Bill and Holley Maher a father and daughter who work together at St. Louis-based benefit brokerage Maher Rosenheim Comfort & Tabash knew they faced a big challenge. It was 2010 and the Affordable Care Act had just passed. The two worried that MRCT though the fifth largest benefit advisory in their area was still small enough to get trampled under the health laws fast-paced changes, drastically affecting their livelihoods.
Something had to be done to differentiate MRCT from other benefit firms.
Bill, 60, a managing partner, felt strongly that whatever the firm did it needed to sustain their business for years to come and he believed technology could give MRCT that edge.
He began researching benefit administration platforms that could provide clients with new, convenient and smart ways to enroll employees in plans, disseminate ACA information, and update clients on benefits regulatory changes.
Holley, a partner at the firm, who at 34 is a member of Generation X, had her finger on what young, working professionals want in their benefits and thats choice.
Together, they came up with a fairly revolutionary idea for a firm their size: Build a private health insurance exchange that helps small- and medium-sized employers control health care costs and that manages compliance, educates employees about their benefit options and assists other independent brokers in their effort to survive by allowing those firms to partner and sell on the marketplace.
While the companys path to developing their private exchange was not without bumps and bruises, in January MRCT launched the SmartBenefits Marketplace. Holley was placed at the helm of the exchange as president, thanks to what Bill deems her proven track record developing client relationships and fresh ideas on how to reengineer the business.
Bill oversees the strategy of the marketplace including new business prospecting from his seat on the MRCT side of the brand along with seven other members of the firms management team.
SmartBenefits is a multi-vendor exchange meaning multiple carriers are available for employer and employee choice and runs on the infrastructure of benefits technology vendor bswift. It can take on clients with as few as 10 employees up to around 1,000 lives. The carriers and products available in the shop are localized to bring the best price and service, the Mahers say, to the community and include: Anthem, UnitedHealthcare and Coventry for medical; Legal Shield, Unum, Guardian, MetLife, Assurant and more for ancillary products. HealthAdvocate is built in to all programs for employee decision support and the Mahers say they just finalized an agreement with a telemedicine vendor and are working on a wellness program option, amongst other projects.
MRCT as a brokerage caters to the Southern Illinois and Missouri market, offering traditional, voluntary and retirement benefits in addition to HR consulting and benefits administration and technology services.
The managing partners steering the company include the senior Maher, William Comfort and Edward Tabash, who functions in an emeritus role today.
The why and how
One of the reasons we knew a private exchange was important, we saw the research across industry organizations showing employee choice, transparency and defined contribution is going to be increasingly important, the younger Maher says. [Intelligence] showed, according to Accenture, basically most around 87% of employers are thinking about moving to a private exchange model in the next five years. The reason employers are doing this is because theyre looking for a way to deal with community rates, so cost.
The SmartBenefits business model is two-pronged: Service clients first and foremost and offer local, independent brokers a private exchange platform to bring to their own clients. Both Mahers knew from the beginning that an MRCT exchange concept would be rooted in one of the key components of their brokerages business model partnerships with other independent brokers, agents and their respective firms.
The slightly unconventional idea of partnering outside the agency came to the Mahers firm back in 2000 from managing partner Tabash, when his firm merged with then Maher, Rosenheim & Comfort.
Tabash worked with financial planners, property and casualty agents, and other brokers whose bread and butter was not employee benefits, to provide a sort of benefits backroom, as Holley calls it, for these types of insurance professionals to supplement their product line. When MRCT was created at that time, the Mahers and the other partners at MRCT decided to continue these relationships with all sorts of agents, providing employee benefits back-up and administration.
Today, MRCT boasts 12 producers in their office and the rest of the 38 full-time employees at the firm are account staff a ratio reflective of their assistance to outside agents and brokers.
Bill says the firm has 28 independent broker partners outside the firm in the aforementioned industries like P&C who are actively selling benefits and are supported by MRCT staff. MRCT has an overall network, however, of about 200 outside agents who use them less frequently for benefits backend help.
With all the pressure on benefit firms, it was important for us then and now to grow with relationships, and our way is through being a backroom resource through those other agents, Bill explains.
The inception
We lived in that world until 2010 when health care reform first came to pass, his daughter says about the companys original business model. We knew [the ACA] was going to be a huge paradigm shift. We read about all the voluntary opportunities and in 2010 we started our education and enrollment department with onsite, one-on-one benefit counseling and also a call-in center just for employees, which was sort of a kick-off to our private exchange.
Then, after years of building and planning, in 2014 we started the SmartBenefits Marketplace and then started our aggressive push to work with new kinds of brokers.
The concept of partnership within the SmartBenefits private exchange is a bit different than MRCTs brokerage model. Instead of forming alliances with P&C and financial planning agents, the Mahers knew the brokers who would be most interested in a private exchange would be their direct competitors other independent benefit brokers, advisers and agents.
While partnering with the competition may sound out of the ordinary, the Mahers say their experience told them that more alliances lead to greater odds of success.
For one thing, Holley says a larger network helps them compete with the only other private exchanges in their market, those of benefit giants Aon Hewitt, Towers Watson, and others catering to large employers. Theres also a mergers and acquisitions option for external benefit brokerages who sign on with the MRCT exchange.
Holley explains: A lot of brokers are older and truly need an exit strategy, so were partnering with more experienced agents and agencies the group medical guys who werent interested in partnering a few years ago.
Its a win-win for MRCT and their partners; those benefit brokers who feel they need a private exchange component to offer their longstanding clients can get that through MRCT along with a succession plan for their agency if they choose to sell it one day. MRCT, which has a built-in succession plan in Holley and other young brokers eager to lead the business for decades to come, wins by building a pipeline of potential acquisitions. The model of succession planning by partnership is one the Mahers recommend to agents across the country who may not have a young predecessor lined up.
Tom Murphy is one of the local Missouri benefit brokers who has signed on to SmartBenefits. Hes appreciative of Bill and Holleys vision to look beyond just their four walls because, he says, we thought about building our own private exchange, but youre talking hundreds of thousands of dollars to do that.
Murphy, who is a managing partner at St. Louis-based Sonus Benefits, which has five producers locally, says its not that his firm couldnt make the investment, but hes not 100% convinced this is the future of the benefits business.
An opportunity to partner with a firm he trusts Murphy previously worked as an insurance wholesaler and sold through Bill for many years on an existing platform is a good way to quickly grasp the private exchange technology while still taking measure of the industry and where its headed.
Bill says as of June, eight benefit brokerages throughout the state comprising 25 agents have signed on to be a part of the SmartBenefits exchange. Were trying to get a footprint throughout the state, he says.
However, Murphy has not sold any of his employer clients in to the exchange. Weve presented it, but just havent sold anything yet, he says. Its important to have, though, because I think if you dont have a [private exchange] option if youre not moving forward, ultimately you die.
He continues: So, to educate and intelligently talk to a client about an exchange, its having that ability to talk to them about it that makes it worth it. I can also translate the comfort factor and trust [I have with Bill] to my clients.
The partner
The Mahers needed a technological backbone to get their ideas off the ground.
Back in 2010, Bill explains, their first attempt at distinguishing their firm as forward-thinkers and a go-to resource post-ACA was to do something with online administration. So, we partnered early with a company that we thought was a good fit, he explains, while noting he wasnt comfortable revealing the name of the failed partner. We worked for 18 months; their focus was on small business, and when youre in the small business market you have to do things simply and effectively and quickly, because the revenue is lower.
Bill knew he needed to cut ties with that technology company if they couldnt be nimble in the way his clients needed them to be.
They didnt have everything operational in a timely manner, he says, and so MRCT went back to the drawing board for their technological offering.
In early 2012, Bill contacted bswift after vetting several vendors through his trusted contacts at carriers and payroll companies and heard the company mentioned with positivity over and over again.
To date, bwift has built private exchanges for other brokerages including First Niagra, for the Utah, Idaho and Connecticut public SHOP exchanges and even has its own marketplace called Springboard.
They were rolling out private exchanges with defined contribution and they were designed for small business, Bill says. Thats what drove us to the marketplace concept, and being the first multi-vendor marketplace in Missouri was appealing.
He says bswift quickly and efficiently took up the technology role, listening to guidance from MRCTs team on the health plans, policies and rules that needed to be in place to guide and assist employers. During the building phase, and to this day, the two companies have a formal weekly web conference to discuss bswifts progress and MRCTs changes to and satisfaction with the exchange, in addition to ad-hoc communication that happens daily between colleagues.
Don Garlitz, the head of exchange solutions at bswift, says the Mahers concept could be a model for future small- to mid-size brokerages looking for an exchange solution.
Theres a lot of traffic out there of people expressing interest in private exchanges, but the challenge is in putting these together, which is why I think he sees the importance in getting other brokers involved, Garlitz says. To put together what Bills put together is very difficult.
He adds that while the Mahers are the only exchange servicing the very small employer market and including several carrier options in the St. Louis area right now, there will surely be competitors in the future but, theyre smart to get ahead of the curve.
Holley says when she realized that they could be the first multi-vendor exchange in their market that went down to 10 employees, she wasnt worried about competition. The big firms private exchanges pick up where we leave off, she says.
Holley explains that the investment, for MRCT, was a big one the creation is in the range of more than $500,000 and closer to $1 million now. But, she and her father view their strategy of being one of the first exchanges in their market, along with their profit-generating tactics of sharing commissions with partner brokers and charging a fee per employee on the exchange in the administration costs, as a chance to grow their revenue.
Perry Braun, executive director of the brokerage membership group Benefit Advisors Network, says partnership in the way the Mahers are offering through a private exchange, or through other non-merger agreements with brokerages with different skill-sets and assets than your own, is the key for independent brokers to survive.
Theres a rush in the marketplace to consolidate, and what this does is provide a stepping stone, perhaps to consolidation, but there are a tremendous number of very gifted agencies that are smaller in size who, by working through the product Bill and Holley have established, can remain relevant and bring product options and technology available, he explains.
In terms of their specific private exchange model, I havent seen anything else out there, he adds.
The Mahers agency recently joined BAN in early June.
Kick-off
Bill says initially at launch in January four existing MRCT clients moved their benefit plans over to the SmartBenefits Marketplace and as of June, there are eight employers on the exchange.
Weve been building volume ever since, he says. We have 24 to 26 employers that have quotes in with us right now. As for where the firm and the marketplace are headed, he hopes in the direction of adding many more.
One of those early clients is Budnick Converting Inc. a producer, converter and reseller of die-cut adhesives like tape, aluminum foil and other adhesives in the St. Louis area.
Karen Limestall, the HR manager, says Bill has previously brought good ideas to the company as their broker, like health savings accounts and health reimbursement accounts when they switched to a high-deductible health plan several years ago the plan employees were on until recently.
When she and Brad Albrecht, the vice president of finance for the company, heard Bills pitch about the exchange last fall, they realized it could be a very good fit for their organization.
The whole health care change is difficult for small- and medium-sized companies because we dont have the resources to have a full-time HR person just to watch the ACA, Albrecht says. So this is a way for us to limit ACA compliance exposure and then also to give our employees more information about their benefits.
For the Jan. 1 transfer over to SmartBenefits, MRCT representatives came down and met one-on-one with each of Budnicks 90 employees.
I think the employees liked the attention they got, Limestall says. Of course, because its new there were some bugs, some of the information didnt transmit exactly to the insurance companies, but we knew we were basically the beta test. But overall, the employees liked the attention and liked being able to do this, and next year will be smooth because weve already worked through everything.
Bill explains that his staff learned a big lesson with the hiccup Limestall is referring to.
It was our first case and we tried making an adjustment to a plan in the system while enrollment was going on and it caused a glitch, but we worked with bswift to fix it overnight and benefit counselors were back the next day enrolling again, he explains. Now we know, once enrollment is up, there are no changes to the plans.
Limestall and Albrecht agree that from their perspective, the biggest asset of the exchange is that SmartBenefits handles all the disclosure notices required by the ACA.
Theyre all housed on the SmartBenefits site and [the employees] can check off that they received them all, Limestall says. At this time, the exchange has really worked, we feel, well for us. The whole unknown portion of whats still to come with the changes to health care plans and government regulations, thats where we feel were most going to benefit. We do feel more at ease with someone helping us behind the scenes.
The future
The Mahers hope they can duplicate the Budnick experience more broadly.
I would think with all the things going on in the insurance marketplace, were providing a new solution that businesses are looking for, Bill says.
My assumption is that were going to see pretty high volume as we all shift to the defined contribution model in years to come.
And Bill just may be right.
In December 2013, industry analysts from the New York-based consulting firm Booz & Company told a group of benefit brokers at a Chicago conference sponsored by EBAs parent company SourceMedia, that larger employers the vast majority of businesses that have signed on to private exchanges in the last year or so dont have as much to gain as their smaller counterparts that havent been as quick to adopt the concept.
For smaller employers, the value proposition is stronger than large, said Kris Weber, principal at Booz & Company, at the event. Weve yet to see a lot of uptick where the value proposition actually is.
Why is it so high for smaller businesses?
You can aggregate demand, which small employers dont have [but] as part of an exchange, an exchange can do that on their behalf and it results in better pricing because its pooled, Weber continued.
The opportunity clearly there, exchanges like the MRCT SmartBenefits Marketplace and benefit brokers like the Mahers are ready and waiting for more employers to take the plunge.
Change brings about positives and negatives, says Bill. Its all about how we approach them.
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Family ties
Bill and Holley Maher the father and daughter team behind the SmartBenefits private exchange say working through challenging times can be tough given their close relationship, but also very rewarding because they get to spend their days together.
The younger Maher says their shared faith can make difficult business decisions, or even heated debates between the two of them, easily go away when they hug and remember what theyre in the business for to help people.
Holley always knew she wanted to be in the insurance business watching her father as a little girl, but she got her grounding on her own at Northwestern Mutual selling individual products for about a year before joining the family business.
I never gave her a single client, Bill says. Her client relationship skills and yearning to move into a leadership role in the agency drove her to where she is today, he explains.
Holley adds that its sometimes awkward to figure out what to call her father in a business context. I have tried to be intentional lately with calling him Bill externally, which is funny because to me, hes Dad, she says with a chuckle.
