Insurance is one of the highest cost for business, and alternatives are needed.
Ray Zinn, Silicon Valley’s longest serving CEO, is joined by John Butler, and expert in business insurance and some of the interesting alternatives available today.
Ray Zinn: Well hello everyone, welcome to another wonderful podcast of Tough Things First, we are so delighted to have with us as our guest today John Butler, who is an expert in healthcare insurance, and he’s going to tell us how healthcare, currently insurance sucks. So John, let’s talk about your background, just give our audience a little idea who you are and just what you’re all about.
John Butler: Yeah, thanks Ray. I grew up in Bloomington, Minnesota here, I’m 63 years old. I tell people a little short story about how I started in my working career, I had a job selling pop and popcorn at Met Stadium, which is the old Twins and Vikings stadium, and they eventually tore that thing down to pull in this horrible thing called Mall of America. It was quite a fight way back when, people thought it wasn’t going to be a good thing. But anyway, that’s what I started in my career as 15, 16 years old, just working part-time over at the stadium.
Just went to high school, college, when I came back from college, just the working guy for about seven, eight years, and I got into the financial industry and insurance industry. And fast forward to 1996, I bought my first block of business in the employee benefits area, which included healthcare, or health insurance, of course. And about seven years ago I started researching specifically the healthcare market for businesses, because that’s the big elephant in the room, and found out that there is a lot of things going on across America that are incredible things, and I couldn’t take credit for it, I just happened to discover these people all across the country that are doing things in a different way, thinking outside the box and using the power of technology to bring forward health insurance and health healthcare solutions for businesses large and small.
Ray Zinn: I ran Micrel for 37 years, and I know that my healthcare insurance costs were about half of my benefit costs for my employees, so it was always a big cost, but I never really understood that they were taking advantage of us, and that this is really a problem that most companies, at least that are the size pf our company, which was we had 750 to 1000 employees working for us at any given time, and so this has been a big issue, health insurance, and I know that they’re trying to find ways of improving that and lowering the cost, but why don’t you tell us, what should we be knowing, as a company with 500 or more employees, about the health insurance industry?
John Butler: Well, the first thing is there’s solutions that exist that are really easy to understand. There’s something called coalition plans that are taking a company from 500 to 1000 employees and put them in a group of collective employers around the country that makes the population 10 to 20,000, instead of just 500 to 1000. And everybody understands the law of large numbers, the larger the numbers are, the more you can manage the risk. So employers can join these coalition plans, but not everybody is eligible to join. You don’t want to get into a coalition plan with a dirty pool where everybody’s managing their claims willy nilly.
The real cost drivers within health insurance and healthcare is basically four things, primary care, pharmacy, outpatient surgery, and hospitalizations, and the superheroes around the country are actually controlling those cost drivers, Ray. So the average cost for a business around the country right now, according to SHRM, is $15,000 per employee per year, and growing. And so these consultants and healthcare vendors around the country are bringing that cost down already, and have under 10,000 per employee per year, rather than 15,000. So you can do the math, and whatever size company you are, if you’re going to save about three to 5,000 per employee per year, and give them better healthcare, that’s something that’s worth looking into.
Ray Zinn: You wrote a book recently called How Health Insurance Sucks.
Ray Zinn: Some of the VA people, veterans, they’d tell you that their healthcare sucks. So Health Insurance Sucks. So tell us again, what can we do? What should my listeners do that run companies that are 500 to 1000 employees, what should they be looking for? What can they do?
John Butler: Well, they should be looking for a unique strategy on their RFPs. What I found is even larger companies of 10,000 employees, we got a local company of 10,000 employees, they went to RFP a couple of years ago, and there’s 36,000 brokerage firms around the United States.
Ray Zinn: What’s RFP, what does that stand for?
John Butler: Request for proposal. Sorry, there’s too many acronyms in this business, ERISA and COBRA, and RFP happens to be something that a lot of companies understand, they check their products and services with the marketplace periodically. But when you go out for proposals with your healthcare, you just pick employee benefit brokerage firms that you hope have some solutions for you. So what we’ve done within our practice is we put these people on the RFP that have reduced cost dramatically, not only the cost of the health insurance cost or healthcare costs for the employer, but they also, as soon as they get that healthcare cost under control, they reduce the cost to the employee, so they reduce their premiums and pass that on.
Ray Zinn: How do they do that? How does the company reduce its cost?
John Butler: Well it’s a relatively easy process, you have a way of determining what your per employee per year cost is, which is basically taking your monthly invoice, adding what the employees contribute each month as well, multiply that times 12, and you have the per employee per year cost. If that’s approaching 15,000 per employee per year, and these healthcare experts that I’m connected to average somewhere around 8,500 to 9,000, then you know you have the ability to make an impact. So we connect them to the best of the best around the country, and it doesn’t really matter where you are, these solutions are reducing down the cost of healthcare, those cost drivers can happen very easily by just plugging in these solution partners.
Ray Zinn: You were talking earlier to me about digital healthcare, I want you to explain to my audience what digital healthcare is.
John Butler: Yeah, digital healthcare is a topic, everybody understands how technology has advanced every single other element of the marketplace here. I mean, it’s incredible. But digital healthcare takes the technology tools, like for instance, Edison Healthcare, you can take your health plan design, you can connect right to Edison Healthcare through your program and direct your employees digitally, so if I was on your plan, Ray, and all of a sudden I needed a transplant done, how do I know where to go? Well, Edison Healthcare has a team of people at Mayo Clinic right here in Minnesota that are the best at it in the country. So you can have me flown from wherever to Mayo Clinic, have the procedure done, flown back home, and it’ll be less cost than what you normally would pay in your local community for that transplant.
So digitally, that’s the key thing that is driving everything, and like I said before, in 2019 more money went into digital healthcare than the previous three years combined, and the public just does not know about this, they don’t know how they can connect all these wonderful things together to form a great health plan at an employer’s size.
Ray Zinn: So you’re saying digital healthcare is how the company saves money, because you’re not using the local healthcare centers to perform these various medical procedures, you’re flying them all over the place to get their cost down?
John Butler: Yeah, and that’s just one way of doing it. The other way of connecting to one of the other cost drivers is the pharmacy benefit managers, these are called PBMs. Normally when you work with big insurance companies they connect you to their pharmacy benefit manager, which is there’s a lot of revenue streams that are getting swallowed up and there’s a lot of waste and fraud within that system, Ray. So digital health will connect you to a fiduciary responsible pharmacy benefit manager rather than one of, there’s actually three of them, Ray, that control almost 80% of the United States marketplace right now, and you wouldn’t know if you have one of these big three within your plan unless you want to a consultant and had them analyze your program. But just by switching the pharmacy benefit manager will reduce down the cost of that particular area pharmacy by 40 to 70%, just by making that one little switch of customizing your plan.
Ray Zinn: Is there any hope for companies that are smaller, that have 10, 12, 15 employees?
John Butler: That’s a great question, Ray, I mean there’s different solutions as I see it in the marketplace right now for different size companies. I mentioned Edison Healthcare, you have to be a company of 750 or more just to get it. But the solution that he talked about in the book, I call cafeteria plan, that’s only my terminology, but people understand cafeterias, as far as restaurants, and it works like this. Your boss gives you so much money to go to lunch, you go to the cafeteria and you buy what you want in the marketplace, rather than what your boss is giving you for lunch. And you pick what you want, they may give you so much a month.
So there was a law passed in June of 2019 that went into effect January 1st of 2020 that allows employers to just give tax free money to their employers, and let their employees customize their own plans. So if you think about it in real general basic terms, I might want a plan that is a high deductible, because I never go in. There’s another person that might want a lower deductible, they have kids and they have family members, and they can choose that themselves. My network might be different then your network. All these things can be customized, and all of the vendors, believe it or not, in the marketplace, in this short amount of time, through the help of technology, can connect everybody to their own health plan and get their company, so the company down at that size, get them out of the business of health care.
I tell a little story in the book, or ask a little question, if your boss came to you and said, “We got a great car insurance plan at our company, I’m able to deduct some of it, and everything else, so jump on our car insurance plan.” And then you find out that one or two people had DUIs last year, cracked up their cars, and your premiums went up 30 to 40%. now wouldn’t you come back to your boss and say, “Are you thinking right on this? I mean, I’m fine, and why is my premiums go up because John and Jim had DUIs last year?”
And that’s the way healthcare has run for years, Ray. They’re in the business of healthcare management, or risk management, and down at that size it’s a simple solution to just break them away from this and allow their employees to customize their own plan. It only happens once a year, Ray, it’s not that difficult, with today’s technology, to go onto a screen and say, well here’s the different plans that fits your network, that fits your deductible, click this, click that, sign up, your boss is giving you 500 a month to do it, plug in the right one that fits you. It’s an old economic principle called the invisible hand, I don’t know if you know Adam Smith from way back when, but it’s basically let the marketplace, individually let them choose, and it makes a huge difference.
Ray Zinn: So you’re saying, rather than have one health insurance program for all the employees, is to give them a certain amount of money and let them go out and negotiate their own plan, is that what you’re saying?
John Butler: Yeah, with the help of the vendors that are in the business, and there’s health insurance vendors around the country, some focus on employee sizes of two to 50, others focus on 50 to 500. You can do it at any size now that that law has passed, all the penalties for both employees, or individuals don’t pay any penalties anymore for not having healthcare, they wiped that out. But most companies don’t realize that there are ways to avoid the employer penalties now that passed way back in January 1st of 2020, and so the reins are off, and as far as I’m concerned, Secretariat’s out of the gate.
Ray Zinn: Well I know that you can work with groups of people and share their deductible, and so as a group you can go in and leverage their deductible to get your medical costs down, I know there’s that, there’s that group, I don’t know what it’s called, I forgot the name of it now, but there’s a group that you can go in and basically use their deductible to-
John Butler: Oh yeah. You know actually, Ray, that’s strange that you said that, because this is not talked about very often. In fact, the solutions that are in my book are not offered primarily by brokerage firms because they’d lose the business, or they don’t know about these solutions, it’s a one or the other, or maybe even both. But there’s something called professional employer organizations, which are popular for companies of about 10 to about 150 in size, and this is basically where, it’s called a PEO, a professional employer organization, where if I was a PEO what I’d do is I’d put together a flowering array of benefits, so health, dental, life, disability, 401k, I even managed your payroll for you, and all kinds of things.
So basically I’ve put together a fortune 500 of benefits, and if you wanted to buy into my PEO you’d pay so much per employee per year, and your little company of 20 employees, you can look pretty strong in the marketplace, but that’s basically, I think what you described there, Ray, was you jump onto their plan, what their deductibles are, their choice are, and some PEOs now are allowing you to customize your own healthcare plan, which is kind of amazing too.
Ray Zinn: To wrap this up, John, how can they get your book? Who’s your book targeted to? Is it the CEO level, or the HR level, who should be getting your book?
John Butler: Well, I think it’s targeted to all of the above, but primarily the C-suites, Ray, because they have to make the tough financial decisions. HR doesn’t really like to do an RFP, or request for proposal, it normally takes about four to six months, we offer it in 60 days. But yeah, you can find us at healthinsurance.co to buy the book, or you can email us at info@JB-benefits.com, either way. And it’s on Amazon, you can actually search on Amazon, or Barnes & Noble is probably quicker, just look up books, Health Insurance Sucks, and it’ll pop right up, it’s right there.
Ray Zinn: Well, I appreciate you taking your time today to talk to our audience about health insurance, because as I mentioned earlier in the podcast, that was half of my cost for my employees, benefit cost, was the insurance, this is really good info for our audience. So all of you out there who are C-suites and want to lower your cost of your insurance, medical insurance for your employees, pick John’s book, Health Insurance Sucks, and you can find it at, as he said, at Barnes & Noble, or Amazon, in any number of places. So thanks again, John, I appreciate you taking your time today to give us a little better education on health insurance, because I do know the health costs are not going to come down unless we do something individually to bring them down.
Okay, this ends another great podcast of Tough Things First, we invite you to pick up our book, Tough Things First, Barnes & Noble, or at Amazon, or any of your other book retailers. Also my new book, Zen of Zinn 2, of course there’s Zen of Zinn one out there, you still get Zen of Zinn 2, it’s just a continuation of those wonderful philosophical ideas that we give you every day, and hopefully you’ll join us again at Tough Things First podcast. So again, thank you John for joining us, and I look forward to seeing how well your book does.
John Butler: Thank you, Ray, it’s great meeting you, and it was nice learning about you a little bit online, you got quite a storied career.
Ray Zinn: Thank you.