Changes with brokers: I believe brokers need to operate differently. Currently, at least 99% of employers get their insurance from an agent or broker. 90% of them are in one type of product, and that’s a fully insured program. 80% of them are with one specific of carrier, Blue Cross. All these statistics show that the broker market is not displaying all the options available. As a result, it is likely that more than 50% of these employers are being overcharged by millions in premium expenses each year by their broker / carrier by not being shown more carrier options.
Today, we’re talking to Russ Carpel, CEO of LevelFunded Health. His company provides a national, tech-enabled insurance platform that was developed specifically for employers to be able to offer their workforces low-cost, high-quality insurance. In some of its earliest deployments, his platform showed that it can save businesses anywhere from $100,000 to $2 million a year while providing better services. These savings and benefits are generally passed onto employees, giving them access to better coverage that improves their lives.
Thank you so much for joining us Russ! Can you tell us a story about what brought you to this specific career path?
Sure. I have had a range of experiences in the insurance industry, but I got started on my current path during one of my earliest interview processes. At that time, I was talking with insurance giant Marsh & McClennan about a potential job as a commercial health insurance broker / producer. As they were talking about what they did, I realized that while they were looking to participate in insurance in a typical way, there was a different opportunity they weren’t talking or thinking about. The opportunity I saw was based in technology and better for both the employers and their staff. During those interviews, I wondered why brokers couldn’t use technology in the same way that a lot of other e-commerce websites/platforms, like Kayak or Trivago, do to reduce costs through competitive bidding. Those kinds of sites offer customers a range of options and they can choose what they need at the best price.
Can you share the most interesting story that happened to you since you began leading your company?
The most interesting thing that has happened to me in my current role is that I found mid-sized businesses are the places that can make the most out of what we have to offer. I started out expecting to develop along a logical continuum that focused on small and micro business. But when we bucked that continuum and pivoted right into serving companies ranging from 100 to 1,000 employees, our business exploded. That’s because we can save this sized employer between $100,000 and $2 million almost overnight, while improving medical benefits for all employees of companies of that size
Can you tell your readers a bit about why you’re an authority in the healthcare field?
I’m an authority because I have enough knowledge to work fluently in the insurance space, but I see things very differently than some of the long time insiders. This vision can be disruptive, making a positive change for health insurance consumers and the businesses they work for. Where most elements of the insurance industry have bought into the way things have been done for decades, I haven’t. I’m not satisfied with the status quo. Instead I believe this tech-enabled way is better for employers and better for consumers that have a huge stake in the insurance decisions made by their workplace.
Can you share with our reader something about the innovations that you are bringing to and/or see in the healthcare industry? How do you envision that this might disrupt the status quo? Which “pain point” are you trying to address?
For the most part, employers currently choose from an extremely limited range of carriers provided by their insurance broker. These brokers are in control of what set of carrier possibilities each of their employers/customers sees. Typically, brokers are only showing their clients (employers) 2 to 3 carriers to choose from. This limits the carrier bidding process and keeps premiums (costs) very high for both employer and employee. Mind you, brokers work on a commission, as a percentage of premium, so therefore they have zero incentive to curb costs for the employer / employee.
What we do is a game changer and is turning this traditional model on its head. Just like Kayak and Trivago use technology to disrupt the way that consumers shop for travel and purchase the elements of their trip, we use technology so that employers can shop for the health insurance benefits that they give their employees. We have tech that allows over 60 insurance carriers to fight for each employer’s business, each year. By employing this competitive bidding process , we can guarantee that employers see the best products, at the absolute best price every single year.
I’ve got a real-world, customer example of how this plays out. One of my clients is a 500-person auto dealer group that is comprised of 20 “rooftops” or car dealerships. They used my company’s technology to browse through more than 60 insurance carriers and work with carriers to design competing proposals that reflect what their employees needed and nothing more. Ultimately, one of these competing insurance carriers (bidders) won the business. Once my client chose and implemented their new insurance program, they saved $2.3 million in the first year alone.
What are the five things I wish someone had told me before I started?
- Focus on mid-sized businesses: As I mentioned before, once I bucked the expected continuum of serving first small, then medium, then large employers, my business skyrocketed. I wish someone had told me to start with mid-sized employers.
- The way things have always been done CAN change: When I was first setting up my program, all I heard was that the only way to break into commercial health insurance brokerage is to work in the way it has been done for years. Now I know that just isn’t true. Change can be good for the customer and can support businesses in a new way.
- How much people can benefit: When I set out on this path, I knew people would reap the benefits of what I was doing but I had no idea by how much. The benefits are enormous. That’s because when you can make insurance more affordable and, therefore, more accessible, it improves the quality of life for a lot of people. For example, most employers only pay 50% of the monthly premiums for their employees, so when we save a mid-sized employer millions, it saves both employer and employees a lot money simultaneously
- How much money employers would save: I’m thrilled by how much money the system has been able to save companies and their employees.
- Technology has a role in health insurance: A lot of people didn’t see how it was possible to apply technology to health insurance. I tried it anyway.
According to this study cited by Newsweek, the U.S. healthcare system is ranked as the worst among high-income nations. This seems shocking. Can you share with us 3–5 reasons why you think the US is ranked so poorly?
I’m happy to. Here are my thoughts:
- Healthcare costs: Currently, I believe costs are high because our legislators have very little understanding or willingness to properly regulate providers. As I see things, it has been a real challenge for these legislators to understand what’s happening so that they can establish laws that help the employer and consumer to rein in costs. As a result, there’s lots of deals being made between insurance carriers and medical providers that I don’t believe are in the best interest of the consumer. They result in incredibly high pricing for both premiums and the underlying health care itself.
- Challenges with the Affordable Care Act: I believe there are some unintended consequences from the Affordable Care Act that have impacted the insurance industry and adversely affected healthcare as a result. I’ll try to explain this — briefly. As I see it, medical loss ratios have resulted in the profit margins for the insurance industry becoming capped at .15 of every dollar. That’s very different than any other industry and is basically unworkable for the long haul. In an effort to retain profits and satisfy their shareholders, insurance companies have resorted to tactics that allows them to see profits through higher premium dollar amounts in sales rather than a higher profit margin. The tactics that do this are driving up healthcare costs for everyone, as now all this has done is force carriers to ask for significant premium increases, annually — so in summary this provision in the ACA has accelerated the rate at which premiums are rising — it’s a real shame.
- Physician challenges: As I see it, physicians face real challenges in establishing and maintaining their practices. These start with the high cost of tuition and time that they invest in gaining their medical degrees. Later on, they face higher costs, including the cost of malpractice insurance, as they run their businesses. Physicians are also subject to very specific pressures related to how much time they spend with each patient and protocols for how they can treat and make patient decisions.
- Pharmaceutical : I’ve seen that in between the time when a drug is made and when it reaches the consumer, as many as 4–6 people touch the product. This includes retailers, wholesalers, distributors, and other middlemen, and this drives up pricing, making these less accessible. Two-thirds of the price of any drug in America goes to middlemen. Not the drug manufacturer or the retailer.
As a healthcare insider, can you share 5 changes that need to be made to improve the overall US Healthcare system?
Sure. Here are my thoughts:
- Changes with brokers: I believe brokers need to operate differently. Currently, at least 99% of employers get their insurance from an agent or broker. 90% of them are in one type of product, and that’s a fully insured program. 80% of them are with one specific of carrier, Blue Cross. All these statistics show that the broker market is not displaying all the options available. As a result, it is likely that more than 50% of these employers are being overcharged by millions in premium expenses each year by their broker / carrier by not being shown more carrier options.
- Addressing the unintended fallout from the ACA: There needs to be a way for insurers to be able to have a higher profit margin and to eliminate tactics they’re currently using that are increasing pricing of premiums to make up for reduced margins
- Creating an environment where it is possible to reduce the costs of prescription drugs: I believe that as much as two thirds of the cost of a prescription drug can be attributed to the number of people involved the process of getting a drug from the manufacturer, to the consumer. I’d look there to reduce costs.
- Evaluating the ways that hospitals and outpatient facilities charge patients: Facilities can charge whatever they can get in any market. They are paid by the insurer and these two parties work together to create a back room deal that determines the prices of medical services and procedures. The consumer has no role in this and, I believe, this may be the single biggest problem in America. The insurer negotiates with hospitals in back room dealings to determine these prices.
- No other industry in America operates this way. Typically, the consumer shops for a product and service — and the market determines fair pricing. Given that the average consumer in America earns an annual salary of $35K, if the health care market’s prices were determined by consumers, costs would probably come down by 80% overnight. How could this work? Imagine if a person walked into a hospital or imaging facility for an MRI for instance. Under the current back room insurance model, the MRI probably costs 5K on average as determined by the carrier and the hospital. If the consumer was solely shopping for service and determining the price, I am confident the cost of the MRI would be closer to $250, as that’s probably all the consumer would be willing and able to afford
- Evaluating physician expenses: I’d suggest looking at ways to relieve some of the fiscal stresses that physicians are faced with.
What steps might you suggest taking to make these changes?
I think that technology has an enormous role to play in leveling out the field of health insurance so that employers can get better pricing while still receive better health benefit options. I also believe that there’s a huge education piece that needs to happen so that both legislators and voters understand how the industry works and what change can be made AND should be made. In addition, I believe that reducing middlemen will help with drug costs. Furthermore, I would like to see the concept of a “ network” ie relationships between health insurers and hospitals completely outlawed, so that we can quit seeing the kinds of price establishing that’s happening now, which is severely hurting consumers and employers from a financial standpoint.
What books, podcasts, or other resources inspire you to be a better healthcare leader. Can you explain why you like them?
There are two books that I’m a pretty big fan of. I like them both because they show differing approaches to explaining the same kinds of problems in healthcare. The first of these is called America’s Bitter Pill: Money, Politics, and Backroom Deals by Steven Brill. The second book is called An American Sickness: How Healthcare Became Big Business And How You Can Take It Back by Elizabeth Rosenthal.
How can our readers find you online?