Ep #465: How to Stop Creating Functionally Uninsured Members - with Kevin Kickhaefar

David Saltzman: 0:00

Can we stop creating functionally uninsured plan members by shifting our focus from payment design to plan innovation? We'll find out on this episode of Shift Shapers. We are here at the NABIP meeting in New Orleans and we are talking to Kevin Kickhaefer, who is president and chief growth officer at Gravy. Kevin, welcome to the podcast.

Kevin Kickhaefar: 0:36

Thanks for having me, David, looking forward to the discussion today.

David Saltzman: 0:38

We appreciate you sharing your expertise, so talk a little bit about your journey, because there are two people in the entire universe who were born and said I want to be an insurance. So how did you get to be doing what you're doing?

Kevin Kickhaefar: 0:49

Great question and your spot on. Because coming out of college was accounting finance and I did work for DeWitt and Tooce long enough to know I didn't want to be an accountant and a good friend of mine, kyle Roff, a serial entrepreneur, got me into the healthcare business, so spent about 25 plus years working between SIGNA and ADNA. I was at that time all in the Midwest out of Chicago selling to the large employer market Actually all sizes Started in small business, worked up all the way, finished that time in the national account space and then I did my first startup with the two gentlemen that actually found a gravy and that was Bloom. We thought we were going to solve healthcare with a private exchange and define contribution back then in 2010. And we did it long enough that we sold that company to Anthem, hcsc, blue Cross and Michigan Then became a blue asset.

Kevin Kickhaefar: 1:41

From there I went to Consumer Medical, which was a shared decision-making expert of medical opinion company, started as a chief revenue officer, ultimately was a CEO of that company and we sold that to a light Big Ben Atman platform out of Chicago in October 21. And took some time off and a beer. The founder of the gravy called me up and said hey, we need some help. We're really growing and what's brought me to the role I am in today?

David Saltzman: 2:11

That's awesome. So let's start by defining the problem we're trying to solve, and then we can talk all about the various pieces of it. What is the issue, as you guys see it?

Kevin Kickhaefar: 2:21

I think that if you think about healthcare and the interesting thing that I like to give a beer a hard time about is he was one of the founders of the Fentany, which started the whole HSA idea and the deductible and getting the employee to have more skin in the game However, over time, employers only were trying to reduce the medical trend increases that they were managing. We've shifted more and more of that burden on the backs of the employees and you're looking now for the average deductible, I think for small businesses, somewhere close to $3,000. You could make an argument for most Americans that's not even having insurance, and so what we have seen is people are delaying care and putting off the care they need because they can't afford it. And we've now, from our plan design, we flip that 180 degrees. So we looked at our book of business and said what if we remove those barriers? What I mean by that is covering 100%, no deductible, no copay on what we say.

Kevin Kickhaefar: 3:35

85% of the encounters most Americans use healthcare for, and so examples of those are obviously primary care, specialty care labs, x-rays including high cost imaging, generic drugs. We want that. We really are trying to encourage people to go in and see their physician when they need to. Now what we've noticed is a lower inpatient stays, lower high cost items and that's in the data I'll be talking about tomorrow is the difference in the cost between our this is on four years of data now cohorts about 50,000 belly buttons. The comfort plan the plan I just mentioned that's been running about 20% less PEPY than your standard HSA PPO plans and where the 22 is, people are getting the care they need earlier to prevent those large costs.

David Saltzman: 4:31

Do you have any data on what the cost is of people not feeling like an access to system? In the example that we use is little Johnny isn't feeling really well. Mom and dad know they should take him to the pediatrician, but they can't afford the out-of-pocket so they don't. And two weeks later he's running up an $85,000 bill in PICU with pneumonia.

Kevin Kickhaefar: 4:49

Yeah, so on that it was interesting. So the Gallup poll in 2021, they asked Americans to describe the healthcare system and the two words that came up the most were expensive and broken and looking at the data that we've seen, it's approaching over 35% of people that are saying they can't afford healthcare. When you ask people, you know have they delayed care after COVID pandemic? It's now approaching like 45%.

David Saltzman: 5:25

That's just incredible. And yet we don't look at it that way, because we are busy looking in the rearview mirror looking at claim spend and if there isn't a claim, then you know how do you count it right. We need to look more forward. I think that's what a lot of stuff is. Now, you mentioned direct primary care. How does that integrate, or does it, or is that just something that you recommend?

Kevin Kickhaefar: 5:45

We are recommending it. We are definitely encouraging through our call center and our app, to get in and find that healthcare that they need, but if you think about all the different point solutions that we've tried to give people money to use care, I think the best way to get it is through plan design. They see it, they feel it. We spend a lot of time and open our own meetings making sure they understand. No, it's really no cost. So much of the time people say this sounds too good to be true, and when they use it, then they see it. We have people that will send us little snippets on their iPhone Like they're pulling up for the first time at the pharmacy, like there's no way this is going to be zero costs, and they will. It literally is zero costs. Now for the broker advisory community, they're probably, at this point, go out. This sounds to be true, so we get that a lot.

Kevin Kickhaefar: 6:37

What we're trying to get the expense side of this equation, if you think about all those things are really lower cost items when you think about the tools to spend the healthcare. If you need a surgery, though, you have to pay that out of pocket max with us, so our most highest selling one is a 3000 single out of pocket max. Then you're like well, kevin, you just said people can't afford healthcare, right, which we get another set. So what we do is we wrap around that. So if you were up playing basketball and twerking me up and you need an ACL, clearly that's going to cost more than the out of pocket.

Kevin Kickhaefar: 7:11

But if you're low wage earner, we have a product which we call gravy pay. Our partner is patient that helps us administrate that. Essentially we give them that interest free load. The cool thing is, gravy takes on that responsibility. So we don't put that liability on the employer and if the employee leaves it's up to us to go track that down. But it's essentially no interest charge to the member. And again, it's all about removing those barriers of care. But when you have a little more skin in the game, that helps us offset all those other things that we pay for.

David Saltzman: 7:43

Well, and it doesn't keep somebody out of the hospital because they can't write a $3,000 check today, spot on. So how the hell did we get here?

Kevin Kickhaefar: 7:50

I think we got here. It's kind of like the. You know the old analogy you put the frog in the water, you turn the pot on and all a sudden frog dies because it's boiling. I think it's just increased like that way over time and I think people are you're starting to see the employers getting more concerned about it. So I think the employers are like wait a minute, I know my workforce can't afford for these high deductibles and they certainly, because they're using discretionary, they don't have the money that they can put in the HSA. So how do we turn that around? And I think it's that's certainly playing out in our data.

Kevin Kickhaefar: 8:29

The other thing that I think you need to is if you look at our renewals, because that, I think, is an always a really good way to validate if we're actually delivering all what we need. So our last renewal season and this is over a thousand employers we had a 93.5% retich rate, which is extremely good for a small business. It's generally about 10 points better than what the book is running. Second point, and the most important part, our average increase on that gravy comfort plan was 6%. The HSAs and the hired those plans are actually running worse. So on those plans. That was about 8.8%, still below medical trend, but we're sharing that back with the employer by getting their folks in to get the care they need.

David Saltzman: 9:18

Sir, so how much employee education do you need to do? Because it's not only the broker community that's thinking, wow, this is too good to be true and we're not just talking about gravy, I mean, there are other folks who are following the same kind of a pathway 100%. How much employee education do you have to do before people realize, hey, this is not a scam, this is not bait and switch or three card monty or any of those great things. We actually have health insurance now that we can use.

Kevin Kickhaefar: 9:43

Yeah, Great question Our account management team and implementation staff. Once we onboard a client, we're doing those open enrollment meetings. We'll show up on site, we send them communication material that explains what this is, work really closely with their HR department, and it's an ongoing process too. We don't just do it one, we're done. So we consistently give our employer clients access to materials that we create. That's innovative, that's fun, that's new. That's one. Two you've got to make it easy for Americans, right. So we're really pushing the app which you can turn on, that gravy pay. Everything's integrated, and what will be coming down the road, too, are more place solutions that we've curated on behalf of the member.

David Saltzman: 10:35

That seems to be a growing trend. I don't know about trying to bring more to the table in one package to make it less intimidator or less confusing or whatever Not about a left field but I've wondered this a lot Is any of the acceptance of this kind of thinking, and this kind of thinking in and of itself being driven by the fact that during COVID, people started realizing that they could pay less for meds using a good RX card than they could if they went through their insurance? And all of a sudden the eyes kind of slammed open and said, wait, this doesn't make sense to me, but yet it's happening. Yeah.

Kevin Kickhaefar: 11:06

No, I think we've reached that boiling point. I think we're at a tipping point, right. But it's cutting so costly and we haven't, as an industry, done a decent job in holding down the medical trend, right, because it's easy. The easy approach is to say, well, let's just make the employees pay for it. We've gone too far now and the employees are looking for other ways to do this and I think when they started to see and delay care and I'll give you actually a personal example I grew up on a farm for the audience, they can't see me when I'm fair-scan so I was driving tractors as a kid and had a lot of sun damage.

Kevin Kickhaefar: 11:44

So I'm going in for my normal every six-month checkup with my dermatologist and a seconder is like well, what are you seeing? Are you seeing more like basil cell? Is it related to the environment? She's like Kevin. She's like we're seeing way more melanoma now because people haven't come in, so the basal cell has turned into something more serious and at that point it gets really costly and people are actually dying, which is really sad. And you know, you see that play out with cancers if you catch a burly, so treatable, right. So we need more of that education and it's got to be easy for the member.

David Saltzman: 12:21

Is the platform that underlies what you guys are trying to do solely self-funded plans.

Kevin Kickhaefar: 12:25

Yes, we're selling level-funded and self-funding because we want the employer to have that skin in the game as well and we will write really small. We'll go down to 15 lives and you can get a very low individual stop-loss amount and make it feel like it's fully insured. But if the employer is doing the right things and encouraging the communication, as you mentioned, they should participate in that. So, with us on our level-funded plans, they get 50% of the surplus back and we don't carry deficits forward. We want to work with them and be a true partner in every sense of the word.

David Saltzman: 13:07

So let's go back to the 20,000-foot subject matter expert kind of a level If this kind of a plan design motif really starts taking off and we can go down to smaller groups. And when I ran a TPA in 98 and for about seven years thereafter you would never say the word self-funding and under 200 lives, under 300 lives in the same sentence. It is heresy. But since we can now go down to smaller groups and do it effectively, what's that going to do to the more traditional carriers?

Kevin Kickhaefar: 13:41

I think, having worked in the health insurance business for a long time I'm not going to see which carrier, but put it this way they had over 15 million members and about 20% of that was fully insured and 80% was self-funded and big accounts. That 20% drove 85% of the profits for the insurance company. Right, because that's where they make their money, because if they have low claims, insurance company always wins. We want to do yes, we want to have a profitable business, but we don't want to do it on the backs of the small employer. And I think you're spot on. As companies like us and others that are in this level of funding going down market, it's going to have to force the bookers to do the same thing, because we are winning more than our fair share by converting fully insured groups to low funding.

David Saltzman: 14:34

Well, I guess the question that comes to mind is can they do that? Their entire business model is so antithetical to this kind of a really true consumer, employer-driven initiative. Do you think they're going to be able to make that leap?

Kevin Kickhaefar: 14:50

They're going to struggle. Haven't worked in two big clans. They don't move quickly. They've antiquated systems. It's harder for them to respond to the innovation, but they will move quickly if it starts hitting their pocketbook and they start losing more and more clients. They'll have to figure out a way to do that.

David Saltzman: 15:13

Are you concurrently seeing more self-pay options coming into the marketplace?

Kevin Kickhaefar: 15:17

Yes, we are definitely seeing that you think about our solution with the gravy pay card. That we do. We want the provider community to know that we make this easy for them and get their funds faster as well, because the last thing they want is trying to chase an individual down for that heighted optimal health plan. That's why we've tried to just eliminate and simplify at the provider level and at the facility level. Those are other options. We don't necessarily need that with our gravy comfort plan design, but some of the other programs out there can do.

David Saltzman: 15:55

When you work on and this is a question I ask almost everybody who's into these kinds of spaces these days when you work on trying to integrate direct primary care, there are so many areas that are deserts for DPC, because it's just really now. It's amazing. It was a concept that was come up by the American Academy of Pediatric Surgeons Back geez way before. Hmos, I actually think, is what HMOs started out to be before the accountants got involved when Entoven and those guys were doing all that work. How do you overcome those direct primary care deserts and there are lots of them. I mean, good Lord, there are medical care deserts still in this country and there are underserved communities. How do you bring a solution like this nationwide? Yep?

Kevin Kickhaefar: 16:38

That's why we have a partnership with Teladot, so we try to push in those desert areas, providing those services through virtual visits. It's not perfect but it does work. I've seen it work. My mother, before she passed, had struggled with mental health and she lived in Kansas and she couldn't find a good mental health provider. But we worked it and she got great treatment through virtual visits. So that's an example. I think we do need to put more funding and support more of the primary care visits. I think it's going to be a combination of industry because, if you think about it, the employers are really providing most of the health care in the US today. I think we can push for legislation. I think we can push for more payment, better payment design for primary care, because I'm a huge believer in that.

David Saltzman: 17:30

If you think about it, most of the primary care can identify and treat most of the conditions before you have to go to a special Well, and most DPC docs will tell you that their average patient has under $5,000 with a medical bills in a year and it's so amazingly cost effective. I'm on Medicare and I still have a DPC relationship, so I'm a proponent, but I understand that it's challenging. Do you think? It's kind of a chicken and egg thing as there are more plans that are willing to support DPC providers and integrate them into the plans, that there will be more direct primary care providers coming into the market? Short answer yes, I can't imagine a doc going to come out of medical school going. Yeah, I want to work for a hospital and be under those kinds of conditions. Nobody. It's inconceivable to me that anybody would go through the rigors of going to medical school and all that training and all that debt to then work in that kind of a system where they really don't see patients, they see diseases and they throw darts at their dartboards.

Kevin Kickhaefar: 18:27

Yeah, I think you're spot on on that and it's building that relationship right. It's so critical to have a relationship with their primary care because they're the ones that are seeing you. They're chickening in on you, they know you. And, by the way, give them time, right? You can't ask a doctor to try to see and diagnose in seven minutes or less, right? We've got to be better about that as an industry?

David Saltzman: 18:49

Yeah, there's no question. I mean, I had a medical event a few years ago where I'm grateful that my DPC doc at the time was up in Maine, was an internist, because they thought I had a form of cancer and he said I don't know what this is, but it's not cancer, and he had the time to spend to research it so that you could find out exactly what it was and how to treat it. So it's, I'm just old enough to remember the old family doctor relationships. Do you see some of that coming back as well?

Kevin Kickhaefar: 19:13

Yeah, absolutely do For the primary care doctors that are good right Because I think they're very resourceful and they do it at a lower cost. You know, we at Consumer Medical Oil Company we also did second opinions and the really good primary care doc. They love that right Because you would work with them on getting the medical records and then you would tap into some of the top experts and you can do that now virtually. I think AI will hope a lot of that as that continues to advance or see that You're definitely seeing a play out in radiology, you know I mean that's a like they can identify and read that faster than physicians and at a more accurate rate. But I think we will definitely am a big component of supporting that model.

David Saltzman: 19:58

So we've got about four or five minutes left. Let's talk about the future, not just for you guys, but in general, of how we dispense healthcare, what kind of outcomes we have good, bad and indifferent and where do you see this going? I mean, by nature of what you have done in your career, you look out towards the future. What do you see coming?

Kevin Kickhaefar: 20:18

Yeah, I think immediate maybe not good. I think you know we've been holding trend down now with the shortage of physicians, shortage of nurses. You saw Kaiser announced that they were going to get a 15% increase. Out in California, united came out and said that's coming. What that really is saying? The current system is not really working right. So I think if we can get more of these preventive stuff, we're going to start to see some of those trends down. I'd say that's one.

Kevin Kickhaefar: 20:45

I think more innovation around diabetes, cancer, musculoskeletal all that is going to help advance and control costs. We have a partnership with sword and they're a really good physical therapy in all right and most Americans give up on physical therapy after maybe two weeks. The clinical effectiveness is generally eight weeks and when you go through that you prevent a lot of surgeries. Right Backs are a great example in the US today, as advanced as we are, it's only effective. The clinical effectiveness of back surgery is 50%. So it's like flipping a coin and when you educate the consumer on that, they will try other things right first. So we need to be better about how we integrate and offer that to the employee.

Kevin Kickhaefar: 21:42

I think also there's going to be more advancement in personalized medicine. The mapping of the genome and how we attack diseases is going to be really fascinating. As we kind of roll that out, I think the government is going to be really looking at the pharmaceuticals and how can we help get our arms around some of that expense. I think that's going to be a big thing on this next election. I think we do need some government support and help in that, because a lot of times they are taking money from the government for the research but they're keeping all that profit and we've got to be better about that as an industry.

David Saltzman: 22:20

Yeah, I think we interviewed some folks from Blue Jeans and they're about to do the first wide scale trial with one of the large carriers, because carriers don't pay for that right now, even though the tests are now like $250, $300. Even just five years ago they were $1,000, $1,010. And what I asked Nick was his name is Nick Glimcher and I asked Nick, do you think we're ultimately going to get to the point where, when babies are born, they do this assay automatically? And he said yeah, that's what the long-term goal looks like. And why wouldn't you do it if you've got seven out of 10 people who are taking plavix and seven people can metabolize it but three can't. And, worse, one of the seven is a hyper metabolizer, so they're getting too much fit in their system and they're prone to stroke. I think that's going to be a huge piece and I mean, are you guys looking at that in terms of integrating it down the road? Is that something you're thinking about?

Kevin Kickhaefar: 23:12

Absolutely, ben Simmons, our Chief Strategy Officer. He's working on that as we kind of think about that health plan of the future. 100%.

David Saltzman: 23:20

That's awesome. Well, I appreciate you taking the time to chat with us today about what you guys are doing and where the market's going. Kevin Keecafer, the CGO, the Chief Growth Officer at Gravy. Thank you so much, Kevin, for sharing your expertise with us.

Kevin Kickhaefar: 23:34

We appreciate it you bet, david, and thanks for what you're doing. I hope you can educate us and make us all a big believer that the room is always smarter than one individual, so the more we can have discussions like this and share our knowledge, it's just going to help the industry.

David Saltzman: 23:47

No question, we appreciate it, take good care.

Speaker 4: 23:50

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