate over the decades here. And, it’s horrible for the employers, right? So they’ve got to pay for this.

But the real reason they were doing this, and I hope this resonates with you, if it probably doesn’t resonate with you, then we’re probably not a good fit for you, but the real reason they were doing this is for the employees.

Because the employees, through their employee share of their contribution to the plan, they’ve just been gouged over the last couple of decades, and it’s just not right. And so, that was the Genesis of all this as I looked through everything, and said, “How do we really get the cost down on every possible thing? We do full transparency on every piece of it, let everybody see everything, and like anything in the business world, the cost does come down once everybody can see everything, which hasn’t always been the case at all?”

And so, with our programs, everybody can see everything and know what’s going on, and that is yielding a much better result for the employers, but more importantly in my mind for the employees who have to pay for all this. So that’s why we did it, and I just wanted to put that out there as kind of the purpose behind everything.

So, let me jump into motivations, and why there might be different reasons for people doing different things. The question I’d ask you in this program manager space, a lot of captive program managers out there now, “Is the program manager managing your client’s risk, or are they managing their compensation?”

So this goes a little bit back to what I said a minute ago, when I was a broker, I eventually moved most of our clients over to being self-funded, and on a PEPM for our compensation. Had some clients didn’t want to move, and they stayed fully-insured and we’d worked really hard for them, and they get increased on their fully-insured premium or whatever it was, let’s say it was 10%. Well, compensation for us went up 10%, and so, even though you’re trying to do the exact best thing for your client, there’s this piece in the back of your mind, it’s like, “That’s a conflict.” Because every time you make more money, when your client’s costs go up, that’s a difficult situation for your client, and it’s an uncomfortable spot for you to be in.

And I think that, that’s what’s happening in a lot of places in the Captive Management spaces, there’s a lot of Program managers that are making a percentage of the premium, so you got to ask yourself, “Why would they be interested in lowering your client’s premium?” So what we’ve done is, we’ve actually created on all of our compensation, it’s all PEPM. So, it’s just based on the size of the group, and if the group grows, we gain as well, but it really takes us out of the business of trying to get our employers to be okay with the cost of everything going up, so it’s all fully aligned. So that’s a huge part of this, and I think that gives you, as a broker and an employer, peace of mind.

Another piece on that as well is that we don’t do any overrides on anything, especially not an override on a vendor that we recommend to one of your clients. So that would be in our view, an extreme conflict of interest, and I do know that’s going on out there a little bit. Something else to keep in mind from a program management standpoint is, the program manager purely focused on the stop-loss financials and kind of ignoring claims management.

So, all of our employers and brokers are encouraged to support and improve the claims situation, so what we do is, we have three scheduled checkpoints throughout the year where we get the brokers and the employer for that group, just that employer and that broker, and we talk through what they’re doing for data analytics, give them some expert recommendations on what they should be doing going forward, on the overall claims reduction piece. And that, in of itself, is really driving the train now on how we keep moving things down going forward, and so, just like to encourage everybody, to make sure that your employers know exactly what’s going on.

So this gets us to another point about captive managers, and what they may or may not be doing out there. I understand a lot of employers that are in other captives don’t even know how to get their dividends. And this was kind of a strange thing because the employers that joined the captives, they are actually becoming owners of an LLC, and if they’re owners of an LLC and they don’t know how to get their profits, that’s just kind of strange.

So, what we do is, make sure that every employer-group understands what is going on, how they get their money back. We’re obviously working on the claims reduction piece, but this whole side of it is, “Are they going to get their money back?” Really comes down to, “Is it possible that inside these super large cells that some of these program managers, they’re basically using dollars that are not being spent by groups that are working on their claims, to subsidize groups that aren’t working on their claims?”

I mentioned last time too, we definitely do the organ transplant policy piece that takes organ transplants off the table. If they’re not doing that in other program cells, you could have some groups buy an organ transplant, and others not. And as soon as there’s an organ transplant, they’ve got to socialize the risk across all the groups.

And that can I think, lead to lack of transparency where basically, you don’t want to tell people why they didn’t get their dividend because it’s not a great story. So one of the things we do is just lay it all out there, and this is what happened, this is the way it works. And then, we make changes going forward with everybody’s eyes open, and in our cells where the employers know each other, they’re working on different things to improve the overall situation that cell and their deal.

Another point is kind of related to that, “Is there a board of directors that was put in place before your client joined the captive program that is basically dictating to the program manager what they should do?” And this leads to a lack of transparency on the part of the overall captive. So this is where I say, “If you have a captive cell, that’s got hundreds and hundreds of groups, and it’s being led by a board of directors that your client’s not on, or you don’t even know how you get on it, and you don’t know how you get your dividend back, how is that just not a fully-insured carrier?”

So, that’s kind of a dividing line that’s going on right now out there in the space, and something definitely to think about. Another thing I’m going to cover later in another episode, like I said before, we’re going to be doing some interviews with brokers, and some clients, and things like that. But I also want to cover a concept that a lot of people haven’t really thought through yet that we have is that, your aggregate policy, should it be in the captive layer or shouldn’t it be? We took our aggregate policies out of the captive layer a long time ago for a lot of really good reasons, and I can cover that, and I think it’s a super important point going forward, and I think it’s starting to show up in people’s renewals if they’re doing it or not.

And so, more to come on that, that’s probably another episode down the road or another topic. One of the things to think about too with your Captive Program manager, “Are they living up to their promises?” So for brokers that have already moved your clients in a captive, if the program manager suddenly is not following through on the things they said they were going to do, or maybe you feel a little ghosted because there’s not a lot of service or attention, how was the past renewal cycle, how did it go? From our perspective, there’s a better way to do it, and that really comes down to, our service model is really, really tight on making sure that we’re always in front of the groups.

Like I mentioned a minute ago, we’re having these meetings, everybody knows what’s going on, and the accountability on those meetings we’ve actually built it into our internal business process so that there’s no way that those meetings don’t happen. Because without those meetings, you’re not going to really know what’s going on, so that’s how we basically live up to our promises, and there is a better way to do this. I was going to tell you too, about one of our captive owner members, decent sized group.

Our average sized client now is about 170, 180 employees, something like that. But these guys are a little bigger than that, but they’ve basically saved $2.3 million through self-funding, and they’re in one of our high-performance, health insurance captive models, the model that we have here at Everlong.

So it’s a multi-generational family owned automotive group, car dealerships, credit facilities, safety supply services, and really before they joined our captive, they had an issue because they couldn’t find a model that looked more like what their industry looks like. Being car people, they wanted the best deal, with transparency while minimizing variable costs, and so they found that in what we do. So we basically presented an approach to stabilize, and lowered all their renewal trends while providing full pass through transparency and relationship-driven innovation. So what is the result of all that?

They got a five-year average Stop Loss increase of just 3.1%, they got no risk of future lasers, and they have full transparency of what they were looking for, and the premiums include the organ transplant coverage, which I mentioned before. And also, when you start netting out the money that they’ve been getting back in dividends over time, they’re on a -6% trend line for the stop-loss, and also, on the claim side it’s been trending down because, they’ve been doing so much over the time that they’ve been with us.

So, self-funded company significantly lowering their PEPY exposure, and with the recent dividends exceeding $57,000, they’re up to now $2.3 million in savings since they’ve joined Everlong. So they came from being traditionally self-funded and a majority of those that joined come from traditional self-funding, and we make the transfer process really simple. So one thing I want to leave you with here at the end is how we do what we do, we call this the Everlong Leap Program. It’s our acronym, the L-E-A-P, so that people can kind of fast track your onboarding and your renewals.

And here’s a quick overview of how it works, so the ‘L’ is for link, so we link you up with the best people at Everlong based on your specific needs, and we start thinking through what cell is going to be best for you. E is for explain, so we help you explain the captive piece to your clients in a simple and clear way. Now we have a lot of brokers that we’ve worked with over the years that they all kind of began in the same place, we got to talk them through the way we do it, and help them understand it.

That’s not always the situation, once they get it and everybody’s tracking, and we feel confident and they feel confident, they go and do it on their own but there is an element in the beginning where we do have to help them explain it to their group, and get them onto a good path with it. The ‘A’ is for analyze, so we help you run the numbers, figure out your cost savings, return on investment, all that kind of stuff.

And then the ‘P’ is we come back and present to you the final numbers that we feel good about, that you feel good about that’ll get you into the program. And so, it’s a pretty step-by-step way of doing things. That’s the Everlong Leap Program, that’s kind of the front-end, the cells process, so to speak. And then, Everlong Elevate is what we do once they’re in.

Okay, now they’re part of the group, they’re an owner of their own insurance captive, and so from that point forward, our service team works with you to continuously elevate what’s possible, okay? There’s no dog and pony show, for us it’s just the work never stops, like I said, we have a commitment to our brokers and employers that we will meet with them three times a year, we have owner meetings annually, everybody gets to know each other.

And so, that is where the rubber meets the road on making sure that once they’re in, their education level continues to grow, because some of this stuff can get a little complicated but they got to see it multiple times, they get a feel for it. They feel like, “Okay, I understand what’s happening. I see my costs are coming down, I feel like I got full control of this thing, and I understand way more than I ever did because of all the transparency.” And so, that is where we want to get them.

So let me transition this to this, because this is where I know that, once we do all these things people aren’t going anywhere, and as you can imagine our retention is really, really high. So here’s our guarantee, so we give your client the benefit of two years. So aside from being acquired, dropping below 50 employees on the plan or going out of business, if your client leaves the program in the first two years, we’ll refund 100% of our fees from over that time.

And we can make that guarantee because, we do know that they’re going to love it, and that’s why we put it out there if that were to happen, if they were to say, “Oh, I don’t like this. This’ not what I thought it is.” And they got to leave, then we will give them the money back, and so, that’s how we put our skin in the game. So it gives your client time, time to participate in this kind of purpose-built, high-performance, health insurance, captive environment. It gives them time to stop shopping for stop-loss coverage, you don’t have to worry about that anymore.

Time to mitigate the fluctuations and stop-loss premium, and it also gives them the time to get their claims down and keep the profit inside the stop-loss premium, that’s the root of this, the financial side of this but there’s so many things that go along with it, but they need time to see that. And so, that’s our skin in the game to make sure that they get to the place they want to be.

Now, that is a better way to purchase group health insurance and level of commitment to our captive owner members that simply can’t be matched. Okay. So, now that you know what’s going on, and I’ve been shining this light on a better way for you and your clients, my question for you is, “What are you going to do differently, from what you’ve been doing yesterday?” So, thanks for tuning in look forward to seeing you next time.