Adviser of the Year re-engineers benefit plans for substantial savings
It’s fitting that Michael “Mick” Rodgers works in an area teeming with historic significance dating back to the Revolutionary War. His own radical thinking as managing partner of Axial Benefits Group (ABG) in the Boston suburbs has earned him the top honor of EBA’s 2017 Adviser of the Year.
Rodgers is widely respected for his unbridled commitment to staring down rising healthcare premium increases on behalf of midmarket employer clients, as well as bravely advocating total transparency around broker compensation to a point where he puts part of his own fee at risk.
The former engineer boasts eye-popping results to back that reputation. Per employee per year costs for proprietary healthcare purchasing coalitions he created are nearly half the national average. His firm’s revenue also doubled last year. Such success has led to numerous speaking engagements and a new book he co-authored for CFOs and HR professionals, Breaking Through the Status Quo: How Companies Are Changing the Benefits Game to Help Their Employees and Boost Their Bottom Line.
Half a dozen peers or clients describe him in letters and nomination forms as an affable forward-thinker with rock-star appeal and a track record that has cemented his elite status in the field. A colleague at ABG even likened him to local hero Paul Revere, quipping that his own cautionary words to clients could be, “The renewals are coming!”
Rodgers shrugs off the comparison with a laugh, adding that he’s actually much more like Sam Adams because of his founding father role. He’s proud and passionate about the movement of change he’s helping lead to revolutionize the way a new generation of fellow brokers and advisers help their clients tame healthcare cost increases, as well as establish more credible relations built on trust.
Nelson Griswold, an agency growth consultant, author, columnist and keynote speaker who runs Bottom Line Solutions noted in his nomination of Rodgers how “as an engineer, Mick was trained to take things apart to see how they work, then put them back together with improvements. As a benefit adviser, Mick has deconstructed employee benefit plans to identify the flaws and reassembled them with critical changes that have allowed many of his employer clients to enjoy negative annual trend and the return of millions of unspent premium dollars.”
Fellow brokers and advisers first took note of Rodgers when he developed what Griswold describes as “an almost-scientific process” to transition fully insured employer groups into a coalition and reap the same savings advantages of large companies with major purchasing power.
Noting that medical trend, premium increases and employee cost-shifting are not sustainable, Griswold believes Rodgers “provides a meaningful alternative to the untenable status quo by changing the very model of employee benefits.”
ABG has a dozen employees who serve 256 employer groups with 16,530 covered lives. Rodgers created four healthcare purchasing coalitions with more than 11,000 individual members from 64 middle-market employers in 35 states whose head counts range from 100 to 500 employees. Three of those groups are homogenous, serving staffing, accounting and health-center sectors, while a fourth serves as what he calls “a staging area” for heterogeneous businesses that are waiting for enough like-minded entities to gather.
The secret to his success: “We’ve figured out how to aggregate risk,” Rodgers says, noting that the bulk buying of his coalitions creates stability and predictability for managing risk.
The idea is to combine companies with similar risk profiles into a large group that can be leveraged for better underwriting and lower insurance costs. Aggressive cost-containment methods include reference-based pricing and medical management, which also ensure the quality of relevant care while promoting appropriate utilization of medical services and plan resources.
What’s noticeably absent from the plan design strategy in each of these coalitions is cost-shifting onto employees, which Rodgers describes as “slash-and-burn benefits.”
Most of the coalition members offer a health savings account only as an option to the PPO plan and 60% of employees have a deductible on their base PPO of $1,000 or less. Just 5% have a deductible between $2,000 and $3,000. These employers usually have a level-funded or partially self-funded program in place that’s being aggregated on the reinsurance. If they offer a health savings account, it’s as an option.
At $7,065 PEPY in 2016, the health benefits of coalition members cost 41% less than the national average of $11,990 PEPY as estimated by the Henry J. Kaiser Family Foundation. The cost includes both employer and employee contributions for medical and other health coverage for all covered lives.
As a result of this much more aggressive healthcare cost management, all 64 members of the coalitions will share in more than $3.7 million in unspent premiums returned back to them by ABG. Those funds go straight to their bottom line as unexpected profit.
ABG customarily has returned between 15% and 18% in unused premium to coalition members since pioneering the arrangement in 2009. This year, it will be 38% largely because of a concierge-type case management that Rodgers credits with making a substantial difference.
“Mick’s ability to design affordable alternatives and think out of the box with nontraditional products makes him elite in his industry,” says Richard Purtell, CEO of American Resource Staffing, a client for the past decade.
In 2012, Rodgers developed a healthcare purchasing coalition specifically designed with his staffing industry in mind known as The Staffing Exchange. TSE grew more than threefold from 14 staffing companies that hadn’t provided healthcare to temps to nearly 50 entities with a combined coverage of more than 8,000 lives.
Building client trust
Rodgers has been able to build on the success of his healthcare purchasing coalitions by being totally transparent with employer clients about his compensation, which is exclusively fee-based. Part of his package is taken in the form of performance pay, with one-third of the fee contingent on an employer’s health plan meeting certain criteria. Otherwise, his fee is forfeited, though that hasn’t happened since the arrangement was introduced in 2014.
When a reluctant CFO during a prospect meeting bluntly told Rodgers he didn’t trust brokers working in the company’s best interest, it led to an epiphany. How could he convince clients to come on board without telling them how much he’s paid, how he gets paid and who pays him?
So Rodgers began working exclusively for a consulting fee paid by the employer and accepting no money from carriers. CFOs and CEOs deeply appreciate that his compensation is tied in part to how well their health benefits plan performs.
“By re-engineering his compensation to emphasize transparency and align his incentives with the client, Mick has made it possible to build relationships based on trust,” according to Griswold.
The formula is working like a charm. Midway through this year, 80% of ABG’s client engagements are on a fee-for-service basis rather than more common broker commissions, which was up substantially from less than 15% three years ago. Most of the firm’s work includes performance incentives, which most often are included in fee-for-service client engagements.
ABG’s performance is based on a simple formula for each prospective new member of a coalition: the difference between current PEPY costs and what the employer would like it to be. “We’re going to set a less than 3% trend or less than what the PEPY cost was the year before,” Rodgers explains. “We have an expression: It’s not what you buy, it’s how you buy it,” he says, noting the approach doesn’t involve changing plan designs or networks, or sometimes even carriers.
Not surprisingly, his efforts have helped burnish the bottom line. In 2016, Rodgers doubled his firm’s revenue to $5.01 million from $2.26 million. Roughly 85% of ABG’s revenue comes from healthcare purchasing arrangements and underwriting.
Tommy McDonald, a VP at MarshBerry, a leading adviser for insurance broker M&A deals for the past 15 years, reports when compared against a peer group, ABG ranks in the 100th percentile “in terms of organic growth, new business production, new client acquisition and critical staffing metrics, including revenue per employee.”
In attempting to explain his phenomenal success, Rodgers makes an analogy. “I’m no longer that line fisherman on the end of the boat to catch one client at a time and then throwing the line back out,” he says. “I’m literally fishing with a net, and I’m trying to take on 10 or 15 or 20 clients at the same time” through the coalition’s risk aggregation process. A layer of credibility is added when he commits to completely transparent compensation and putting part of his fee at risk.
The success of ABG’s healthcare purchasing coalitions and performance-pay strategies has led to several speaking engagements for Rodgers, who earlier in the year addressed the Roundstone Captive Forum and Underground Adviser Masterclass group of top benefit advisers.
Rodgers also belongs to the Agency Growth Mastermind Network, which he describes as a group of elite, independent advisers who gather from across the nation on a quarterly basis to share best practices. The mutual admiration they show toward one another raises his confidence level in the commitment he has made to healthcare coalitions and transparent pricing.
He describes those fellow masterminds as “like-minded, high level experts” who are leading a revolutionary movement. “The fact that I happen to live in Concord, Mass., makes me think about it every day,” he says. “What I’m learning from my peers in California, Nebraska, Ohio, I’m bringing to the Massachusetts market. What they’re learning from the Massachusetts market they’re bringing to their own markets.”