There is probably no aspect of healthcare that has changed as dramatically over the last few years as insurance claims data. For every C-Suite leader or HR manager to justify their next rate increase, they must have the right amount of data at their disposal, gathered from the clients themselves. However, most employers do not have any access to this information. Jacob Sheridan of TPA Stream aims to make this process a lot more convenient through their product, Beacon. Joining Louis Bernardi, he explains how this simplified and standardized process helps collect historical claims data. He discusses how it can help business owners deliver better plans and guide consumers to make better insurance decisions. Jacob also talks about how the right gathering of such data can give back leverage to the people so they can stop being mere spectators.
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Improving The Gathering Of Insurance Claims Data With Jacob Sheridan
Thank you for joining us. I’m going to bring in our guest for this episode, Jacob Sheridan from TPA Stream. Jacob, how are you doing?
I am doing well.
How’s everything? I’m excited about this episode. It’s demystifying claims data and how forward-thinking employers are making informed decisions. I probably should say group health insurance benefit decisions. There’s probably no aspect of healthcare and health insurance that has changed as dramatically as data has changed over the last few years. We met a while ago. We’ve talked occasionally, and I thought it was time to get you on the show. I’m so happy you agreed to jump on. I’m going to let you introduce yourself. Tell everybody a little bit about yourself, also, TPA Stream, and then we’ll start talking about Beacon a little bit.
Thank you so much for having us. We’re glad to be with you on this episode. I’m excited about this discussion. A little bit about TPA Stream. We’re an insurance technology software company based in Cleveland, Ohio. We’ve historically been very focused on working with third-party administrators. Those that focus on pre-tax and COBRA administration across the United States. Helping them win new business and streamline back-office operations with our two core products.
Those two products are Claims Harvesting. It’s a way to capture claims data from insurance carriers on behalf of participants for any size group. This works for small groups, medium size groups, or large groups. This product could be perfect for you if you have had challenges collecting claims data for various purposes. We’ve historically been focused on the TPA channel. However, we’ll talk about our new Beacon product for brokers and how we’re taking the same technology and providing it directly to brokers this year.
We also offer a second product called Employer Invoicing, where we help our third-party administration customers take data from their various systems, bring it all into one place and help them send out invoices to their employer clients on a monthly, semi-monthly basis, or quarterly basis. We’ve built processes to automate the flow of collecting payments and integrating with accounting systems to help these administrators save a ton of time when it comes to managing how they make their money.
Those are the two core products that we’ve had in the market for third-party administrators. I am super excited to talk more about Beacon and how we’re taking this awesome Claims Harvesting technology and giving it to brokers. Also, it allows them to win more business and have a different conversation with their employer or clients.
For the audience out there, why is this so relevant? I call them to benefit decision-makers. If you’re someone in the C-Suite, a CEO, a CFO, or if you’re an HR director, an HR manager, or a generalist. Whatever you are, if you’re involved with making group health insurance decisions for your company, one thing that you have to understand, and probably most do, is that the amount of information that you are provided with is only enough to justify your next rate increase. That’s what insurance carriers provide.
They need to give you enough information to show you why, and that varies depending on the size of a company. If you’re in New York and you’re less than 100 employees, your community is rated. You can argue that maybe it’s not relevant because you can’t change a premium. However, if you’re over 100 employer groups in New York and pretty much any state now, 50 is the cutoff for large employers in most states.
In New York here, where I’m domiciled, it’s 100-plus. If you’re 100-plus, you’re probably at least partially experience rated. This means your claim spending is being taken into consideration to determine your future premium. They’re using a twelve-month period in the past to determine what your premiums are going to be. They’re going to give you the numbers that they feel are relevant to justify their math to determine that renewal increase.
They’re going to use things like retention and pooling charges, credibility, and all these things that most people pretty much ignore. It’s simple, “Here are your claims. Here’s what your premium was. This is what your loss ratio was, and this is what we need to write your business or keep you on the books for the next year.” That’s not enough. There’s so much more to go into real depth. There is so much more important information in that monthly claim spend. The breakdown of the medical and the prescription cost.
I want to start by saying if you’re out there and you’re if you’re reading this, you need to read real carefully because data is everything in healthcare. That’s what we’re going to be talking about. The importance of data and the amount of data you can get because, as Jacob mentioned, most employers don’t think they have any access to data. They might not even think it’s their right to have the data. They might think that they shouldn’t have the data under HIPAA and they’re happy not having it.
It’s because having the data is going to open the door for a lot more in-depth conversation about benefits that can lead the pathway for making much more informed healthcare decisions. When I came across the Beacon product that we’re going to talk about, it caught my eyes and ears. It’s because we have a lot of clients who couldn’t possibly have the insights that we’ve had the pleasure of.
However, it hasn’t always been pleasurable the last few years going down the rabbit hole and finding out how bad it is in the healthcare and the health insurance world. That data that you can get from your insurance company, I call actionable insights. Instead of making random benefit decisions, you can make informed decisions. I don’t know if you want to elaborate a little bit more on what the Beacon specifically is within your products.
We’ll talk about what Beacon does, why we built it, and how brokers can leverage it. We’ll also talk about the concept of loss ratio, which is something that all small businesses need to understand. What we did a few years ago was we evaluated the ways that our customers were leveraging our technology. We learned that there was a huge opportunity to do more with our claims data.
We initially developed our claims harvesting product to automate the substantiation and reimbursement process for pre-tax accounts, primarily HRAs and FSAs. Also, to automate the shoe boxing process for HSAs. We’ve learned that health insurance brokers have a huge opportunity to leverage this data to help their employer clients save money and make better decisions when setting up an employer-sponsored benefits package.
It can mean anything from a fully insured plan to a self-funded plan or even do an ICHRA. That might make sense, but without having the actual claims data, it’s hard to figure out what to do. There has been talk over the years about how self-funding typically makes more sense for larger companies that have 200 employees to 1,000 employees. What we’ve learned over the years is that there are small businesses taking advantage of a self-funded plan or level-funded plan.
They are taking advantage of a MEWA. There are so many different variations out there that larger businesses are able to take advantage of. Smaller businesses historically have been unable to evaluate these types of plans because claims data is typically needed to evaluate and underwrite small businesses for these alternative arrangements.
Smaller businesses historically have been unable to evaluate insurance plans because they need claims data to evaluate and underwrite for these alternative arrangements.
From my experience in talking with prospects mostly because we know where our clients sit, it can be a heavy lift to convince an employer. We’re a broker. I’ve spent the last few years changing the paths of what we were doing in the past. We are focusing on insurance because we were trained to do that. We wrongly assumed that the insurance carriers we write group health insurance plans with get the best prices because of their leverage and size. That’s simply not true. It’s completely the opposite. They use their leverage to create opportunities to profit from every aspect of healthcare.
For every claim that is paid, a portion of that ends up back in the hands of the insurance companies. I spoke with an underwriter with one of the largest, if not the largest national carrier, and my jaw dropped at things that I could have only imagined that they were doing. It’s capitalism. It’s not illegal. They can do it. The data’s the only thing that’s going to expose that. When the consumer increases their awareness and becomes more informed, now you’re going to be able to make the decision. Do you want to go back to that insurance carrier and do business the way you’re doing it?
Now, you’re going to have that a-ha moment of why we can’t seem to get this under control. We’ve gone the spectrum. Most employers, since the early ’90s, and that’s when I started, we went from a $2 copay to 100% hospital. There wasn’t even a prescription benefit back then. It was part of the medical. You had a $2 copay for most things to the $14,000 deductible HSA plan now. That’s a result of the annual exercise of paying more, getting less, and passing more costs onto employees in the form of contributions, but also passing that out-of-pocket exposure.
That singular focus on the insurance, because that’s what you’re given, is what caused that because you did not have the data, the information, or the technology. Frankly, even now, you know it. I can’t call up an insurance carrier and say, “Send me the report that Beacon can provide me.” They’re not giving it to us. It’s not happening. It will hurt them in their pocket and, more importantly, on Wall Street pretty quickly.
Let’s talk about that. There are carriers out there that do profit from these small businesses, but there are some good ones out there. One of the things that Beacon can also help to expose is when you have a good plan, when a fully insured plan does make sense. This speaks to the value of data and being able to make more informed decisions. There is an opportunity for the majority of employers out there, but there are some that a fully insured risk pool makes sense.
I will dial that back a little bit. It doesn’t necessarily mean that you might not be more appropriate to fully insure it because even though I’m a proponent of self-insurance, I know it is not always the solution that fits the group. We have quite a bit of business that’s with an appropriate carrier that, even though they are a large group, they do not experience rate them. They bundle them with other similar size accounts and that can be better. It still doesn’t mean they’re not profiting from the claims. That’s where I’m going. I’m not blasting insurance carriers. What I’m about and I think what your technology is, goes so far to help us address the unknown.
It’s because the healthcare systems and the health insurance companies’ regulations at the state level are only going to change for the betterment of the employer plan sponsor when it’s exposed and the consumer will make the decision. Many years ago, we wrote nothing but indemnity plans. There wasn’t managed care. There were no networks, but the consumer made a decision. “We like managed care. We like a copay. We don’t want the $250, $500, or $1,000 deductible. We like the lower premiums because back in the day, there were true discounts.
The consumer was king, and they put every indemnity company out of business. Chubb’s no longer there. They migrated into a Cigna or Guardian. They tried their hand in the benefits space. They might be in some states, but most of those carriers largely went by the wayside. This is another opportunity for the consumer to say, “We need to take the leverage back. We need to stop being a spectator. We want the data. We’re going to partner with companies like yours. We’re going to get the data, and let’s see where that takes us.
I guarantee you now, they’re not reading this, but in the boardrooms, in those war rooms where the top of the top at the healthcare and the health insurance world are, they have numbers. They know what consumer habits are changing already. They’re projecting what’s this going to look like in ten years. I could tell you firsthand because I’m pretty aware. I try to keep a pulse on what’s happening. This is why health insurance carriers are so desperately and quickly trying to get into the healthcare world.
They are buying practices because they know certain areas of profit are going to dry up and they need to create more of it. I use this English muffin analogy that I started with Eric Silverman in Austin, Texas. I said, “It’s like an English muffin. When you look at it on the outside, it’s smooth.” I didn’t know it was a corn mill. Eric said, “Corn mill on the outside.” He knew a lot about English muffins, which scared me a little bit, but he did. When you cut it open, all of those nooks and crannies are where the profits are hidden.
Our job is to try to fill those in and eliminate them as much as possible. They’ll always be ahead of us. There’s no question about that. Self-insurance is a great solution. It provides some capability, but I have a tremendous amount of opportunity in the fully insured world to give employers as a broker the data that a company like yours can help us provide. Let’s talk about not from the real technical aspect, but how do you use Beacon to get that data?
We’ve mirrored a process and approach that many of you are familiar with, which is very similar to if anyone on the show uses Venmo to share money with family and friends. Venmo uses a technology called Plaid to link up to your bank account. They make it easy to make that connection. What we’ve done is create something very similar for health insurance. We leverage individuals, their usernames, password, and any other information required to log into their online portal.
When they sign up with our service, we make it very clear that we’re going to be logging in on their behalf as their agent collecting these claims data and then sending it to a third party that we name and making it clear where we’re going to be sending the information. What we do is we have built an email approach where we can email employees. We give them information as to what the service is all about. We put the broker’s logo on the emails. We make it easy for employees to register, sign up, and connect their health insurance accounts with Beacon.
From there, we will log into that account periodically to see if any claims are available. We’ll pull those into our software platform. We make it easy for all of our broker customers and our third-party administration customers through a standardization approach that we developed for all the carriers across the US. We have a very simplified and standardized data model that we can then expose to our broker customers.
We’ve developed a number of reports to make this information easy to digest, understand and then enable a broker to do their job. They use this information to have a different conversation with their employer clients and potentially carriers. We had a case study we talked about from last year where there was a 30-employee company that was given a very high renewal from their insurance company after all of their employees signed up with the service. When the broker looked at the data, they realized that their loss ratio was around 25%.
If I remember correctly, was it a 50% increase or 80% or something?
It was in the high 30%, I believe. After a conversation with their current insurance carrier, they were able to bring that increase to zero. They weren’t able to reduce the rate, but they were able to see significant savings by having the data and being able to then calculate the loss ratio. I don’t know if you want to talk a little bit about the loss ratio.
Let’s talk about that.
It’s important for any business out there purchasing insurance.
Before we talk about the loss ratio, I want to make it super clear that this is a technology that is very user-friendly. It’s an email to an employee. The employee provides their login credentials. Beacon is going in, pulling that data. Going in periodically to pull the new data. It can go as far back as you’ve been a member of that plan.
This is useful, especially with a group that may be fully insured with the same carrier, because now you can get 2, 3, 4 or 5 years. Could you imagine what an underwriter can do with that data? When you’re looking at that data, is it just totals or does it provide more detail on what the claim or the diagnosis was? What was the procedure? What was the diagnosis? Is it pharmacy information also?
We’re able to collect any information that’s available in the online portal. We support medical, dental, and vision carriers now and also prescriptions through a medical login. We get all of the information that you would see as a consumer. That’s typical of all the dollars and cents, provider information, procedure name, and procedure codes, and we not only get that at a summary level for claims but also on a line-level basis.
Does this data go into some dashboard or is it only Excel spreadsheet-based? Is there a portal that the broker-advisor or the employer can go in to review that data?
D, all of the above. We have a portal. We have spreadsheets. We also have reports in PDF form that can be used.
You could imagine the decisions you’re making now about plan design and changing carriers. I try to think about the consumer’s behavior. One of the things that the American healthcare consumer was very clear about for the past years is to network. The insurance carriers that grew the largest network the quickest were the ones that succeeded the best. Even now, whether you have to make a call, do we go with a skinnier network at a cheaper price or do we go with a larger network?
Now, the larger networks are still getting the lion’s share of the business. That’s where the mindset is. If they have a bigger network, 60,000 doctors in my state, that’s the one for me. Even though you’re not likely to use more than 3, 4, 5, or maybe 10 doctors, bigger is better. However, bigger can also be more expensive. If you have this data, you can say, “Here are the doctors we use.”
Imagine your ability to now say, “Maybe this other skinnier network would be perfectly fine. What’s the disruption?” As a broker, that’s one of the things, disruption reports. We do those all the time. If you’re a large group, we can usually get a disruption report or a physician utilization report and we can compare it against the competition, but a small group can never do that. That’s useful in and of itself and also the claims. I didn’t even know that you could pull dental and vision. That’s news to me. I never thought about that.
Let’s talk about the loss ratio. As a Benefit Optimization Officer, the BOO, broker, consultant, or whatever you want to call me, the loss ratio in its purest form is your total medical and pharmacy claims compared to the total premium you paid over that same twelve-month period. That’s your loss ratio. If you paid $1 million in premium and you had $800,000 in claims, then you had an 80% loss ratio, but that doesn’t tell the whole story because now you have admin retention. All these pooling charges, broker commission fees, taxes, and all of that stuff are the starting point of the conversation. Do you want to add to that?
In its purest form, loss ratio is your total medical and pharmacy claims compared to the total premium you paid over the same 12-month period.
It’s ultimately is driving the price of the premium for all these plans.
With that group that you were mentioning, it’s hard to believe. I’m assuming that there’s a group of 30 people. They get a 30% increase. They have no idea whether that’s good or bad. They don’t know. We had a claim on an account this past year. It was a $2 million claim. That can happen to a 30-person group. It could happen to a two-person group. It’s not a New York group that you’re talking about because they would’ve been community rated, which to your argument before that, probably would’ve worked out well for them. It’s because their claims don’t matter.
However, what you discovered because you had a forward-thinking advisor, you had an employer who has to make the decision, “We want to do this,” because it’s their call. A broker can’t do this on their own. They need the support of an employer that says, “For the sake of our plan and our employees, we do not want to continue to absorb 25% to 30% increases every year.” That puts us out of business. We can’t compete. Our competitors could do a lot better.
They took the initiative. They rolled it out. I’m assuming close to 100% or 100% of the employees understood because there’s a conversation there to have. “Why are we doing this?” You want to be very transparent with the employees. “We need to do this. This is your health plan as much as our health plan and we can’t absorb 30% again.”
You can’t as well. Typically, employees are paying a part of it as well, right?
There’s no question. They do it and they find out that their claims are 20% of their premium. Let’s use $500,000 in premium and their claims are $125,000. The insurance carrier wants to raise it by 30%. That’s a $150,000 increase. They need $650,000 next year for a group that had $125,000 in claims the prior year. That’s fine. That Math works out great. That’s an extreme scenario or is that something that you see time and time again?
We continue to be amazed at what the data shows us. I think the point of that case study and this conversation is that you have to have the information to have an understanding. There are employer groups out there that have unhealthy populations that need to stay on fully insured or should be looking at ICHRA plans. There are others that have healthy populations that should have gone to self-funding many years ago. They didn’t know.
They might be working with a broker in their regional area that never has sold a self-funded plan or never has been aware of a MEWA or different captives that different MDUs offer. Step one is getting some information, understanding where you are, and then being able to make decisions from there. I’m a huge proponent of a three-year strategy. You don’t need to make changes immediately.
We’re talking about some pretty extreme changes for small businesses that could be extremely valuable, but we’re going to cause change. There might have to be different providers utilized, different prescriptions taken, and all sorts of other types of changes. I’m a huge proponent of getting the data in year one. In year two, start to make some incremental changes. In year three, if there are some opportunities to make more changes, do it in year three. After you, as the broker, have had the time to understand the information or the employer group. Also, create a plan design that fits the employee’s needs.
One of the other topics we can discuss is the value of employee-centric plan designs, which I believe is where the industry’s going. With the current economic climate and how hard it is to find great team members, the benefits continue to be one of the ways that we create an attractive workplace. It’s another thought. If you have any other thoughts on the loss ratio, it’s so important for employers to understand the concept. We have to drive the pricing.
It’s not always the groups that get the 20% or 30% increase. We picked up an account in Florida that had zero increase for three years in a row, but the conversation that we’re having here on LinkedIn caught their attention. They thought something was wrong. They knew something was wrong. They didn’t feel right about it. They said, “We know something’s going on. We know that even at a 0% increase, they’re making a tremendous amount of money on us and it’s still a lot of money for our company and for our employees.
They allowed us to do some due diligence for them. We competed with two of the largest global insurance brokers in the world. I was like, “This is going to end well for us.” It’s because most of the time, again, bigger must be better. In this case, it wasn’t and we proved that, but our analysis was so different because of the data we were able to go back to them with.
Using that data, after they appointed us the broker of record, we hadn’t done anything yet, but our conversation was very different. They knew it was impactful. One of the first things that were very clear, and it’s clear with 90% of our prospects, is that they’re not looking for disruption in year one, but they want to start riding the ship. They want to get this thing back on track. It’s one of the reasons why our agency is called BritePath.
It doesn’t look so great now, perhaps for your company, but data are going to open up a whole new world of opportunity. Sometimes we discover that what you’re doing now may be in your best interest. We can tweak the plan and design, but we’re not going to change the funding mechanism necessarily from fully insured to self-insured or things like that, but we discovered similar situations. They had a 50% loss ratio.
They have zero increase. They made the numbers on the renewal. That financial exhibit, they made it look like, “This makes perfect sense, but they completely manipulated all of the numbers, the credibility, the retention, and the trend. We took that renewal and compared it with another one from the exact same carrier that was renewing the same month with a very similar headcount and said, “All the numbers are completely different. All they did was plug this in to make the net increase work.”
That’s what employers need to understand is that what you get in front of you at renewal time is the narrative that is going to justify what they’re asking you for. They know your habit is going to be, “Let’s negotiate this down to the best we can do.” Ninety-nine percent of the time, it’s still way too much, but you’re going to be satisfied. Your finance team is probably going to be satisfied because that’s what they budgeted for.
That’s where the data is so important. I want to talk to you about that a little bit real quick. This ability to collect and harvest the data is the paramount reason the CFOs and CEOs can get back into this conversation. It’s because I’ve had so many over the last few years tell me, “I stepped away from this conversation because there was nothing for me to dig my teeth into. I have to focus my time and attention on other areas of our business where we have negotiable operating expenses that we can negotiate. They feel helpless to do that with their health plan, which is their 2nd or 3rd largest expense.
This is why they should get back involved, collaborate with HR and their benefits advisor, and go to work for their employees. It is absolutely possible to reduce your cost of health insurance by 20% to 40% potentially. Let’s say 20%. What an impact would that be of reducing your cost by 20% and at the same time, enhancing the benefits that you’re offering to your employees or reducing their contributions?
The domino effect is you can offer a plan that is night and day above your competition at a lower price, you’ll be able to get their best talent from them and where’s that going to take your company? This is something that it’s hard to get the audience sometimes because you’re trying to tell them, “Let’s change the focus. Take it off the insurance. Let’s talk about the data and the healthcare,” because that’s what the data is. What we’re paying and where our employees are going for the healthcare they’re consuming.
I wanted to ask you a question. One of the pushbacks that a lot of companies have when you talk about self-insurance, for example, is we have high-cost claimants. What people need to understand is a high-cost claimant isn’t always what it appears to be. A high-cost claimant might be your number one reason to explore self-funding. It might make it a little bit harder in year one because of the claims associated with that high-cost claimant. You have no ability to control when you are insured.
You’re not picking the network. You’re not determining the discounts. You’re not. You don’t have any ability to bring in direct contracts. You don’t have any control over your PBM contract. When you do self-insure, I’ll give you an example, and I’d like to know your thoughts. We had one group who was self-insured already but direct with a national carrier. For years, we talked to them. Again, a 3 to 5-year plan. About the 3rd year, they said, “We want to try this. We’re going to go independent TPA.”
In the first year, moving to the independent TPA, which allowed us to bring in our pharmacy benefit manager, we didn’t change the formulary one iota, with one exception. The same pharma and formulary, but a different contract. A different way the PBM got paid. That high-cost claimant, primarily medication-based, went from a $650,000 claim down to a $180,000 claim. That’s what self-insuring can do because you are now able to pick your best-in-class partners. Have you had any experience with that? Has anybody come back to you and said, “Using your data, we were able to do this?”
You bring up a good point with high-cost claimants. As an employer, as a broker, with high-cost claimants, typically, you pause. There are a bunch of concerns around it, and a fully insured plan makes sense. However, the control that you get with self-funding is extreme. You can pull different levers to help manage costs for high-cost claimants.
I’m also a huge fan of ICHRAs which it’s the worst name in the world. I think that there are going to be some companies out there that introduce new marketing approaches to talk about them, but in certain markets and certain companies that have the ability to offer different types of plans, that’s another approach that can be used as well. Ultimately, I think that for every small business out there, if you have more than a few employees, there’s an opportunity to leverage different types of plans and have a little creativity.
Step one is finding a broker that’s willing to evaluate different options. Step two is gathering the data, but I completely agree. When you have high-cost claimants, it’s almost a reason to learn more and evaluate different options rather than stay where you are. It’s because, likely, if you do stay with a fully insured plan and that high-cost claimant is driving a lot of claim volume, you’re going to see some high premium costs and a renewal increase that likely could be significantly lower with different alternative designs and funding options.
You mentioned ICHRA a couple of times. For those people that might not be familiar, let’s say an HR director doesn’t know what an ICHRA is. They haven’t heard about an ICHRA because a traditional insurance broker probably is not introducing you to an ICHRA. An ICHRA is an Individual Choice Health Reimbursement Arrangement. In layman’s terms, it means you are going to reimburse your employees for the cost of them going out into the individual marketplace to purchase a health insurance plan as an individual with certain criteria that must be met.
They’re going to give you that receipt monthly. We bought insurance, here it is, and now, you are going to reimburse them X amount of money. Pick the dollar amount, an X amount for a single, a couple, a parent, and a child. You could do it in many different ways. Why that could be a real viable solution for an employer is if you have an unhealthy population where you’re in a marketplace where the claims of your members, that 30-person group that you mentioned on the flip side could have a 180% loss ratio and their premiums would be 250% higher.
However, they could go to the individual marketplace, where I know there’s no health underwriting. Depending on the state, in New York, even the individual marketplace is community-rated, but in other states, it could be based on your age. I don’t think it could be gender anywhere because of the Affordable Care Act, but you’re buying it based on your age. That might be a more comprehensive solution because if you’re offering it as an employer, that same plan that may be a gold plan on the marketplace could be 40% through your company because of the way that market operates and how they price plan.
This can be done with an HRA document and leave the employees up to their own demise to go out there and shop or there are companies out there that will assist in the purchasing. They will guide. They are almost like a navigator. They will help your employees make the plan decisions. They’ll even give you a portal. They’ll do some of the billing and exchanging. They’ll collect the contribution through your payroll just like you do on your medical plan. It can be as much technology-based and TPA-based as you want it to be and maybe a 3-person group, 5-person group, or 10-person group. This is the way to go.
We helped a one-person group. We connected them to one of our TPA clients who’s taking advantage of an ICHRA plan because he found that this approach was the best way to set up a plan. It provided the most coverage at the lowest rate.
Right now, this is treated by the IRS favorably. There were several years there where there was a gray area, “Is this legal? Can we do this?” If I’m an applicable large employer with 50 or more full-time equivalent employees, I might not have legally been able to do it that long ago. There are all of these different things. We have to trust that the TPAs that are doing this are up on the newest and most up-to-date IRS guidelines. It’s because you don’t want to be taking these deductions from your employees pre-tax and then find out this wasn’t a legit deduction and now you got an audit and your employees owe money and you owe taxes.
That’s important, but right now, my understanding is that this is favorable. We introduced it to a couple of clients. New York doesn’t have a lot of creative things. It’s a marketplace that is ripe for the picking of a lot of different types of solutions. It is very heavily GA-centric and GA sells insurance products for overrides from insurance companies.
What the consumer and brokers end up showing is sometimes determined by the amount of information the general agent shares with the brokers who might not be benefit experts. I wanted to share that. I probably have to have a show one day or a guest that can specifically talk about ICHRA because it is growing in popularity and usefulness for sure, especially for those types of groups.
From your experience, I know you know a lot of advisors like myself who like to think of ourselves as forward-thinking benefit advisors. That’s why I changed my title from broker, consultant, and advisor to benefit optimization officer because that’s what we should be trying to do. Optimize our benefits for the spend that we can afford as an employer so that people can get the best care.
We are not doing what we do to save people money, but how we do it saves money. It just so happened. We’re lucky from that standpoint. What type of employer, maybe from a mindset standpoint, maybe from an industry standpoint, what are you saying as employers that are more likely to say, “Yeah. We’re going to do this, and not only that, but we need to do this.”
I think you have the early adopters. Typically, it’s technology companies. You have a lot of software companies out there, innovative companies who are in the technology field. They’re quick to implement a product like Beacon. They completely see the value. Their employees use Mint.com, Personal Capital, and Credit Karma. Our approach is something that early adopters and innovators welcome.
We see a lot of technology companies leverage our product and this approach. What’s also been interesting, though, is a lot of schools, municipalities, and organizations that historically haven’t shopped likely have the most opportunity to save money more so than anyone else. It runs the gamut. I believe that any employer out there that doesn’t have access to historical claims data and is working with a broker that’s truly using data that’s specific to what has been incurred over the past few years to help make informed decisions has a huge opportunity to optimize, improve, adjust their benefit plan. It enables them to have a different conversation with their employee population.
Any employer that doesn’t have access to historical claims and is working with a broker has a huge opportunity to optimize, improve, and adjust their benefit plan.
At all companies across the US now, employees want information. They want to know what’s going on. What benefits are we choosing? What benefits are we not choosing? Why did we change benefits? Having the data enables employers to have a conversation that employees want to have. If rates are going to go up 20%, we’re finding that employees are okay with that if they understand why. However, if they don’t have an understanding, it leads to all sorts of nasty things like turnover and reduction of retention and other issues.
In my upcoming book, which will be released sometime in the 23rd century, probably at the rate that I’m going. I talk about it all the time, but I’m making progress. I have a meeting coming up for the first round of editing. You hit on something that’s super important. When you ask people basic questions about, “Would you like to do this? How does this sound? Would you like to save money? Would you like to enhance benefits? Would you like to be able to provide your employees with a resource or a tool to help them access the highest quality healthcare?”
Everybody would say yes to every single question until you say, and again, I’m not trying to throw anybody under the bus, but I do believe this. Are you willing to spend an hour discussing it because it’s possible? That’s where it breaks down sometimes because it sounds like a lot of work. It sounds disruptive. This is different. We have been, and I use this word very deliberately. As an American healthcare consumers, brokers benefit, decision-makers, and insurance carrier reps have been groomed to believe we are getting great value from the healthcare systems and the insurance companies from that we get our benefits.
They have our back, and we don’t want to learn more because maybe we’re so far off course that the learning seems more painful than the benefits, out-of-pocket costs, and premiums we’re feeling now. I truly believe that. I have this quote, “If not today, when?” That’s something that, from a personal growth standpoint, I look at that.
It’s for me, but it’s also for employers because here’s the ugly truth and there’s no disputing it. There’s no one coming on a shiny white horse to rescue the American employer’s plan sponsor or the American healthcare consumer. There’s no one coming to rush to save the patients. No one’s coming immediately and saying, “Let’s drop the cost of all this.” It’s not going to happen.
If you do not use every possible resource to increase your health insurance and healthcare knowledge, you will keep getting what you’ve been getting for the past 25 years. You have three choices. One choice is to keep going the way you’re going now and pay more, get less. That is the guaranteed solution or spend eight hours a day for the next three years trying to learn what Jacob and the PBM experts have learned. Also, what were the stop loss experts, direct contract experts, and what did Louis learn as a benefits advisor about these systems?
You can do that. Good luck trying to spend eight because that’s what it took me or you can hire someone. Partner with a company like TPA Stream that can provide insights that don’t teach you the whole truth, but give you the power to be the consumer again. My book will probably be titled Managed Care: Wall Street’s Favorite Spectator Sport. It’s because everybody loves the employer and their employees and the patients because you’re an employee purchasing or selecting a plan from your employer.
However, when you take that ID card and you enter the healthcare system, you’re a patient. You wear a bunch of hats. The more informed you can be, the better the results. If you raise your expectations, if you set your expectations and say, “Where’s my data?” That’s all it takes. You’re going to wake up a lot of your partners. You’re going to wake up your benefits advisor and say, “I heard about Beacon. Can you tell me about it? Why don’t I have my data? Why 30% increase?” If you hadn’t asked the question, they would’ve never gotten the result that you helped them get.
Lou, one thing we haven’t discussed is the questionnaire process. A lot of small businesses potentially have gone through the medical questionnaire, the Individual Health Risk Assessment. I have learned a lot about approaches that small businesses have taken in the past to learn a little bit more from their employees and get underwritten for different types of plans. I think that a lot of small businesses either have tried that approach or haven’t tried that approach and find that it does take a lot of time.
One of the other things we’ve learned is that when employees self-report information, they sometimes provide too much or the wrong information. It’s been fun for me to learn how valuable getting information from the sources and not necessarily through other methods or through questionnaires, forms or even meetings where you ask employees to share issues they’re happening with different prescriptions.
I wanted to share that as well because I think it’s important for any small business out there that has looked at approaches in the past, has tried out filling out questionnaires, and how sometimes that approach doesn’t provide what’s needed to enable the employer to be a consumer. Also, to take control of their health plan.
I’m so glad you brought that up, too, because some employers that we talked to or some prospects that are out there have tried self-insurance many years ago, and it blew up on them. What they need to understand is, although they changed their funding mechanism, they did not address the core problem, which is having the ability to control their healthcare spend and having the data. They probably tried self-insuring with the same insurance carriers with which they were fully insured.
They didn’t address the rebates on the prescription. They didn’t address spread pricing. They didn’t address the navigation, the very predatorial steerage of the healthcare system that wants to make sure every single test is done under the umbrella, the net of that healthcare system, and at the point where it makes the healthcare system the most money.
That is what you’re competing against now if you’re out there in the healthcare world. You tried that and probably somewhere along the line to get self-insured, maybe now you had claims data. Maybe you were a large employer. Large enough where you had historical claims data and the carrier had it, but maybe you’re an employer out there right now that is around 100 employees, or maybe less. Maybe it doesn’t have any access to data.
Stop loss is what you need to purchase because you’re not big enough to incur any claim amount. You’re going to purchase stop loss. That’s the insurance that you’re still going to have a base policy that covers you against any real excess claim of maybe $50,000, $70,000, $75,000, or more. In the old days, when you had not enough information, your employees were asked to fill out a health questionnaire.
Many years ago, this was common in even a five-person group. When I got into the business, every application included 10 to 20 questions. I don’t know if you were involved in the insurance back then, but every policy is a small group or not. Insurance carriers could decline you and then you had to go into this bad risk pool. In most of the carriers that we’re working with these days, there are no health questionnaires because they’re using capture data. These huge databases are released from all commercial insurance companies, pharmacy databases, you name it, and credit card companies. They know about 4,000 different points, potentially about every single person in this country, which is super scary.
If I gathered a basic census of names, dates of birth, and addresses from an employer, I can share it with certain companies. They’re going to take that data and they’re going to be able to zero in on the actual healthcare risk of that company and that population significantly more accurately than those health questionnaires. As you said, those health questionnaires were voluntary answering and there was no guarantee people were truthful. There was no guarantee people weren’t oversharing. “Twenty-five years ago, I smoked a cigarette in the bathroom in high school.”
Some of those tools out there are incredible. The data that they’re able to use to help with the underwriting process. What we’ve learned is that those approaches are awesome, especially when paired with our approach.
You’re getting the data. You’re making that possible, potentially that initial underwriting, “What do you have?” Capture data is one thing, but you have the claims data.
Also, being able to understand what just happened. A lot of the captured data is helpful and can help to predict risk. However, you can’t typically predict what’s happened in the past 6 or 12 months. Someone that might have improved significantly and whose condition completely improved. A lot of the data that might be out there on the internet associated with them would indicate that there are high risks. The importance of having the actual data, unbiased, what occurred, is beyond valuable in this space.
A lot of capture data is really helpful in predicting risk. However, it can’t predict what has happened in the past six months or year.
One of the things that are happening at a huge clip nowadays is that the high-cost claimants are more and more regular people on specialty medications. We’re not talking about necessarily huge exposure to hospitalizations or in-patient, things like that. There are many medications on the market now that are $20,000 or more per month. That’s a $240,000 claimant. That’s showing up.
You’re paying $240,000. The trend on that’s going to be whatever it is. There’s no way for you to circumvent that. When we get a report from you and it’s able to say, “Here’s the diagnosis potentially,” the data that you can collect from the insurance companies, I’m sure, is slightly different based on what that carrier has in that database.
Also, what’s available to consumers and the EOBs that are presented.
Some of them are going to be more robust than others, but they’re all going to be significantly better than what you have now. It’s going to justify what you’re doing. It’s going to help you make decisions for that 3 or 5-year plan. It’s going to help you identify the needs of your employees that are lacking. You know you might look at that data and say, “Holy moly. Only 10% of our employees had their routine physicals last year.” That’s a 100% benefit, but they don’t know it.
Also, flu shots.
It’s anything. The amount of things that this can help an employer and a benefit advisor like myself. Unfortunately, I can’t just do it. I have to have a client and a prospect that says, “That’s what I’ve been waiting for. I didn’t know it was possible. I’m not making another decision on my benefit plan without it, and I’m going to give a compelling reason for my employees. Make them sure they understand this is a positive thing.” This isn’t, “Big brother, we don’t want to know about your healthcare claims. We want to be able to make decisions because this is our plan.
We’re spending X amount of money on you guys. We want to make sure that that investment is being made in the best possible way. Is there anything that I didn’t cover? This was the fastest-hour call I’ve had in a long time. This was great. I was a little bit more prepared. I told you I was going to have a couple of questions. I’m trying to up my game a little bit as the host, but if there’s nothing else that you specifically want to say, how can people contact you? I’m sure on LinkedIn, Jacob Sheridan is the name.
You got it. Find me on LinkedIn. Send me a note. Send me an email at Jacob@TPAStream.com. I enjoy working with TPAs, brokers and employers and adding value. It’s been fun for me to work with an awesome team that’s built some great software that’s able to capture data to help businesses make better decisions. If you’re a broker advisor or a GA out there, we want to partner with you. We want to work with you. The products we offer aren’t necessarily right for every group but can help.
We’re excited to be part of the health insurance world, to drive a little bit of value, and to help small to medium-sized businesses and even large ones that don’t have the data at their fingertips to be able to make better decisions. Also, ultimately take better care of all their employees that are helping drive their business forward.
That’s the reason why we do what we do. Thank you so much for doing what you do. Thanks to TPA Stream, and you were a great guest. I appreciate it. Thank you for joining us. This was great. I am looking forward to talking to you again, and hopefully, let’s get some employers interested and connected with you.
It sounds great. Thank you so much, Lou. I am happy to be here.
Thank you. Take care.
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About Jacob Sheridan
Jacob Sheridan is CEO and co-founder of TPA Stream, a startup in Cleveland, Ohio focused on transforming the benefits experience for millions of small businesses, brokers, and third-party administrators with claims data and software. Recently, TPA Stream launched Beacon, a software that provides claims data for any group to brokers and underwriters, allowing them unmatched insights for plan creation and evaluation. Jacob has experience building, selling and managing entrepreneurial businesses and software. Focusing most of his time in healthcare, Jacob has developed a keen understanding how technology can make healthcare easier for individuals, employers, brokers and third-party administrators. He graduated from Rollins College in Winter Park, Florida with a focus on International Business.