Today we're talking with John Butler from JB Benefits who is a fierce defender of free-market solutions and is dedicated to turning the business health insurance marketplace upside down. You will learn immediate solutions to dramatically reduce health insurance costs, while at the same time giving businesses a controlled healthcare budget.
Seven years ago, John Butler began researching the business healthcare industry and uncovered the many free-market solutions already being offered all across America. Realizing that most all of these solutions were being hidden from view by the distribution channels across America, John began writing his book Health Insurance Sucks about 3 years ago.
He has now disconnected from any affiliations with insurance companies, pharmacy companies, and all revenue connections within the industry.
He now works as a “pure consultant” connecting employers nationwide to the free-market vendors that are consistently reducing employer healthcare costs, while improving benefits to the hard-working men and women of America.
Narrator: Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.
In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.
Josh Patrick: Hey, how are you today? This is Josh Patrick. You're at Cracking the Cash Flow Code. My guest today is John Butler. He is from JB Benefits. I normally turn down folks who are in the health insurance business on getting on the show, but I made an exception today for John because he seems to have some really interesting things to say about health insurance which can (a) get you better insurance and help control your costs. So, since I have no idea what he's going to tell us, I'm going to bring him on the show and let him do that.
Hey, John. How are you this morning?
John Butler: Very good, Josh. Thanks for having me.
Josh: Oh, it's my pleasure.
So, since I have no idea what you’re thinking to say, but it looked interesting to me, tell me about the health insurance landscape. And I know that an awful lot of blue‑collar business owners listening to the show have somewhere between 15 and 40 employees and they're just sick and tired of paying through the nose for health insurance getting crummy coverage. So, what do you tell folks like that?
John: Well, crummy is not the word that I’d use. I wrote this book, shameless plug, Health Insurance Sucks.
Josh: Okay. Well, that's about the same.
John: It tells you a little bit about how I felt about the whole situation before I started down this road of even writing the book. So, I've been in the brokerage business since 1996, been in the financial insurance business since ‘88. So, 63, as I'm coming to the later years of my career, I'm finding out that this is my new career.
So, what I did is I took a journey, about seven years ago, to start just researching all of the different options for employers around the United States. What are the alternatives other than higher premiums, higher deductibles? You know, more miserable benefits for employees and all the employers around the country trying to put their best face on and say, “Hey, here's what we got for you, employees. Hope you like it.”
So, there's a number of different things going on in the marketplace. I point out three in the book that are specifically different than most any brokerage firm in the nation would even tell you about. And the reason that they wouldn't tell you about those, Josh, is because they'd lose your business.
Josh: Okay. I mean, that's true. People tell me about having no conflict of interest. And the truth is, we all have a conflict of interest, we just have to recognize what it is. But since they won't tell us about it, I bet you will. So, what are they?
John: Well, that's a good opening question, frankly, because, you know, the insurance companies write contracts for brokers out there and they can be let go for cause, basically. So, if I'd have a contract with one of the major health insurance carriers in the nation and I'm peddling my insurance products to employers around the area that are in the small to mid‑size business, like you mentioned, they are running the show, because they are paying my salary in some way, shape, or form.
It's interesting because, you know, I had this flash of something that came into my head years ago. There isn't an invoice that you pay to a brokerage firm, is there? There's just--
Josh: I think most of our listeners know that insurance companies pay brokers and that's who they're really working for. But I'm really curious what is it that the guys can do, that's going to save them money and get better coverage?
John: Well, the three different options that I point out in my book are something that maybe some people have heard about in the marketplace before but most haven’t. So, the first one is a pretty obvious one. And it's outsourcing your benefits through an organization called a PEO. And --
John: --Josh, you've heard of PEOs before?
Josh: I'm very aware of PEOs.
John: Okay. So, as I started researching all the PEOs across the nation, I realized that there are some PEOs that want the health insurance inside that PEO. And that health insurance inside that PEO goes up in price and down in benefits just like everything else in the marketplace. It may have some minor advantages but that is still true. Okay? So, the newest PEOs now they have the ability to carve out the healthcare. So, in essence, now, I can outsource all of my benefits, but I can customize my health insurance to the way I want to do it.
So, the second option that is not really within most people's purview is something called coalition plans which has started flourishing around the nation pretty quickly here over the last three to five years. And what that means is that, if I'm a company of 25 or 40 employees, I can join a coalition which is similar to like a captive in the Worker’s Comp space or in the PC space. But I can be a part of a 10,000‑, a 20,000‑person organization even if I have only 40 employees. That substantially reduces down my cost.
And then, what these companies around the nation-- and it's not just me doing this, Josh. It's everybody around the nation that I've been in contact with for seven years. I would basically, on my RFP, if a company came to me, I would put one of these companies around the nation that has a coalition plan that reduces down the cost for the health insurance and allows you to control the budget and control the benefits to the employees.
So, one just short story is that I had a company that we put on a coalition plan as of the first of last year. The 66 people in this company, but we reduced their cost down by $224,000 and made the benefits better to all the employees. So that's the second one.
Josh: So, let me ask you a question about the coalition plan. I assume you can customize the benefits within it--
John: Correct. Yeah.
Josh: --and there's a plan sponsor who is putting all those together? So, essentially, they're putting together a very, very large what's called partially self‑funded plan?
John: Correct. Well, it's really a fully self‑funded plan within the organization.
So, the coalition takes companies from all over the nation, plugs them in, and they actually have a process that they take them through that makes sure that they're not dirty members going into this clean pool. So, they teach them how to do things like, instead of just the normal co‑pays for office visits, they put in direct primary care which is doctors that are operating outside the insurance business. And so, you can go to them, and you can pay a subscription fee, and you can have their time anytime you want, as a member.
And then, they basically go into the cost drivers in the plan which is prescription drugs which is the highest one of all, going up. That's going up probably the 50% of the cost of a plan in the next three to five years. There's outpatient surgeries and there's hospitalization.
And those three cost drivers, within the coalition, they actually use incentives within that plan, Josh, to plug in the different members and the vendors around the country, like we have one out of Milwaukee, Wisconsin here, plug that one into the coalition plan here locally in Minnesota. And they have relationships with all the healthcare providers.
So, this particular one, just to use a knee replacement as an example, they came into this area, had a relationship with Twin Cities Orthopedic for a bundle knee replacement, full‑knee replacement, for $26,000. But the other knee replacement costs around this area are subject to the PPO cost which could be as much as $80,000, $120,000. I mean, it's whatever card you have with whatever insurance company. That's what they charge you. They give you the discount.
But if the members in this coalition plan go to that particular organization to get their knee replacement, they wipe out their deductibles. So, they lower the cost of the service and the incentive inside the plan is, if I'm the one that needs that knee replacement, instead of paying the $3000- or $4,000‑deductible, I get it for zero.
Josh: So, with this plan, I mean, I live in Vermont which has a very restrictive health insurance regime and requirements for health insurance carriers, will these coalition plans be legal in Vermont?
John: Absolutely. Yeah, that's a good question also.
So, the networks can be rented. Easy to rent a network, frankly. So, the larger networks, you know, whether it's Cigna, Aetna Blue Cross, or whatever, it's relatively easy. The people who run these coalitions can rent these networks to make sure that, you know, it's a nationwide network. So, if you're in Vermont, you know, it's no problem going to physicians and hospitals and so forth within that large network.
Then, they basically piecemeal this whole thing together after that. They rent the network. They hire a third‑party administrator to administrate all the claims. They hire a pharmacy benefit manager to attach to the TPA for all pharmacy benefits.
And it's really quite evolved. I mean, you know, we don't have enough time to go into the entirety of a custom health plan design, through a coalition plan, but you kind of get the gist. Rather than just giving all your premiums to an insurance company and say, “Hey, you know, cover my people.” These people have it figured out. And this is flourishing around the country quite quickly.
Josh: So, would a plan like a coalition plan make sense for a company with 200 employees and it has a partially self‑funded plan? And, by the way, let's explain what partially self‑funded is first because I'm sure there's a lot of folks who have no idea what we're talking about, the jargon.
Well, partially self‑funded-- you know, all this stuff can be really complicated, but it's relatively easy to explain within a coalition design. So, a partially self‑funded plan within coalition means that, for every member on a company-- let's just go back to that 40‑person company. And with spouses and kids, there might be 60 of ‘em on there. If any one person has a claim, that claim will be paid by the company up to a certain level. And let's just say 25,000, for argument's sake here.
Josh: Right, right.
John: Okay. So, if I'm the one who had, you know, got in an accident and had my broken arm and all that kind of stuff and with complications, my claim was $50,000, the company only paid $25,000. After that, the coalition plan pays between $25,000 up to their stop‑loss maximum which is probably a half million or a million, okay?
John: So, all the members around the country can choose their own stop‑loss level, 25,000, 50,000, whatever they want, but then that amount is paid by all of the members of the coalition that pay in each year. And so that, between 25 and 500,000, let's say, is paid by the coalition. After that, it’s stop‑loss insurance. Meaning, any claim that goes over a half million, the coalition has you covered. Hopefully, that makes sense.
Josh: Yeah, it makes sense. In my experience, it sort of sounds to me like a coalition plan sounds like a combination of partially self‑funded plan and a captive Worker's Comp plan. And captive insurance is where you set up your own insurance company. You have a high deductible for yourself. You hire an insurance company to take the excess loss.
Josh: That's exactly what this sounds like.
John: That's exactly right. But, you know, the funny thing is, when I found out about these coalitions, about four years ago, I didn't realize that they even existed, that you could, you know-- in fact, a partner in Minnesota here is partners with a guy in Boston, Massachusetts on his coalition plan but, you know, three or four years later, there's hundreds of ‘em that have popped up around the country.
And so, you know, most people understand that it's better to be a part of a larger group, a population, to reduce down risk in the insurance world but so little companies know about this. I mean, that's why I created my website, we have what's called a fast track RFP, to educate people on just what's out there. And then, we run a 60‑day RFP to put ‘em in touch with the brilliant people around the nation that are actually doing this to success.
Josh: Now, this sounds to me like a really cool idea. The challenge we have with small companies, at least in Vermont, is that you go into community rating. And community rating is--
John: Mm-hmm. Yeah, Minnesota too.
Josh: It’s great except that all the Medicare and all the people who are unhealthy are part of your group. Whereas, Walmart, for example, with their group plan which is fully self‑funded, all their people are working so they're more healthy, so they get a better rate out of the box. And I'm assuming that, because I'm in a big group with hundreds of thousands of people, who are mostly healthy, my rate will go down significantly.
Yeah. And what you're talking about there, I mean, whenever you get into the language of insurance, Josh, the way we are right now, you know, population - large populations, and stop loss insurance, and so forth. The problem in a general sense, and this is kind of a last point in my book, the last alternative, that I think is going to be extremely attractive is that companies-- actually, there was a bill passed in June of 2019, that allowed companies as of January 1, 2020 to give tax free money to their employees, to allow them to get their own coverage in the marketplace.
And I'm not sure if you've heard of this before, Josh, but have you ever heard of something-- it’s an acronym but it's called an ICHRA? If you heard that phrase before?
John: It's the Individual Coverage Health Reimbursement Arrangement.
Okay. So, we’ve got acronyms for everything in this business. You know, the COBRAs and the ERISAs or whatever. But this particular solution is really flourishing around the nation because, when you think about this in a general sense, why has a company got connected to health insurance in a general sense in the first place? And it's more or less, the history of this goes back to World War II when there were wage and price controls and employers wanted to give their people benefits in some way, shape, or form. They couldn't raise their wages, so they gave ‘em healthcare. And the government passed a law that says, “Hey, that's tax deductible now.” So that exists today.
But what it does do, and this is one just question I ask in my book, if you were my boss, Josh, and I was a part of that 40‑person company and you add a car insurance plan that said, “Hey, you know, we have the ability to deduct this. You should jump on our car insurance plan.” And then, I find out that two people, within your population of 40, had DUIs and cracked up their cars, and my rates went up by 25% to 30%, you'd really question the legitimacy. Why are we doing that? I mean, my record is great, right? So, it breaks away the company from a risk management principle. And this thing is there's TPAs around the nation that have kind of perfected this at this point. The HRAs been around for decades, Josh. You probably have heard of health reimbursement arrangements?
Josh: Yeah, I had one at one point, actually.
John: Okay. So, now, within literally about a year and a half's time, and through the help of this thing right here, technology has advanced this thing to where I can plug your company in Vermont. I can give each employee $500 a month, tax free. And there's TPAs that basically do all the reimbursements for your employees. It looks and feels just like your group plan except for now I own my own individual plan and I customize it to my deductible, my network, to my family's needs - you know, co‑pays for prescription drugs, however I want to do it. And you, the company, just give me tax free money.” And I think that that's going to be quite a flourishing product around the nation here.
Josh: Well, again, you know, in Vermont, if you buy individual insurance, it’s through the exchange and the exchange is not cheap. So, how do you get around that?
John: Well, there's a number of different ways. I mean, you're right. In Minnesota here, the insurance rates for individual insurance rates are a little less expensive than around the rest of the country. In fact, I think it's New Mexico, and Minnesota, and Alaska - three of the cheapest states in the nation.
But another thing that is coming into play-- and this, basically, I go into the last two chapters of my book in this. I'll just use me as an example, Josh. Our coverage in 2018 was going up for me and my wife. We were 60 years old at the time. It was going up to $1800 a month for a $4,000‑deductible. Now, what we have is a choice. And we chose a health sharing plan which is my choice - my wife choice. We have a $1,000‑deductible now. And together, it's $367 a month.
And so, I'm not sure how familiar your audience is with health sharing but most--
Josh: Not at all.
John: --people have heard of Medi‑Share before but, you know, Medi‑Share is--
Josh: I've heard of neither. So, please explain.
John: Yeah. It's a really simple concept that's been around for over 40 years. Basically, people pay in outside of the insurance system now. They pay in a set price each month. Ours is $367. We pick a plan. We picked the $1,000, you know, deductible plan. You can pick $2500 or $5000 and make your costs even cheaper. But all of that money goes into-- you know, I'll use one -- there's one that has 400,000 members in it. So, my premiums or my cost goes down around the nation with all these other 400,000 members. And anytime we have a claim that hits a thousand dollars or more, it's shared by the members in the group.
Josh: So, I have a question for you.
Josh: I had a cancer experience, about 13 years ago. I don't know what the actual cost is but my thought is it was about $800,000.
John: Yep. Yep. My wife had had lung cancer surgery about a little over five years ago.
Josh: So, would I get thrown out of the plan because of my high cost of insurance?
John: No. But that's a really good question.
So, here's how that's evolved in the health sharing space. Remember, now, I'm a person on your company plan. You've got 40 employees. I'm just choosing this myself. You can give me the $500 a month and I can get an individual coverage and use that money tax free, okay, or I can choose this health sharing plan which I'm just using an example right now.
So, how that works in the health sharing space is that there's companies that will accept everybody, but they have a pre‑existing condition clause in there. And how that works is-- and I'll use my wife as an example. If she did have cancer, within the last three years, that is a pre‑existing condition, she would not be covered for that cancer in the first year. In the second year, she'd be covered. If it re‑occurred for 25,000 the coverage in the third year 50,000 of coverage. And after the third year, she's completely covered under that plan. So, there are risk management principles in here.
But, again, if you're that company that just said, “Hey, I'm just going to give you all $500 a month,” which is now your budget, right? In Vermont your individual insurance’s probably pretty expensive, right? But that does--
Josh: It’s relatively expensive, yeah.
John: Yeah. But that does mean that you have disconnected from the risk management principle which means that there's not going to be a company like Blue Cross, or Aetna, or Cigna coming back to you and saying, “Your rates are going up 20%” because you own the contract. Now, you are just operating within a budget. And it will take you about 30 minutes, at the end of the year, to evaluate what your insurance cost of your 40 employees are and decide whether or not you want to raise that $500 tax‑free to people. Lower it or raise it, it's up to you and it's within your control. So, it does get a little complicated behind the scenes but that's the risk management breaking away from it. I call it cutting off the head of the snake. So, this is an evolving thing here, Josh.
So, you know, back to my original proposal here of what we're talking about, as far as options for employers, that RFP will show you what a PEO looks like, if you want to outsource your benefits, what a custom health plan design, if you want to do the coalition type of benefit, or if you're more interested in the ICHRA, or the individual coverage design, the HRA.
So, our company is designed to show you all three. And it's basically just data in. You just give us a census data and they'll kick it back.
Josh: So, John, quickly, we're almost out of time.
Josh: This does not sound like this is a commission product. How do you get paid?
John: A couple of different ways. I get paid because I'm not the vendor, I'm a consultant. I can get paid just a percentage of the savings which, actually, I like that model because, you know, we are just trying to reduce the cost for the owner of the company. Give them what they want between these three choices and I would just plug in the vendors. The other way-- and everything has got to be transparent with me, Josh. It’s not going to be behind the scenes and having an employer wonder.
So, for instance, like on a PEO, you can get an outsourcing of benefits here for about $500 per year, per employee. And so, you know, that's a relatively reasonable cost. So, you'll know what they get paid, okay? What I get paid is if you need me on an ongoing basis, I get paid a per employee per month which is relative to the size of the group. You know, basically, the larger the size, the less the per employee per month.
But that's my really critical thing here is that there's too many things behind the scenes, Josh, that are not transparent with the insurance companies, the pharmacy companies, the hospitals. It goes on and on. So, it's quite unnerving.
Josh: So, I'm intrigued. And I'm going to bet our listeners are intrigued. And, unfortunately, John, we are out of time.
John: That’s okay.
Josh: So, if somebody wants to find you, how do they go about doing so?
John: firstname.lastname@example.org. You can also go to our website and that link is up there. You actually have the ability to--
Josh: For people who are listening, who aren't watching, they might want to know it’s jb-benefits.com?
Josh: That’s jb-benefits.com.
John: Yep, jb-benefits.com. Or you can email me directly at email@example.com.
Josh: Great. Thanks a lot, John.
I have two things I'd like you to do.
Josh: First, I just read that iTunes is changing up how they do reviews and subscriptions and all that stuff, but I still want you to go there and rate and review the show. Give us an honest rating. Give us an honest review. And then subscribe. That's if you--
John: [inaudible 00:23:44].
Josh: If you don't like the show, don't subscribe.
And the second thing is I just published my second book. It's called The Sale Ready Company. It's a continuation of the parable with the Aardvark family. And I think you'll enjoy it. Most people who’ve read it said, “Boy! This was fun to read even though I had learned some business lessons along the way.”
Easy to get, just go to www.salereadycompany.com. That's www.salereadycompany.com. You get to buy the book. We're selling it for $7.95 as a discount. It’s normally $14.95. And along with it, you get six or seven bonuses that will help you implement all the stuff we talk about in the book.
Josh: So, this is John Butler. You're with Josh Patrick. We're at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.
Narrator: You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around a hundred years from now?”
If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at firstname.lastname@example.org.
Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.