Episode Transcript
[00:00:02] Speaker A: Welcome to Align for Impact. I'm your host, Matthew Naylor. I started this podcast because healthcare and leadership both come down to the same thing, alignment. When people, purpose and performance connect, real impact happens.
On this show, we'll talk with entrepreneurs, brokers and change makers who are challenging what is broken in healthcare and in business and find new ways to make a difference for companies, communities and the people they serve.
Don I'm the host of the Matthew Naylor podcast and I love having these types of interviews with people like yourself because of your experience, your subject matter expertise.
But this podcast is about this very interesting intersection of employer health and self insured medical plans where we talk about risk financing, we talk about healthcare services, we talk about cost containment and healthcare technology.
And what's so interesting about the conversation is there's people that play roles in each one of these pieces like you and your experience.
Just based on our relationship, this risk financing piece, you spent a lot of years at Berkeley building, helping build an amazing A and H business. But prior to that you've done a ton of stuff. But that's kind of like in the risk financing section where you're talking about stop loss and reinsurance.
And you're also like, you build an unbelievable captive business, but on the other side of it you have this healthcare services, TPAs and PBMs, cost containment, disease management, case management networks, narrow networks, high performing networks, you know, know, virtual primary care. You got all these things down here and then you got this healthcare technology and there's lots of people out there like the springboks and the deer walks and others.
But you were in this one quadrant for a very long time. And I'm really excited about this conversation today because I think your experience really speaks to where the market was, kind of where the market is at the moment. And I'm very interested in kind of where you see the market going. And Don, we know each other, we've had this amazing relationship for a few decades now.
I really would like for you, in your own words, to help us understand.
How did you get in the business? How did your career start? Where have you been? Where are you? And kind of, where are you going?
[00:02:36] Speaker B: Okay, so that's cool. I mean, we've had a great relationship and I've really appreciated everything we've done together in the past.
What's interesting you talk about, so how did I get started in the business?
You know, early on, similar to you guys, I was an athlete in high school, going to college to play some sports. But my thought was, you know, okay, I'm really good at math, but what am I going to do with that?
I'm going to go be a high school baseball coach or soccer coach or whatever. So to do that, I had to be a teacher.
So I went to school as an education major.
And where'd you go to college? Undergraduate. I went to the College of New Jersey. And then graduate school, I went to Penn State.
[00:03:20] Speaker A: Awesome.
[00:03:20] Speaker B: So, okay, I'm moving along, doing the thing, and I do my first semester of student teaching, and I walk into the building, there's kids running down the hall in between classes, and a teacher walks out of the room and hip checks them into the lockers. And I'm like, oh, this isn't what I'm set up for. I can't be doing this stuff. So I happened to. My parents had a guy who was a CFO at a very large corporation in New York. He said, you know, math people get into being actuaries, and they do pretty good. I'm like, okay, well, let me check it out.
So I started taking the exams while I was at the College of New Jersey.
[00:04:00] Speaker A: So up until this point, Don, you knew nothing about actuary?
[00:04:02] Speaker B: I knew nothing about, you know, someone gave me a pamphlet, and I did the problems. I'm like, okay, I could do that.
[00:04:08] Speaker A: Yeah. So, Don, you're a pretty smart guy. You know, I picked up on that a long time ago.
[00:04:12] Speaker B: Well, I don't know how smart I am, but I had the discipline to do it. And that's probably the hardest part about being an actuary is the discipline and the ability to really focus and spend the time you have to focus.
So I. I had passed three exams before I got at a. The college in New Jersey.
[00:04:31] Speaker A: Wow.
[00:04:32] Speaker B: So I was in pretty good shape. I went for my MBA at Penn State. I got out of school there, had a great job up at Aetna as an actuary.
[00:04:40] Speaker A: How'd you land at Aetna? How did. So you got out of Penn State. How'd you end up?
[00:04:43] Speaker B: Just the interview process.
When you come out with three exams, you're in pretty good shape.
[00:04:47] Speaker A: Yeah.
[00:04:48] Speaker B: So, you know, I did a lot of interviewing. Again, knowing nothing about insurance, because those three exams were mathematical, as opposed to insurance.
So I interviewed a lot of places.
Just weird reasons why you would choose Aetna. You know, they seem to be heavy into sports.
Everything around that campus is focused on social stuff.
[00:05:12] Speaker A: Yeah.
[00:05:13] Speaker B: So it was a great experience there at Aetna. I learned a lot.
[00:05:15] Speaker A: They had a good training and education program at Aetna.
[00:05:18] Speaker B: The Actuarial program was probably one of the best. Really. They gave you a lot of time to study. That was your. That was your focus there.
[00:05:25] Speaker A: Awesome.
[00:05:25] Speaker B: So it was a great experience.
[00:05:29] Speaker A: They don't really have any of that stuff anymore.
[00:05:31] Speaker B: They don't do that. The actuarial programs. They're non existent. They do give you hours, but I mean, your job was primarily to pass exams.
And I was fortunate when I came in because I had the mba. They put me in some pretty good rotations around the company where I learned a lot. I mean, you know, I was in the corporate actuarial, I was in the pension underwriting eras and the group underwriting, group health underwriting, which is where I kind of started with stop loss and things like that. So it was great experience. And I was heading up that underwriting department.
[00:06:10] Speaker A: I'm not trying to date you, Don, because, you know, we've been doing this for a long time.
[00:06:14] Speaker B: That was like 10 years ago.
[00:06:15] Speaker A: 10 years ago.
[00:06:17] Speaker B: No, that was back in the 80s.
[00:06:19] Speaker A: 80s.
[00:06:19] Speaker B: So.
[00:06:20] Speaker A: Wow.
[00:06:20] Speaker B: Yeah. So it was pretty. And the program was excellent. I mean, it's. You know, there had to be 40 actuarial students going through that program at a time. So they were. It was a factory.
[00:06:31] Speaker A: And highly competitive, I'm sure.
[00:06:32] Speaker B: Very competitive.
[00:06:33] Speaker A: Yeah.
[00:06:33] Speaker B: And you know, it's. That's where you get the discipline that you need to study for the exams because you really have to focus. The pass rate is pretty low.
[00:06:42] Speaker A: Yeah. But I would have never passed the actual.
[00:06:45] Speaker B: It's not that the materials are. It's that really you have to focus. It's just a large quantity of information that you're trying to absorb.
[00:06:53] Speaker A: So how long were you at Aetna for?
[00:06:56] Speaker B: I was there for five years.
[00:06:58] Speaker A: Okay.
[00:06:58] Speaker B: And then I moved on. I went to.
At the time it was TPF and C. Okay. In their insurance consulting. Then we merged with Tillinghast.
So that was their consult insurance consulting operation. And I was there for two or three years and then moved on to Continental Insurance.
[00:07:22] Speaker A: Okay.
[00:07:22] Speaker B: Where I helped to oversee the three life and health companies they had there.
[00:07:27] Speaker A: Okay.
[00:07:29] Speaker B: The funny thing there at Continental, again, because of that finance background.
Within a week, first project is to evaluate the three life and health insurance companies and make a recommendation on whether to merge them, sell them or do whatever.
So I come back, I meet with the chairman of the board and the cfo and I said, look, it sounds like a good idea to merge these together, but honestly, you're not in a good position. And although this is like my job, you should sell. So we Ended. I ended up being involved in the whole sale of those operations external, which is a pretty neat experience.
You don't get that kind of experience. I had some m A experience at Tillinghast, but, you know, this is. This is pretty neat. I think it's pretty neat stuff. So that was pretty cool. So then what happened is so the.
I mean, those guys like me a lot, and they said, hey, look, you know, we love you. You send. You're, you know, helping us sell these businesses, but we kind of want to keep you. And I'm like, European C shop. I'm not sure what I'd be able to help you with. Why don't you go up to our benefits area and help us figure out what to do with health care? You know, medical costs are starting to, you know, take off. This is probably the medical inflation was going through. Everything was going through the roof there.
I again, you know, when someone gives me a whiteboard and it's blank, and they say, what do you want to do?
So this is when cafeteria plans were coming out. I mean, we literally put together a true cafeteria plan where you have $2,000 and you can buy medical coverage for you, your family life, disability. But I mean, it was truly a cafeteria plan. You buy. You could get cash back if you want. If you want to buy it, get cash back. That was pretty neat. That was a. That was a very interesting process that we went through. And cafeteria plans didn't really take off. They called it flexible benefits back then.
But that was an interesting project or lifespan because you really got into everything and the cost of everything. And we, you know, I was able to use a lot of my knowledge of pricing and negotiating different programs with different carriers on each of them to get what would be a great shopping list for employees to buy.
So that was pretty neat. From there, I ended up going to Foster Higgins.
[00:10:12] Speaker A: Okay.
[00:10:13] Speaker B: And that's where I met, you know, Dave Wilson.
Dave Wilson. I worked there for probably three or four years.
[00:10:19] Speaker A: Yeah.
[00:10:21] Speaker B: And, you know, that was great. That was part of Johnson and Higgins.
[00:10:25] Speaker A: Yeah.
[00:10:25] Speaker B: And this is the time around when the Clintons were in office and they started talking about national health care.
But we saw the opportunity as provider consulting.
And so we had. We had.
Dave and I were pretty much involved in a lot of insurance consulting stuff. So we had proposed to J and H to, hey, we'll start a company if you give us equity.
And they said, no, we're not going to give you equity. And so he said, okay, well, we'll start our own business. So we went off and we started Apex Management Group. And that's the point where you guys came in and we actually, we got connected through you, through Donna Petrilli. Yeah, Remember Donna? She was great.
And built that business. And, you know, like in any business, you start.
We started with provider consulting, but we did have some pretty big stop loss clients.
And you kind of followed the money when you have your own business.
[00:11:28] Speaker A: Yeah.
[00:11:29] Speaker B: And it was stop loss, you know, the provider consulting business, although there's still possibilities of, you know, provider at risk situations coming up here. And we had some really good clients on that side, which I thought was very helpful and educational and, you know, the whole learning experience.
The stop loss became. Became the big, the big ticket item.
And that kind of led us to being pursued by Gallagher because we had a strong data analytics tool that we used for employers to track what's going on and things like that.
So Gallagher came in and couldn't refuse. When did you start Apex 93 and
[00:12:26] Speaker A: when did you sell it to Gallagher?
[00:12:28] Speaker B: 2002.
[00:12:29] Speaker A: Yeah, yeah, I remember the actuarial tools you built for the employers around frequency and severity and the data analytics. They're really kind of before their time. They're really, really good stuff.
[00:12:42] Speaker B: You know, it was interesting when we, when we were building that and, you know, Dave was a great mentor for me. I mean, Dave knew a lot about healthcare. And as we were building that model, we thought we had probably the best model on the market, but we didn't have the reputation of the Tillinghast model.
So we had a pretty good PR guy who got us out there on the same level of those guys. And our tools were actually pretty good, to be honest. We had a couple of clients come back, you have underwater say, well, what rate to manual should we go? No, you should be looking at us because we're hitting it pretty hard. And I remember at one point, transplants were starting to take off and we were incorporating that in our models and it was obviously raising the prices and everybody was upset. Hey, hey, hey. Well, we had one at large and carrier come back and say, you know, yeah, we used to moan about your rates, but as we look at our history, you guys are right on target with that stuff. Yeah, I mean, you were like, bingo. This is like, you know. So we got ourselves out there. We were, we were doing pretty good.
[00:13:58] Speaker A: That was a great business. So you went, it's really cool story, Dom, because you started out not thinking you were going to be an actuary, being good at math, wanting to be a teacher, then really Figuring it out like, hey, got your MBA at Penn State, got into Aetna, started out in a corporate role.
And after Johnson and Higgins kind of decided, okay, well, I'm not doing this corporate thing anymore. I want to be an owner and operator and entrepreneur, which is a huge transition in life for people. And you went out on your own with Dave Wilson and. And formed Apex and then successfully sold that to Gallagher.
[00:14:38] Speaker B: Gallagher, yeah.
[00:14:39] Speaker A: Yeah. What did you. What. What happened after that?
[00:14:42] Speaker B: So we. We had a girl. I had a. We had a great relationship with Galler. It was. And they're a fantastic broker. You know, their operation is top notch. Y.
So we incorporated all of the. What they wanted was the Apex stuff, the data warehouse and everything, incorporated as their backroom actuaries. And we were very successful doing that. And I think they still utilize, and not under the Apex name, but that whole branch of the operation.
We started putting it all together for them, getting involved with a lot of their clients. I mean, I remember we had one example where it was a pretty big commission client for Gallagher, and something happened where the client wanted to reduce their commissions, but they realized, we don't want to take away the Apex piece. And we know that's probably a big part of the commissions, when in reality we were a tiny. I mean, what we were charging was
[00:15:43] Speaker A: way below for Gallagher.
[00:15:47] Speaker B: So I found that very interesting. And we tried to sell that proposition within Gallagher to get. Get it out to their clients.
[00:15:56] Speaker A: You mentioned Gallagher. I've always been a student and a studier of other leaders and entrepreneurs. And Pat Gallagher, phenomenal entrepreneur. Hyatt Brown, phenomenal entrepreneur.
Pat Ryan, Hank Greenberg. There's these Stephen Way, there's these.
All very different people, but incredible, dynamic individuals and great leaders and build great cultures.
After the Gallagher piece, where did you go?
[00:16:34] Speaker B: So I was in a great position at Gallagher. I'm sure this is cool.
I'm doing my thing, easy button, like, great business.
My wife goes to me, you know, you just sold Apex. You're here at Gallagher.
Like, I know you're kind of cruising along, everything's going good, but you're not that kind of person.
What do you think the next thing you want to do is? I mean, this was literally a conversation we had.
[00:17:06] Speaker A: I love it.
[00:17:06] Speaker B: And I said, you know, when I was taking the exams, in my mind, what this is preparing you for is running an insurance company. Every aspect of the insurance company is what the actuarial exams used to be. So I said, you know, how cool would it be to run an insurance company?
So this was Maybe a year into the Gallagher thing, a couple years down the road, I get a call from.
Did you know Jay Woods?
[00:17:41] Speaker A: I recall Jay. Where was Jay?
[00:17:44] Speaker B: It was a reinsurance broker.
[00:17:45] Speaker A: Yeah.
[00:17:47] Speaker B: Don. Hey, I'm with these guys up in Connecticut, and they want to learn about the Stop Loss business. I said, cool. I'm thinking, okay, project. You know, we did a lot of projects at Apex where, you know, we got Munich Green to Stop Loss. We worked with generating Stop Loss. So we had helped organizations get in the Stop loss. I'm thinking, you know, great. Another sizable project here. Right? So I go up there, I talk to Rob Berkeley. Nice guy. Rob's very smart guy.
And so we had lunch.
Cool. I go home. Something. All right, that's cool. Maybe. Maybe this is something.
He goes, hey, what do you. What do you think about you helping us in Stop Loss? I said, I don't know.
[00:18:35] Speaker A: I think.
[00:18:36] Speaker B: I think I can help you guys out. You know, we've done this before.
No, no, no, no, no.
How about you come here and build a Stop Loss? I'm like, whoa, that's interesting.
[00:18:50] Speaker A: That's such a cool conversation.
[00:18:51] Speaker B: Yeah. So I said, you know, Galaga just acquired us a couple years ago.
He goes, how about if we buy Apex?
I said, I don't think Gallagher is going to like that idea. They're not going to go. They're not going to go for that. Well, okay, so how about you just come?
What's it going to take?
Okay. So I go to him, I say, all right, let's talk about it. You know, I go home to my wife. I said, who's this company? W.R. berkeley? I never heard of W.R. berkeley. You know, I look them up. Fortune 500 company, bingo. They're in their space there.
And my wife, who was a PNC actuary, she says, well, you know, I used to do. I used to work with.
She used to work at Munich.
Work with Midwest Mutual. Is it Midwest Mutual, I think, which is a Gallagher, which is a Berkeley company.
And she goes, and they're pretty big. I said, really? So I'm looking them up. That's pretty cool. So I go up there to talk to those guys.
What's it going to take to get you to come in? And I meet Bill Berkley.
[00:19:58] Speaker A: Yeah. Amazing.
[00:20:00] Speaker B: The smartest business person I've ever met.
[00:20:02] Speaker A: He's another.
It's funny, Don. We're talking about all these wonderful people, but I've studied Bill quite a bit and his son, because people like you when you were interviewing, even me when I was a Lot younger people didn't know who Berkeley was.
They were like the whale below the ocean that never came up to get harpooned.
And they built like this amazing company founded in an incredible culture, like an amazing culture, but also really unique and niche and distinctive programs, like, very detailed, lots of discipline.
And I've watched them for a very long time. It's just another. I can understand why at that point in your life, sitting across from Bill Berkley, that it's not in the stop loss business, for that matter. I don't think they were in the A and H business at all.
[00:21:05] Speaker B: Not at all.
[00:21:07] Speaker A: And then they're intrigued. They want to get into it.
[00:21:10] Speaker B: Well, I guess he had wanted to get into it for a long time, but they just couldn't find the right click, you know, to do it.
[00:21:21] Speaker A: Well, Bill Berkley's a talent first person. He's a people first person.
[00:21:25] Speaker B: He's a people person. Absolutely, he is.
[00:21:28] Speaker A: I've not met him personally, but I've been on lots of capital market presentations and I've seen him speak and present.
And he cares about talent and people.
[00:21:39] Speaker B: Yeah, he does. And that's what makes that company so amazing. You know, first of all, they basically give you a whiteboard and say, draw the picture you want.
If you understand how the sausage is made and you can quantify it and you can protect the risk and make money at it, let's do it. Risk adjusted return.
That's the whole focus.
[00:22:03] Speaker A: What year was this when you were.
[00:22:05] Speaker B: This was 2005.
[00:22:06] Speaker A: Wow.
[00:22:07] Speaker B: So those, those are the situations, you know, that just really get me going. I mean, okay, yeah, I'm good at this. I can, I can. I have visions.
I like doing things I like, you know, I have no problem taking chances, doing things off the board.
So that process went through and, and, and I remember that Rob Berkeley says, so what's the one thing holding you back? I said, well, I have to be honest, PNC companies have a knee jerk reaction to bad things.
All right? He goes, no, that, that doesn't happen here.
I said, all right. So we ended up putting it together and they, they, you know, they were great. Everything was great. So I said, you know, I talked to my wife, dude, two years ago, you said, this is it. Yeah. I mean, you, you don't get these calls.
[00:22:57] Speaker A: Yeah.
[00:22:57] Speaker B: So, okay. Gallagher wasn't too pleased, but I said, look, you know, yeah, you don't get this opportunity.
So I took it. And.
[00:23:07] Speaker A: And they hired you to be the head.
Yeah, president.
[00:23:12] Speaker B: President of the, you know, billboard said what do you want the company to be called? Yeah, I said, you know, how's Berkeley accident?
I mean the other companies had special names. I'm like, you know, I don't know, I'm no marketing guy, but.
[00:23:26] Speaker A: So you are employee number one.
[00:23:27] Speaker B: Employee number one.
[00:23:29] Speaker A: That's so cool.
[00:23:29] Speaker B: So you know, we started putting things together.
You know the interesting thing again, you go back to all of the things that you learned in the book going through the exams and then now you have to start to build all of the many components with an insurance company which, you know, we're involved in making the sausage, but we don't know about all the other things that are involved in running a business.
So you know, putting everything together from the claims, the finance, the account management, the systems, the underwriting system.
So we went through all of those things and from ground zero.
The difference between me and the other 70 companies within the Berkeley's that were built from ground zero is they already had paper, they already had product filed so they could just borrow it and do it.
I didn't have any of that. There was no pay. So we had to go through, you know, finding the paper. We use their starnet and then we got the Berkeley Life and health filing, 50 states, filing all the products, building the infrastructure, finding office space, recruiting the team, recruiting the team. So it's all, it's all a process now recruiting the team, that's a very under appreciated function. You know some of the things you learn when you have your own business, which you've done, is it's best to hire people that you can work with. You're going to be with them 10 hours a day and even though the superstar is a superstar, if they don't connect with the organization, it's not good. Yeah, you know what I mean?
[00:25:14] Speaker A: That is such a true story.
[00:25:16] Speaker B: You know, building a team around your ideas and thoughts and things like that is very important. And you know, you got to make those personnel decisions throughout your whole lifespan within a company like that. But you know, that's an important piece.
[00:25:32] Speaker A: So that was in 2005.
I'm going to fast forward to when you left, but I'm going to come back.
When did you leave Berkeley?
[00:25:41] Speaker B: So I left Berkeley in 2021.
[00:25:43] Speaker A: In 2021, in 2005. There was no people, no process, no systems, no file product, no premium, nothing in the market.
[00:25:53] Speaker B: Right.
[00:25:53] Speaker A: When you left Berkeley, how big was the business?
[00:25:58] Speaker B: It was about 450 to 500 million.
[00:26:00] Speaker A: 500 million of premium. And how big was the team? From zero to what how many total?
[00:26:05] Speaker B: We had to be over 100, 100
[00:26:07] Speaker A: FTEs on this a and H team.
And you know what, I'm going to come back now because I think it's so interesting that here in 2005 you were zero. Here in 2021 you left with 450,500 million of premium. You built an amazing business with the support of a lot of wonderful people.
But you also didn't take a very traditional approach to the business.
Stop loss in 2005 looked and felt very different in 2021.
What did you do along the way to like reshape your vision and strategy for, you know, because what you thought you were going to start with, right. Didn't you know it wasn't the exact same thing when you left and ended and Barclays turned into an amazing company on the A and H side. They were always an amazing business.
[00:27:00] Speaker B: So again, when you get the opportunity, I mean the reality of Stop loss back in 2005 was It's a commodity.
All right? So okay, you want to go out there, you want to be a direct writer, but at the end of the day to build the business, you're building it into a commodity, right into a commodity market if you will.
How many organizations have we seen try to do that and basically go crazy writing premium and just getting hammered because okay, you got to be the lowest kid on the block. What else do you have to offer me? So one of the first things that I emphasized was building intellectual capital. I wanted people to know that we weren't just a stop loss insurance company.
We have a lot of smart people here that are experts in different areas and are very innovative. We will look at you, tell us what the problem is and we'll come up with a solution for it.
And there were many variations in those first couple years.
You know, people give us something, we came up with several different things. I mean they don't all hit but you need to be able to show people that you're willing to think outside the box to solve their problem and then people will come to you. And a lot of brokers I think appreciate that, that we would help them solve their clients problems by coming up with a solution.
We had one and again the Berkeleys, I remember this one product I came up with, it had to do with commercial real estate and they wanted the ability to offer a multi year guarantee on Stop Loss to give them some so that that's not an issue relative to their budgets.
So I scratch some stuff up, I go up to talk to Bill Burke and I say, I know you don't like multi year guarantees, but here's my thought.
I came up with this thing and Bill's an extremely bright guy and he goes, okay, let me think about it. Within a day, I'm sitting there going, holy Moses. I don't know who he called or what he was doing, but he was right on top of all of the issues within 24 hours. And we went through it, okay. We set the parameters and we went out and offered it to this group. It didn't go anywhere, but that was the kind of environment you had there. It's like, okay, don't, don't sit in your little box here. Think outside the box. If we can get a premium on it because it's new, that's an opportunity. You can make hay with that and then move forward. You get the risk adjusted return and it moves forward.
Same thing happened on the captive side. So I, I had actually presented a concept to them which came up in a similar situation back at Apex where we were dealing with a large organization that had franchises and they're trying how can we help our franchises with medical benefits?
So I had come up with this concept that wasn't particularly about captives.
It was like, okay, take the parent company and you be the ultimate reinsurer. And then you price down to each of these guys and if they go over, the corporation takes care of it. And in effect you have that.
I said, why don't we do this at Berkeley?
Bill didn't want us doing things with the Berkeley people. So. But then they had some captive operations that didn't turn out so well and so well. I was talking to some of those guys and we went back and forth and literally in my office, I have a flip chart. It was just like, okay, this is this, this is this. Okay, this is how we break the pieces out. This is how we make the money. This is our roi.
And we presented that to those guys and it was like, all right, go, go to it.
[00:31:22] Speaker A: What year was this?
[00:31:23] Speaker B: That was 2007.
[00:31:27] Speaker A: So in 2007, was there anyone else in the A and H business that was so in the captive business?
[00:31:36] Speaker B: So there were some people who were doing stuff, but it really wasn't popular.
[00:31:42] Speaker A: Yeah.
[00:31:43] Speaker B: So we come up with this idea.
This is how you know you're doing something.
I go to a sigh meeting on a committee.
We had just launched this thing.
There were a couple of people there just lambasting me, saying, that's a fad. You can't do that. That'll never work. What are you guys thinking about how you. Buh, buh, buh, buh, buh, buh, buh. I'm like, hey guys, we'll see, right?
Just so happens that two of those people are now living off of very big blocks of captive business. Yeah, so, so the concept was different. It shook up the market.
We were, we were fortunate. We found some really good partners to build out captive programs with and it, you know, was very successful.
It's, you know, when, when you, when you think about the value to the employer in the process and, and we kept it, we relatively simple. We used to talk about a triangle.
Don't collapse the triangle and keep the integrity of the triangle. The triangle being the employer, the stopless carrier and the captive. Keep the integrity of how the pieces work, the financial pieces and everything separate, but keep it strong as a unit. There was very successful. And you know that, that's the, that's a, a motto that we carried through for.
I'm sure it's still going on there right now.
[00:33:11] Speaker A: Yeah, well, Berkeley's, you know, they're a major player in the captive space. And I'm sitting across the table from the guy that really helped build it, which is pretty cool.
You know, Crumbdale, my, my first captive don that I built was in, I think about 2000, but it wasn't for employer health, it was for quota share reinsurance with our partners and they were big insurance companies that wanted to participate.
So I learned a lot about the captive business over a very long period of time. And when I sold my last business in 2015, we had a very large captive and quota share and things were emerging in the space. And when I formed Crumbdale as an entrepreneur, I always had a serious conflict with insurance that's being sold to people for the wrong reasons.
And so just as an owner, as an operator, as an entrepreneur, I always felt like I had to put my head down on my pillow and feel good about the product, the service, the solutions that we were building and selling as an insurance company or as an MGU or a wholesaler.
And when we formed Crumbdale, I really felt very strongly that fully insured small employers that are privately held family run businesses putting food on the table for their families, maybe a first generation, second generation, third generation business shouldn't take their second biggest thing on their line item on their expense side of their business.
Probably outside of payroll and with no data and no information, just be like, oh, let's go self insured and let's go into captive. And so at Crumbdale we made a decision to really think long and hard about the optimization and the supply chain and the things that were actually impacting a self insured customer so that we could integrate them, leverage data, drive to the lowest net cost and produce a better outcome. And we've built an amazing level funded solution that's fully vertically integrated, that serves the employer and the consumer, the member, the right way. I'm just wondering, you've learned a little bit about our business over the last several months and you have all this breadth and depth of experience of where the captive business has been, kind of where it is at the moment. I'd love to get your perspective on where you think the captive business is going to and how do you think we fit into that?
[00:35:53] Speaker B: So again, you get back to my weird personality.
Things kind of with the captive world started to get pretty stale, if you will.
I found that too much of it was about trying to sell stop loss.
That's not really what the purpose of the captive is. The purpose of the captive is for employers to engage in the management of the risk and reap the rewards when it's successful. But when you get to the ultimate stage, it should be pretty much break even within the captive because you've made it nice and lean.
So as we were going through, I thought it was more important to make a deal to help them understand this is a long term event. This is not a one year quoting of stop loss.
And in my mind, the way this is going in the future, and I think the organizations that will be successful are the ones that have the intellectual capital to basically be consultative with the information to help their clients manage the risk and stay on top so that you can shift the curve and shift the slope. Okay, so to the extent that you're able internally to bring that expertise to the table, that's the value that a captive program can provide to an employer and to the broker for that matter.
I think a lot of people think that, oh, I joined the captive and I save money. No, the captive is just the financial vehicle. It's the actual management of the risk. And to the extent that you can be their consultant on all the risk management techniques and not only the ones now, but invent the ones for the future, that's where you'll be successful because people will come to you.
Now, relative to Crondale, I look at you as actually starting from a different place than everybody else. Everybody else started with stop loss.
You're starting with the services, you're starting with the intellectual capital, and then you're Wrapping around it, the stop loss, the captive, the bonding of the members and bringing it forward.
To me, that's the future. That's going to be the future. And that's where you really get the hook into those members to rely on you to be their strategic advisor on how they manage risk.
So you guys are heading in the right direction. I know you're building a lot of things.
It's a dynamic process. You're going to be building and building and building as you see the opportunity to help them manage the risk.
The more you take internal, or at least have somebody internals that's the expert on that topic then, then I think you're, you're in pretty good shape.
Some organizations are basically just wholesalers of vendors.
That could work.
I think if you have the, the intellectual capital, the experts as part of your staff that manage those things, or you can own those things, that's fine. But you want them to rely on you as an expert, not just a seller of someone else's services.
[00:39:33] Speaker A: Yeah, I think of the captive and the risk financing piece and how the incentives are misaligned a lot of time.
They're not very transparent. And, you know, not that we're a fiduciary because ultimately the employer is the fiduciary. When you think about the captive itself and the members that are joining the captive, you know, I think when I think about aligned incentives and how Crumbdale's approached the business, we've really started at the. To your point, the opposite end of where everybody else started, which is how do you optimize the supply chain from a contracting perspective so that everything is fully integrated, where you have full access to all the data, all the members are doing a similar thing and they're getting the aggregation and leverage of all of those things to really drive to a different outcome, to drive to a lower cost, ultimately that has a very positive impact on the risk financing piece because you're really kind of controlling the first dollar claims.
[00:40:43] Speaker B: Exactly. And to the extent that you can get those members to bond with each other, to think about ideas, to see what's going on, to start thinking like an insurance company as opposed to an employer, then you've kind of kept that triangle intact. And I think what's happening now is it's starting to kind of. I see a lot of different players trying to throw risk into the process without getting the appropriate risk premium to cover it.
So you make too many, too many promises are being made and it's starting to have bad results within a captive solution.
So you always want to keep that triangle there, be the education piece to all the pieces and to manage that process, that is the value. I see account management as being more consultative management and the real piece that keeps everybody together.
You know, you're going to have the underwriting piece, you have the clinical piece, and you have the account management to keep everything, to be the expert on all of those pieces. So everybody comes to you when they have a question about any one of those pieces, but they keep the integrity of the triangle.
[00:42:10] Speaker A: Yeah, it's hard, Don. I mean, you probably saw this in your experience at Berkeley, but it's hard for brokers and employers.
They have this point solution fatigue.
Because when you think of managing an insurance company, managing a captive, or managing a self insured employer health plan, there are a lot of moving pieces and it's very easy for people to pull the easy button.
I'm just going to take Blue Cross and they can bundle it all and it really doesn't matter. I'm going to take Aetna or Cigna and it really doesn't matter. Unite it. And not that those are bad companies because there's components of what those companies do that we actually partner with because they provide really good solutions. But it's when the easy button's pulled and it's not aligned, it produces real bad outcomes.
[00:43:00] Speaker B: And there is no easy button because it's ever changing. So you have to stay on top of this.
So to be a member in a captive, you have to want to actively learn and manage the risk, not just from the employer's perspective, but you as a member of the captive insurance company, to manage the risk, to keep the integrity of the captive.
[00:43:24] Speaker A: Yeah.
[00:43:25] Speaker B: So many situations where we would get in the room with a group of employers and, well, I want the lowest rate. Oh, do you want the lowest rate? And do you want. Okay, so what do you think is going to happen to the captive if everybody gets the rate below what the risk is? You're not going to have a captive anymore.
[00:43:45] Speaker A: Yeah.
[00:43:45] Speaker B: So take, take the employer hat off. Put your, put your. I'm running an insurance company now. What should everybody get charged?
[00:43:52] Speaker A: Yeah.
[00:43:52] Speaker B: Okay. That's where we want to get to. Right.
And how can we manage that? How can we manage. Okay, we want lower. Okay, how can we manage it to lower expected claims?
That's what our goal is.
[00:44:05] Speaker A: Yeah. Well, Don, I've appreciated the time. I've really enjoyed the conversation.
We've had an amazing relationship. But I, I really appreciate you sharing your lived experience because there's very Few people don't wake up one day and decide to get into the A and H business or stop loss business or become an actuary.
And there's very few people that have your lived experience. And I appreciate you sharing it with us and me today. It's been really fun.
[00:44:36] Speaker B: Well, I've been very impressed.
I've been able to follow you as you've been able to follow me and seeing what you've done, what you've built and the way you're going around building it and everything is outside the box. There is no such thing as let me do what the other guy did.
You know what, let's start doing things. How many other companies are doing podcasts like this to get information? How many other companies are taking the initiative to build something internally to say, you know what, maybe we can do that better. Why don't we do that better?
[00:45:06] Speaker A: Yeah.
[00:45:06] Speaker B: So, you know, it's good to see, it's a breath of fresh air to, you know, work with an organization. You got some great people here and they're into it. I mean, the people are into it, which is.
[00:45:19] Speaker A: Yeah, well, the people here at Crumbdale, we, we care about impact. We care about, you know, serving people properly. We have a real passion for, you know, doing the right thing. Healthcare for very, you know, for too long has been a really big black box to a lot of people.
And what's fun about our business is when you work hard to do the right thing and you build a great team, you get to serve people in a very unique way that really meets them at sometimes their most difficult times in their lives.
You have a mother or father or a niece or a nephew or a child that gets sick and it can be a very scary thing. And so, you know, what we do, although it's in the center of this employer health system, when it comes to a self insured medical plan actually really has a really huge impact on the people that are leveraging our platform and our solutions.
[00:46:17] Speaker B: Well, people like working with people that are into it.
If I feel you have the passion about what I'm going through, well, I'm going to work with you.
I don't want to work with, you know, 1, 800, call me. No, I'm working with a person who really cares, who's really thinking about the issues, who's really thinking about what's going on in my plan, in my world. Yeah, no, that's the kind of person I want. And you know what, I'll pay a premium for that.
[00:46:41] Speaker A: Yeah.
[00:46:42] Speaker B: Because I want, I want to know someone's there for me.
[00:46:45] Speaker A: Right.
[00:46:45] Speaker B: So you got that going.
[00:46:46] Speaker A: Well, I appreciate it, Don. It's been a great conversation. And I appreciate the time.
[00:46:50] Speaker B: Oh, thanks for having me on this prequel.
[00:46:54] Speaker A: This is Matthew Naylor. You've been listening to a lot, lined for Impact.
