Podcast: A New Approach to Comparing, Selecting Health Benefits

Wounded Woman Form



Welcome to PeopleTech, the podcast of the HCM Technology Report. I’m Mark Feffer.

My guest today is Erick Kuhni. He’s the founder and CEO of a company called Benefit Sculptor. They help both brokers and small businesses compare and select an appropriate health plan for their employees. Of course, this involves data which we’ll talk about. We’ll also get into COVID’s impact on benefits, understanding employees’ needs, and more on this edition of PeopleTech.

Hey Erick, welcome. So well to start, could you tell me about Benefits Sculptor?


Yeah, so Benefits Sculptor is in some ways it’s a technology company, in some ways it’s a consulting company. Who we serve largely is, directly we serve employee benefits advisors who work with small businesses and then indirectly through them we serve those small businesses. And what we do is we provide a new way of evaluating benefits along an analytical spectrum as opposed to using conventional spreadsheets as a way to shop for employee benefits. What we’re focused on doing is taking all of the data that’s related to employee benefit decisions, including information like wages and payroll, and creating optimizations in order to help brokers and companies identify basically solutions that drive recruitment or attention. So we apply an analytical approach to benefit selection that says, “If I’ve got a budget of X, here’s what I have to work with if I’m an employer, and help me identify the best possible arrangement of benefits when it comes to the out-of-pocket spending, the budget for the benefits and the access to doctors and hospitals, in order to be a competitive employer.”


So who’s your user?


The user is employee benefits brokers. So today, if a small business wants to get benefits, they have to go through a broker. And when I say have to, there are exceptions to that, but it’s overwhelmingly broker driven. That’s the gatekeeper to the market. And so our user is the broker, the beneficiary is the employer and the employees.


And can you give me a little bit of information about how do they use it? I mean is this something that there’s a platform and you-


Yeah. It’s a dashboard. So the best way to explain it is to explain what brokers have been doing up to now and then what we do that’s a little bit different. Like I said, I was a broker for 20 years, I’ve worked with lots of brokers, I’ve been with lots of agencies and pretty much every broker operates the same way. If you’re a small business and you’re offering benefits, usually your benefits are up for review, we call that the renewal, every year and it’s in some calendar event based upon when you initially bought your plan. Doesn’t necessarily have to be the first of the year. In any case, what will happen is at that renewal, a broker is going to come to you and maybe even competing brokers who are trying to win your business if you’re the owner. And they’re going to come to you with some options and the options will be laid out on a spreadsheet. The spreadsheet has been the workforce of most of these brokers.

And what they do is they go to all of the insurance companies that they work with and they get a smattering of options and they put them out on the spreadsheet and come to you and say, “Hey, Mr. or Mrs. Employer, I think this is what you ought to be doing and this is why.” And most of what’s driving their recommendations and selection is a fear of cost. So they’re looking at what’s happening in healthcare, they, they’re concerned about it because that’s the world they live in. They assume that that’s what their employers are concerned about and they come in and they present these options and oftentimes they’re targeting, “This is how we’re going to help you control costs.”

Meanwhile, what the employer’s trying to do is say, “What can I offer to my employees so that they want to come and work here? I’ve got to pay them wages, I’ve got to give them a work culture and environment that’s exciting and interesting.” Especially today, that’s one of the biggest challenges that businesses have is not just how much are you paying, but why would somebody want to come and do this rather than go and make videos and that do kind of thing? And so they’ve got to create a compelling story and then the benefits become a huge part of that. The attitude of employees today is still very much one of the things that I get from my employer is I get my benefits. That really hasn’t changed. We’ve studied it and I’ve always thought that that was going to change, it hasn’t ever changed. Employees still see their benefits as a major component of their benefit offer.

And so the employer is getting advice from a broker on how to manage healthcare costs. Meanwhile, they’re trying to actually recruit labor with these benefits. And those two motivations are in competition with each other, controlling costs and having something attractive to offer usually butt heads. And so what we do, I was a broker for a lot of years and I would play that game. I would go in and sit down with employers and try and show them all what I thought were the most efficient things that they could do to offer their benefits. And then they would look at me and say, “Erick, I’ve got to go out on the floor and I have got to convince these people that this is a good deal and we’ve got these projects coming up. I need to hire more people. And once I finally got in tune with the motivation was not healthcare, as much as we’re selling health insurance, not healthcare, it’s recruiting labor and creating a value proposition for labor. That’s when I started to change my own consulting approach.

So my background, in addition to being a benefits pro for 20 years, I’m a bit of an anomaly in the benefits world and I went to college and studied statistics and economics and just got very involved in computer science and data science and that kind of thing. And so I have this a little bit of a tech background. So I began taking a lot of the data problems that we were having in benefits and turning them around and building models for consulting that would change from, “Okay, well how do we get the lowest cost benefit?” to, “Let’s start with total compensation. Let’s start with what is the employer trying to do to attract labor? And then where are the optimization so that we can create as strong of a paycheck as possible, while creating also a strong benefit in conjunction with that.” And when we developed those models, we saw the value in providing these solutions to other brokerage and so we built it into a full-fledged software platform that we call Benefit Sculptor.

So when a broker comes in with Benefit Sculptor, we don’t start with this assumption of, “Hey, I went out to a bunch of carriers and got some quotes.” What we do is we provide all of the data for the market every single time. So when a broker sits down with an employer, they don’t have a spreadsheet of options, what they have is they have a map, they have a scatter plot if [inaudible 00:07:30] just a very simple conventional scatter plot of every single product on that map. And we’ve ranked the products according to price deductibles and a measure called actuarial value, which is a measure of benefit strength. And we identify where the employer currently is on that map in terms of where their current benefit offering sits. And then we ask them a series of questions about out-of-pocket expectations, about hospital requirements, docket requirements, that kind of thing, budget requirements including the cost sharing with employees.

And then we’ve built an algorithm into the system that just takes that data, depending on where you are, that could be 100 options, that could be 500 options, just depending on where you are. And by asking some smart questions, we drill that down to a narrow set of options that meet the employer’s criteria objectively. We’re not playing favors to certain insurance companies, it’s not incentive driven, it’s entirely based upon, “Okay, these are our requirements, this is what it’s going to take for us to be competitive this year.” And we zero in on a handful of options out of the massive options that we started with very quickly. We can do that whole process in under five minutes so that the employer can look at what you’re presenting to them and get emotional buy-in. And the biggest strength of our platform is it’s tech, it’s data, it’s all those things, but really it is a consulting solution because the broker’s able to sit down and analyze the market in the capabilities that they’ve never had. Their spreadsheet approach does not even come close to being able to do what our software can do, even if they’re using tech to generate their spreadsheets.

And then more importantly with the employer, they have had benefits data communicated to them, they’ve never had a business intelligence approach to data when it comes to benefits. They do an everything else. They do in inventory management, they do it supply chain management, they even get it in labor management, but they don’t get it in benefits management. So we’ve brought it to the modern age. They’re looking at a dynamic dashboard where they can say, “Okay. I now for the first time, see the entire world in front of me. Meaning the world of options that I can choose. I’ve got a very smart computer that can do the calculus and all of that stuff that’s necessary to find the optimization.” And now I can confidently walk out onto the floor and look at the employee and say, “Hey, we’ve done our shopping and we know that the plan that we’re putting together for you right here is the best option.”

And they need to be able to know that because it’s not just the confidence of telling the employees that, because the employees are going to go and test it in the real market. Right? That’s the challenge that the employer has, that the employees are going to go out and they’re going to say, “Hey, I talked to XYZ employer and they’ve offered me something better. They’ve offered me something different.” And in order for the employer to be competitive, they’ve got to beat that in the offer. Once the employees find out when they go and talk to other employers that they’re not going to getting as good of an option because you’ve used an analytical approach, that’s where the employer starts to really see the returns. And that’s what the employer cares about.


You focus on small business and I’m wondering what are the challenges, the particular challenges that small businesses face, the kind of things that they really need help with as they’re attacking this and how do you approach that?


Some of the challenges that they face are that they face a perception challenge, first off. The perception is that, one, there’s not a lot that can be done for small business. They face that themselves. Most small businesses, if you ask them, you say, “Well, what can you do about your benefits?” They’ll say, “Probably nothing.” That’s their perception. Their brokers even think that or brokers think, “Well, there’s not really a lot we can do for small business.” And they think it’s a very simple market and it’s actually not. In some ways it’s more complicated than the larger group markets because the larger group markets, they have underwriting and they have risk and all of that that needs to be accounted for. And that’s the elephant in the room.

Smaller groups have very complex rating structures, very complex pricing structures of their products. They may be fixed, but it’s very hard to budget with the variable rating pricing that they have. Just give you an idea, the price difference for a person age 21 and a person age 65 in a small group market is a three times factor. When you add family size into that, being able to predict what your benefits are going to cost you based upon the employee’s ages and then their family sizes could be as much… You could have as much variation of as five to one on what your premiums are going to be. And so the analytical side of how do you budget for that, how do you analyze that and anticipate that, is far more complicated than most people realize. And it’s where a lot of people throw their hands up in and you say, “Well, there’s nothing that can be done.”


So in this environment, the economy seems weird. It seems like thin ice. We’re still sort of working our way through the results of COVID or the debris of COVID, whichever you prefer. Given that, how do you find brokers are fairing? I mean, are they having a harder time finding clients and answering clients’ concerns or is it just business as usual?


Brokers have been having… Well, there there’s two answers to that. One is just the general effects of COVID and how that’s affected laboring and brokers. Brokers have been struggling a lot longer than COVID when it comes to growing their business. Most brokers are not growing their businesses by very much. The average age of a broker in the United States is 59. There are younger brokers coming in that are bringing it down and that’s why it’s at 59, you want a higher number. Most of the brokers who are here have been in this business for 20, 30 years and they’ve been sitting on a block of business that they grew at a time when benefits weren’t as traditional. There’s a lot of brokers that have been around since the ’80s and really haven’t grown their business since. And that was a time when small business was really starting to embrace benefits. And so [inaudible 00:14:06] groups at the time.

Today, if you want to write a new group, you have to take it from somebody. And that’s a harder sell. You’ve got to come in and convince an employer that, “I’m going to do a better job for you than the current broker.” And the challenge that they have is that at the end of the day, we’re all selling the same products, we’re selling them at the same prices. And so the only thing you have to convince an employer that they ought to do business with you is either a stronger consulting methodology or you have to wait for someone to screw up or age out. So that’s a challenge that the brokers have had.

Now, a slight modification to that is that we saw one blip in this market about 10 years ago, and it was a company called Zenefits that came in offering a tech solution. And they went from no clients to 40,000 clients in just under four years. And they proved that there is a market of opportunity for business acquisitions for sales, but nobody has duplicated with it. What Zenefits did that is different from most brokers is they didn’t come in and begin attacking healthcare. That’s what most brokers are doing today, is they’re coming in and waging a war on healthcare. So we’re going to solve the problem with healthcare costs and all of that. Which frankly, brokers are not very well equipped to do, especially for brokers that are working with small businesses. You don’t have the strength you’re going to need to be able to compete with the fully insured health insurance market or the hospital systems or any of those things.

And so what Zenefits did, they came and said, “Look, we’re, we’re not going to waste our time with that. What we’re going to do is we’re going to provide you with a tech solution that helps you manage your labor. We’re going to help you with workforce management, and we’re going to give you some value add for that. And in exchange for that, we’re going to support your benefits plan and we like you to make that stick open.”

And that’s similarly what we’re we’re trying to do. We’re not doing it the same way Zenefits did, but we’re coming in and saying, “Healthcare is what it is. We don’t want to just throw money away, but healthcare is what it is. And the job of an employer is to figure out how to provide value to their employees and to do it as efficiently as possible.” So we’re not trying to beat the healthcare system through small business benefits. We want to be efficient, but what we’re trying to do is help the employer be more effective with labor. We’re trying to offer the employees quality compensation so that doing the work is still of value to them. Now that’s answer the question one and that’s how have the broker been affected.

Small business has been affected in a massive way in COVID. And then the massive way that they’ve been affected is what everybody’s talking about and that’s work from home. But work from home has led to a new problem/opportunity. And that problem/opportunity is that you have many more… Sorry, my phone is dinging here and I don’t want to be on the recording here… But anyways, the shift has been not just that people are working from home, but employers are hiring remote at a volume that they never have before. So any company that doesn’t require physical hands on deck, meaning you need an HVAC installer, clients I’ve worked with before, plumbers, they need to have people local.

But if you’re a law firm, if you’re an accounting firm, if you’re a marketing agency, if you’re a tech firm of any kind, anything where people work with a computer, you’re starting to see a lot of companies hiring employees from all over the country, if not all over the world. But there’s a lot of remote hiring even within the US. And so the challenge that brings is that if you’re a small business, let’s say you’ve got 10 employees and half of them are located in other states than where you’re located, how do you put together a benefit package that will meet everybody’s needs, especially when most insurance policies and insurance plans are really state-based. Meaning that they’re built very well to accommodate healthcare within the state that they operate in, but they’re not as strong in delivering benefits outside of the state. And so employers are having to look at strategies that they would not have looked at as strongly in years past because of the need to accommodate employees in other states.


Well, Erick, thanks very much. Thanks for coming by. I’ve learned a lot, so I really appreciate it.


Yep, thank you.


My guest today has been Erick Kuhni, the CEO of Benefit Sculptor. And this has been PeopleTech, the podcast of the HCM Technology Report. We’re a publication of RecruitingDaily. We’re also a part of Evergreen Podcasts. To see all of their programs, visit www.evergreenpodcasts.com. And to keep up with HR technology, visit the HCM Technology Report every day. We’re the most trusted source of news in the HR tech industry. Find us at www.hcmtechnologyreport.com. I’m Mark Feffer.

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