Ep #471: Reimagining the Future of Healthcare: No Deductibles and Copays - with James Millaway

David Saltzman: 0:01

What would happen if somebody built a health plan with no deductibles and no copays? Can they even do that? We'll find out on this episode of Shift Shapers.

Host: 0:12

This is the Shift Shapers podcast, Connecting benefits advisors with thought leaders and entrepreneurs who are shaping the shifts in the industry. And now here's your host, David Saltzman.

David Saltzman: 0:25

And we've asked James Millaway, who's the CEO at Zero Health, to join us to maybe talk about doing exactly that, as strange as it may seem to you. Thanks for being on the podcast, James.

James Millaway: 0:36

Hey, thanks so much for having me. David, Happy to be here and excited to chat.

David Saltzman: 0:39

It's our pleasure. Tell us a little bit about your journey. How'd you get to be doing what you're doing?

James Millaway: 0:44

Hey, that's a great question. You know, I accidentally ended up in healthcare right Like a lot of most non-clinician folks. I had a college, ended up working at a large integrated health system, from there at a regional HMO, and then really learned the business on the broker consultant side. About eight years ago my partners and I were lucky and fortunate enough to exit our agency business, which gave us an opportunity to get to where we are today.

David Saltzman: 1:09

That's awesome, and has this been a long time vision of yours or something you've kind of had in the back of your head, or did you just start by? You know most of our guests with apologies to Simon Sinek never start with. Why most of our guests start with. Why not? Was that the case for you guys?

James Millaway: 1:24

You know, I think what happened with us is we just got really lucky right and really lucky in a geographic sense here in the middle of the country, in Tulsa, Oklahoma, and years ago a friend called me and said we've got to go to Oklahoma City, there's a maniac down there that you have to meet.

David Saltzman: 1:40

I know who that is yes.

James Millaway: 1:41

That maniac about eight years ago is introduced to Keith Smith from the surgery center of Oklahoma and it was phenomenal what he was doing and we were beyond lucky to be sitting in his backyard.

David Saltzman: 1:52

And he would accept maniac gleefully. We've talked to Keith once before. We're going to talk to him in a couple of weeks actually, so that'll be fun. It's fun that you brought up his name. He's a force to be reckoned with.

James Millaway: 2:03

Absolutely.

David Saltzman: 2:04

I love the guy and I love what he spawned. So you know, we've had deductibles and copays, Like it seems, forever. I mean, I've been doing this 40-something years and they've always kind of been around, even back in the days when we had indemnity plans. What's the problem with deductibles and copays?

James Millaway: 2:20

They're amazingly huge barriers to care. You know, when you look at how the markets have worked in the direct-to-employer insurance business whether those are fully insured or self-insured plans the easiest way to absorb a 10% increase, a 15% increase, was simply to raise those deductibles right. Take your deductible from 500 to 1,000. And that 10% increase is now six. So it looks good on the P&L. But we've just historically used those deductibles just to completely shift all the burden to the employee and their family members. And I think one thing I didn't appreciate early on in my career was the amount of working-class Americans that were functionally uninsured certainly had equal access to care right, because they all had the same plan, they had the same plan choices, but far from equitable access to care because they simply couldn't afford those out-of-pockets.

David Saltzman: 3:13

And you know, when we talk about that and we've used that phrase a few times on the podcast it's a great phrase, you know, just for listeners. You know you've got somebody who's making 36 or 40,000 or something dollars a year and they've got, you know, a spouse and a couple of kids in an apartment and one of those cars that Zig Ziglar talked about, a Rolls-Conardly. You know Rolls-Down-One-Head can hardly make it back up the next and while they've got a card in their wallet they can't afford to use it. What does that do to claims cost? I mean, when you start deferring care, what's that Delta look like? What does that do to your overall claim spend?

James Millaway: 3:46

Yeah, it looks ugly, right, Because barriers to care prevent people from accessing care and there's no data to support the supports that playmembers are just skipping meaningless care. Right, this is the single mom having to make a decision of fixing her car so she can get back to work or take her diabetes medication, and so people are skipping high value care at rates oftentimes higher than the low value care, and for an employee population right in a successful company that might stick around for five, 10, and 15 years, those care deferrals will add up in the long run.

David Saltzman: 4:22

Yeah, and ultimately they snowball, don't they?

James Millaway: 4:25

Absolutely.

David Saltzman: 4:26

Yeah, absolutely so. If you use a phrase insurance, as it should be, what do you mean by that?

James Millaway: 4:34

What do you mean by that? You know insurance as it should be. I think if you take a step back, like, first and foremost, let's not forget, we call these things benefits, right, these should be benefits that people actually enjoy, benefits that people actually value. Insurance as it should be is to protect against catastrophic risk, right? There's a reason why in our office building we do not insure the light bulbs. We know these light bulbs are going to burn out. We just need a quick, efficient way to replace those light bulbs when it happens and much of what's happening on an employer-sponsored health plan in a given day, given quarter, given year are everyday things that we know are going to be happening. The insurance should be there to offload and transfer the risk of large, infrequent, unknown catastrophic risk.

David Saltzman: 5:21

You know I kind of hinted at this early on in our conversation. But how the hell did we get here when we have automobile insurance we don't expect it to pay for oil changes or windshield wipers, and we have property and casualty insurance that oftentimes has a good size deductible and whatnot? How did we get to the point where folks expect their health plan to cover every little thing?

James Millaway: 5:43

Yeah, you know, I think one of the biggest misconceptions and we hear it all the time and people tell you our healthcare system is broken. It couldn't be farther from the truth, right, it performs exactly as it was designed to. And so this is just years and years and years of people kind of passing the buck, right, and saying, oh well, this third party can help me do this, this third party can help me do that, and one day you wake up and the third party is the one in control of everything.

David Saltzman: 6:09

But wouldn't you think that the third party would want you not to be going and seeing the doctor and racking up dollars for the sniffles or the flu or a cut on your arm or something?

James Millaway: 6:20

You know you would think so, but more claims, more revenue means more market clout, means more dominance, which means more success for those entities. So much like any business, the more of the complexity that you could seemingly absorb, the more attractive you are to the buyer.

David Saltzman: 6:37

Well, and you're right. I've said this often, you know and you hear it. Everybody who's listening to this podcast has heard somebody say health insurance is broken. And I give the same answer that you just did. But I go a step further and I say the reason it's not broken is because it's working for the people who designed it to work for them. That just wasn't you.

James Millaway: 6:54

Right.

David Saltzman: 6:55

Right.

James Millaway: 6:56

Yeah, I couldn't agree more. You know, when you look at the employer, the employer conundrum of unsustainable costs and cost shifting and lower and lower value of their benefits. The employee who's making changes or trade offs for rent, for gas money, for those car, fixes right Like it's not working well for them. But had they all been investing right on the supply side of health insurance it probably would have worked out pretty well.

David Saltzman: 7:22

Well, you know, this is what happens when you end up with an accidental health care system in a country that is just using health care by the bushels full, I guess. So what do you do to solve this problem?

James Millaway: 7:36

You buy efficiently, and you know, one of the phrases I do like and I often hear and I don't hear it as much as like is the easiest way to pay less for health care is to simply pay less for health care, right. So employers, right, who have the power right, have a horrible, horrific supply chain problem right, and there's no efficient way or a simple, efficient way to buy things at high value, and high value right is low cost but quality outcomes, and so employers and their broker consultants really have to step up to the plate and say what are the risks facing our organization and how can we buy more efficiently?

David Saltzman: 8:18

So how do you accomplish that? What's step one in that process?

James Millaway: 8:22

Step one is to understand where you're spending your money, right, so large catastrophic claims are what get all the headlines. Right, it's premature babies and complex cancers and specialty drugs, and unfortunately, there's not many things you can do to avoid a premature baby. Right, people are going to get cancer and these are going to be catastrophic losses, but that's what the insurance is for. So take a step back and look at what we call the drip, drip, drip of the health plan. Right, this is the 2000 comprehensive metabolic panels you're going to do over the next 12 months, the 175 CT scans of the abdomen and pelvis. Look at where your spend is actually going in the areas that you can impact and figure out if you can actually execute on a plan to buy more efficiently for those types of services.

James Millaway: 9:06

We look at claims data all the time and what's generally surprising to most brokers and consultants and employers is we certainly see orthopedic surgery, right, musculoskeletal care in the top 10 of spend. What's shocking to people is number two is often lab and pathology Number two. Number three is often CT scan. Number six is often colonoscopy or EGD and this is the drip, drip, drip of the health plan where employers and their brokers, consultants, can buy more efficiently.

David Saltzman: 9:34

So how do you, how do you educate and direct employees to go and do that?

James Millaway: 9:37

Yeah, you know, I think it it. It varies from employer to employer. Right, you can't just say everyone's on an email campaign, because if I run a sheet metal shop and I got 2000 guys out on the floor, I'm not communicating with them by email. So you have to really understand In your organization what methods of communication have worked in the past and then you use those same mediums and those same type of messages and educate people. But first and foremost, you got to make it easy. Nobody wants to compare the prices of 10 different gastroenterologists to see where the best price for the colonoscopy is. You've got to make decisions binary. This bad decision is going to be expensive. This good decision is going to be free.

David Saltzman: 10:24

Do you find that there's an initial reticence on the part of employees when they're being directed to particular care?

James Millaway: 10:35

Yeah, I mean, I think the biggest hurdle you got to get over is this too good to be true, right? Why is my health plan allowing me access to this provider or that provider for no out of pocket, no deductible, no copay, no co-insurance? What's the catch? Is this cut rate care at a cut rate price? And so once you overcome that right, which is why it's so important the primary voice is coming from the employer, coming from the brokers and consultants, right, the people that have credibility and trust already with these populations. It's important that that message come from leadership, that this isn't cut rate care at cut rate price. These are the same doctors your next door neighbor and your aunt and maybe you've seen in the past. We're just buying more efficiently. And once you get people in, they fall in love. Right, these are sticky benefits People don't want to leave. They think about this by name when they interview at other organizations. And once you get people and develop that trust, you just don't lose that trust.

David Saltzman: 11:34

Is the no deductible and no copay the hook that really gets them starting to think differently?

James Millaway: 11:39

The no deductible and no copay is the initial hook. The stickiness of the approach is holding people's hands right. These are high touch, high tech solutions giving people personal health assistance, care, navigators, people that they know, people that they know by name, that they can email directly, that they can call directly. The no deductible, no copay is what gets people in the door. That incredible convenience is what keeps people sticking around.

David Saltzman: 12:10

So is care management something that's integrated or is it something that gets added on? Is that an outside service that gets added to a no deductible, no copay plan?

James Millaway: 12:21

It's the core of what we do. It's the core of execution in these type of models is who are the human beings that are going to help navigate Right? It's important that we never point and that we always escort, and I tell employers that all the time never point, always escort.

David Saltzman: 12:39

That's a great phrase. I love that and I'm a R&D. I may rob and duplicate that.

James Millaway: 12:44

Please do.

David Saltzman: 12:45

So what kind of numbers can you move? What kind of delta do you achieve, initially and then over time?

James Millaway: 12:52

Yeah, so we would expect to. Anywhere from 20 to 30% of the entire medical spin could be diverted to direct contracts with bundled case rates, driving savings of about 40 to 45%. So at orbital velocity we would expect to see reductions of care of total spin from anywhere from 10 to 15%.

David Saltzman: 13:15

Did those? Did plants like this work on a national network or is it region by region? How do you go and contract those direct pay docs?

James Millaway: 13:23

Yeah. So there's certain things that it's relatively straightforward to execute on a national basis, right Lab imaging, physical therapy, gastroenterology. It gets a little bit more difficult when you start thinking about outpatient and inpatient surgical procedures. Right, healthcare is still a largely localized event. I tell people all the time if you've been in one hospital, you've been in one hospital. Right, the attributes that make Joplin Missouri the way it is are completely different than the attributes that make Chicago, and so I think for everyday things that are super high frequency, national is pretty straightforward. You really have to have a regional focus when you start thinking about outpatient and inpatient surgical procedures.

David Saltzman: 14:08

And is that something that your organization does as well? Or, again, is that something that you have help with or you use existing networks?

James Millaway: 14:15

Yeah, no, that's a great question. So in addition to the care navigation that we supply, we control both sides of the marketplace. So on the buy side of the marketplace is that self-funded employer. On the supply side are all kinds of providers. Our providers would range from a family-owned physical therapy all the way up to a health system owned by Ascension or an ambulatory surgery center owned by Tenenter USPI. And we maintain the contracts for both the buy side and the supply side in the marketplace.

David Saltzman: 14:43

That's nice, especially from a data standpoint.

James Millaway: 14:46

Oh yeah, because data is key, right, and if we go back a few minutes and you say what's the first thing an employer could do? Right, it's understanding your costs, right when your spend is going. But if you boil it down to why we exist is we're here to help people turn data into insight, into suggested action and suggested action and measurable impact. The employers that we talk to have all kinds of data. They get very little information.

David Saltzman: 15:14

And that's the key. I remember years ago I was talking to a friend in Florida when they finally decided that they were going to make the carriers give data to companies larger than 50, smaller than 100, from 50 down, and I said to my friend, I said that's really. She was all excited about it and she was a TPA and I said that's really great. How many advisors do you think actually understand what's in there? And she said two.

James Millaway: 15:36

Two yeah.

David Saltzman: 15:37

And that's the problem. It's having somebody intelligent to interpret that data and help employers make actionable, wise decisions on it. Do you help brokers learn how to do that, or is that something that you guys do, or how does that work in your motif?

James Millaway: 15:54

We want to help the entire ecosystem. So we're helping providers understand what the data means, we're helping employers understand what the data means, and we're certainly helping brokers and consultants understand what that data means and how it can be powerful, not just for them, but for their clients and for these prospects. I think about a phrase that I hear often in my head from a good friend of mine named Dave Chase, who you know right, who started Health Rosetta, and Dave's always said the fix has already exist, we just have to scale them.

David Saltzman: 16:25

That's true. And speaking of scale, is this opportunity something that's only for larger groups, or does this play in any kind? I presume it's mostly self-funded groups that you're working with. Does this matter what size?

James Millaway: 16:37

It doesn't. So we work exclusively with self-funded groups, right Because they're on the risk, that's, the exposure of these wild volatility and pricing and outcomes. We've worked with employers with the smallest, 70 employees, to as large as 30,000.

David Saltzman: 16:53

Wow. So this is one of those it sounds too good to be true kind of things. So I asked you if it would be okay to ask this question. We don't generally, but how do you guys make money?

James Millaway: 17:02

How do we make money Transaction? So we don't want people to think they need to pay a per employee per month or a per member per month, because we think you shouldn't be generating revenue unless you're generating value. So we charge a transaction fee every time we process a payment from the health plan to a contractive provider.

David Saltzman: 17:22

So you do the TPA part. Do you see yourself as a TPA or?

James Millaway: 17:26

We don't see ourselves as a TPA, but we're doing limited administration based just on these direct contracts. We sit alongside the underlying health plan which, for the most part across our book of business, is all administered by a large carrier right Blue Cross United Signoratna.

David Saltzman: 17:43

So I want to touch back on. We got about two minutes left. I want to touch back on something that you said earlier. One of the things that I've been asking folks is as the generations get younger, who are involved in being employees and members, therefore, of health plans, are you finding a desire? Use the word frictionless earlier. Are you finding that that creating frictionless solutions is even more important than it used to be? It's almost a demand from them?

James Millaway: 18:10

Yeah, absolutely. And I think these iPhones we all have in our pocket conditioned us to a world where I can get a car in five minutes, I can get my dinner in 20 minutes, I can book a rental house in two minutes. So we've conditioned people to expect 10 times the delight and half the cost, right. So people aren't getting that from the typical legacy benefit plan models and these younger generations are expecting that. Those younger generations are demanding that. So frictionless is important. You've got to sell simplicity.

David Saltzman: 18:45

In our last minute. Where do you see this going? Where do you see this in a year or five years or 10 years?

James Millaway: 18:50

We hope to be the one brand and healthcare that people trust right, the one brand and healthcare that people know has their back. I think there's a reason you don't see people walking around in t-shirts emblazoned with insurance carrier logos. Right, we want to deliver a product that people trust, a product that people love and a product that people can't imagine living without.

David Saltzman: 19:13

And that is a great place to end our conversation for today. James Millaway, CEO at Zero Health. James, thanks so much for sharing your insight with us.

James Millaway: 19:20

Hey, thank you so much. I very much enjoyed this.

Host: 19:26

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