Rather watch? Visit: https://www.everlongcaptive.com/podcast-ep4/


Welcome to the Everlong Edge Podcast. I’m Doug Truax, CEO of Everlong. Thanks for coming back. You know, prior to founding the company, I, like you, was an innovative benefits broker. I was really watching how the industry status quo was, at best, treading water when it comes to situations with the clients, and knowing that there had to be a better way of doing this. And that’s why I founded Everlong, and it’s a purpose-built, high-performance health insurance captive, really designed to break free from traditional ways of thinking and provide a better way to purchase group health insurance.


Okay, so leak number one: there’s strength in numbers, also known as, critical mass. So, in my opinion, strength in numbers is a survival strategy. It’s not really a business or risk management strategy. In business, and in risk, it’s really about thriving, not simply surviving. It’s about leveraging the tools available for the best possible results. I’ve talked about this before. History also shows us how this type of thinking and complacency can lead to disastrous results. During the Hundred Years’ War, the decisive Battle of Agincourt in 1415, the English army famously achieved victory in spite of the numerical superiority of its opponent.

So, how did they do that? So they modified the existing boat technology to create the longbow, and that innovation then overcame the so-called strength in numbers. So that’s also why years and years ago, in 2010, we named our first captive cell the Longbow Employee Benefit Captives, because of this innovation. And that’s exactly what we’ve done here at Everlong. We’re taking the current captive model used in the business liability world, modifying its structure and improving its performance, enabling us to turn back the tide of this ever-increasing medical insurance cost caused by lack of control and transparency, and then all without requiring a sea of employers to navigate volatility.

And that’s one of the biggest myths out there today. I’ve talked about it before, big companies generally don’t have stop-loss insurance. So once you get to 8,000, 10,000, 15,000 employees in a captive cell, you know what’s going to happen, you don’t have to have all these people everywhere. So the group’s inside the cells can get to know each other, which I think is a big differentiator for us, because we have these smaller cells where they know each other, but they’re super big, big enough to make sure that they get all the leverage that they need.


Okay, so leak number two: rate caps provide value and peace of mind. So, speaking of old technology and traditional ways of thinking, rate caps are outdated, archaic remnants that should be sunsetted, in my opinion. Rate caps came into existence because it was one of the only tools available in the risk management toolkit. It was kind of like this blunt instrument that met the basic needs and added very limited sophistication of the times. We’re talking about 50 years ago, there wasn’t a lot you could do.

Well, today, though, for anyone that’s paying attention, it’s clear that the industry has evolved a lot. Society’s evolved, business, employers, and benefits have all evolved. And as a result, so too must the risk management toolkit. And it has. So today, we have access to powerful health data tools and analytics, solutions that are sophisticated and they’re designed to help wellness prevention, help population health management, and to really inform the claims management with decision-making.

And that’s really how captives should be doing business. So look, if your clients are hitting their rate cap, something’s really wrong. Not, you know, “Oh, goodness, that’s really a great thing that my client has this rate cap.” The right question really is, why is my client hitting the rate cap, and what can I do about it? The reality is rate caps don’t provide real peace of mind, it’s just an illusion that no matter what my clients do, or don’t do, they’ll still be okay and you get to retain the business.

But, I personally think that it’s reckless thinking, because a stop loss, when you’re self-funded, a stop loss is a must-have. Just like when you think about the airlines and their safety measures they have in place, they don’t talk about it anymore. Airlines don’t market themselves as being safer than their competitors because they all have sufficient levels of safety. This is how you need to think about the captive industry. There is sufficient safety already, it’s time to move the conversation forward. And another thing to consider is, rate caps do load up the premium. They make the whole thing more expensive. And I’ll get into compensation of captive managers later, but that’s another factor in this.

But I do think that forward-thinking brokers talk about the should-haves, like predictive claims management and things like that, and the could-haves, like the dividends that you could get back. Now, that, to me, is real value to your clients, and that’s how you differentiate yourself and demonstrate your value to your clients, and improve their condition by providing a better way to purchase group health insurance. And just to plug us, obviously, a purpose-built, high-performance health insurance captive solution that allows for the integration of sophisticated tools to help your clients make informed decisions with upside, not the same old decisions with the same capped results.


Okay, so let’s move on to leak number three: all captives are essentially the same. Now, this couldn’t be further from the truth, and it plays right into the hands of those only focusing on quantity — the strength in numbers argument — not quality. So here’s a number of ways — we had to pick a few, here’s a number of ways that Everlong provides real differentiation and quality.

So first, stability, and not all stability’s equal, I talked about this before. Our stability is looking really good, our six-year average on our stop loss renewal is 3.1%, you factor in the dividends that we give back our clients on our negative 6% trend line. And then, speaking of dividends, completely transparent, everybody knows how they’re gonna get it, what it is, how that works. I’ve actually heard of employers being in captives they don’t have any idea how they get a dividend. And this is something I’ve said previously, as well, if you’re — don’t know how you get your dividend, there’s a board of directors you’re not on and you’re just the face in the crowd, how’s that not a carrier? So, something to consider.

Also, a big differentiator for us is that we’re not property-casualty people, we’re all employee benefit brokers, so we understand the space quite well. We’ve been there, came out of the brokered space into the captive space, and that helps as we communicate with our broker partners, and also, as we’re talking to the employers who are the owners of the captive cells. Our compensation is a PEPM, per employee per month. And it’s not a percentage of premiums and things like that, so, it’s a line incentives. And I do think that different motivations yield different results, and we’re seeing that. And I think that our broker partners really appreciate that transparency, I know the employers do as well.

Another big piece for us is claims management. Out of all the captive managers out there, I have not seen anybody that does as sophisticated work as we do for the claims management piece, and how we help our brokers and our employers with our in-house resources, to make sure that we’re doing everything we can to improve their situation. And obviously, we’re looking out for that captive layer too, and there’s lots of different ways to do that. So, we’re big on that.

We’re fully independent. I’m the owner, I call the shots. Most times, I think that that’s a pretty good thing. You’d ask some of the employees at Everlong, maybe they differ at times. No, I’m just kidding, they all think it’s all perfect. But it’s independent, we’re not owned by private equity. Another big factor, multiple fronting carriers. We’re not beholden to one carrier, which, I’ve addressed this before. If your captive is a carrier, well, you’re not going anywhere. So, multiple fronting carriers. Another big thing, organ transplant. And I think that that’s been a huge differentiator for us. I interviewed one of our broker partners previously on an episode. And, you know, when you take the organ transplants out of the equation, you really start moving off some big risks. I think that definitely contributes to what we’re doing, that’s mandatory for all of our groups.

Last thing I’d covered too, we do screen our employers. That’s why we don’t need to rate caps around here, why subsidize employers that don’t care? That’s when you really get away from that strength-in-numbers argument. You don’t need a gazillion people on this thing, and a gazillion employers. You need a cell of employers that are tracking on what’s going on. And so, when I say we screen the employers, we do try to figure out where they are, you know, where their attitude is about claims management.

We don’t want the CFO or the VP of HR just like, “Ah, you know, everybody loves Blue Cross, just take the 10% move on, we don’t really care.” I mean, I don’t want them. What we want are the people that are saying, “You know what? I think there’s a problem in this space. We’ve spent a lot of money, I’d like to figure out what’s going on.” You know, I saw the other day that the CEO of Cigna made $79 million last year. And I’m a capitalist, so I have no problem with people making money, but you gotta ask yourself, if they can pay him $79 million in one year, there’s probably a lot of profit laying around.

And so, that’s all we’re doing here at the end of the day is, we’re giving people, employers control. And when they get control, they get to take the profits back for themselves, and they spend a lot less money, and their employees are happier. And the decision-makers at the employers are happier, and that’s what we’re really after here. That’s just a few of our differentiators, I just wanted to point out some of them. There’s a lot of them, but I just wanted to point those out.


Okay, so let’s move on now to leak number four: my self-funded clients are already doing well, also known as, if it ain’t broke, don’t fix it. So, that probably shouldn’t be your attitude, it’s really our job as the innovators and as the innovative broker, to move and improve your clients’ condition over time. And so, you’re getting them from where they are, and thinking today, to where they need to be tomorrow. And so, change is only hard and uncomfortable when there is no new information to shed light on the unknown. And that’s why we can never really bury our heads in the sand on this stuff.

And so, in fact, here at Everlong, most of our clients come from traditional self-funding. They stopped this little leak that was keeping them and their clients in a treading water situation. You can now help your clients see the enlightened, better path, the better way forward. And I think it really is moving down that spectrum, obviously, from being traditionally self-funded to self-funding and a captive, and all the things that come along with that.

So, in closing, I want to talk about what a paradigm shift looks like and feels like. It’s disruptive to the calm equilibrium of the status quo, your comfortable habits. We’ve all been there. But with any type of innovation, there are the innovators. I think we’re one of them, here at Everlong. You got the early adopters, you got the early majority, you got the late majority, and then you got the laggards. And so, we’re currently in that phase between the early adopters and the early majority, called the chasm. And if your clients don’t cross the chasm and reach the early majority segment, you’re going to miss out on tremendous upside here.

So if you think about this, in terms of like, Amazon, they went from selling just books to everything, and it became a seismic shift. And that’s what a seismic paradigm shift looks like. When this really occurs, what happens here is, this key piece right here, where innovation becomes expectation. And before you know it, or perhaps you’re already hearing it from some of your groups, that your self-funded employer clients will start asking you about other better options. And why is that? Because the early majority, if the segment is growing, then that early majority segment, that’s the pragmatists. They see the value and they accept the change.

And that’s where a lot of this is starting to happen right now. And frankly, by definition, most of your clients are not early adopters. I mean, that’s a small amount down here, they’re more over here. But, you can’t help that. But what you can do to move it along faster is help them see the value in here, and the value of moving sooner.

And so, you and I both know, the future of group health insurance is already here. It’s just not widely distributed yet. And in fact, here’s where I think the industry is today, we have already gone through the first disruptive transition, and now we’re in the eye of the storm. It’s calm, right here, luring some of you into complacency, traditional ways of thinking and doing business. But the tail end of this disruptive force is coming, and you need to be prepared to shore up these little leaks that we’ve been talking about, and start asking, “How can I help them cross the chasm?” Because it’s closing with or without them. And don’t let them slide into the late majority, or worse, become a laggard.

So, I really think the next three to five years, we’ll see the largest self-funding shift in history. So my closing comment is, let’s ride that wave of innovation together. Well, all right, that’s the show for today. Thanks again for tuning in. And I look forward to seeing you next time on the Everlong Edge Podcast.