Hello, everyone, and welcome to another great webinar here on CPA Academy. My name is Chris and I will be your webinar moderator for today. Our topic today is maximizing employee benefits, revenue growth potential for CPA firms. Our presenters are Donovan Pyle and Maurice Clark. If you haven't already, folks, go to your Q A. Let me know you can hear my voice. See Donovan and Maurice on your screen and see the very first slide also in the Q A. Let me know where on earth you are coming to us today. We love to know where teenagers are coming to us. And I am seeing folks coming in from all over. I'm seeing Ohio, New York, California, Virginia. Fantastic. Welcome one and welcome all. Now, if you have any questions for Donovan or Maurice, please just put them there in the Q and A.

And if you have any text, just put them there as well. I will get you guys as soon as I possibly can. Just remember, there is one of me, and there are many of you. One other area of Hoskim today is going to be your CPE credit. This class is worth 1 hour of CPE. And the way you will earn that, stay logged in for 50, that's 50 minutes of the allotted time, and answer three or five polling questions. Your credit will be indeed processed today and will be available in approximately 24 hours. Also, please download the hand that's made available for you, Donovan and Maurice. The attendees are ready and the floor is all yours.

Fantastic. Well, welcome everyone, and thank you for that gracious introduction, Chris. Much appreciated. Great to have such a nice group here today. But yeah, we're talking about maximizing employee benefits and what are the revenue growth opportunities for CPA firms. Before we dive into our introductions and who we are, I just want to set the table a little bit on what's going on out in the industry that we see. Anyway, we see a number of CPA firms entering the employee benefits space in various forms, providing various services, et cetera. And I think I would love to get some feedback on this, but from my perspective, it seems like a lot of CPA firms are attempting to differentiate themselves in the marketplace. They're attempting to grow organically within their current book of business, which a lot of companies try to do.

How do we provide more services, goods and services to our existing customers to grow that way? And let's face it, gaining new customers isn't always easy. It might be different in the accounting space, but in lots of other industries, it's hard to gain new customers. So how do you grow organically within your existing block of business? And how do you add more value to these conversations? I feel like based on talking to the accounting firms, clients and other colleagues that we have in your industry, that they're continuously getting pulled into the employee benefits conversation, and employers are more and more asking their accounting firms for advice on how can we stop the bleeding with what's typically our second or third largest expense. So anyway, let's dive right in. And before we do that, I just want to give a warning here.

We have to have this warning because this is like the Matrix. Once you pull the hood back on this industry and you see how the sausage is made, you'll never unsee it, you'll never see it the same way again. So we don't make you sign a waiver, but maybe we should. So anyway, quick introductions. My name is Donovan Pyle. I am the CEO and founder of health Compass Consulting, based in Orlando, Florida. I started the firm in 2018 and our mission is to eliminate the $300 billion that employers waste on health care every single year. That's a lot of money. That equals roughly $2,500 per employee per year. And we do that by serving as antidote to the employee benefits brokerage industry. We are an alternative to that entire industry. We're a new kind of professional services company.

With that, I will turn it over to my right hand man, Mr. Maurice Clark. Maurice.

Hey everyone. Thanks Donovan, for the alleyup here. I just wanted to introduce myself to the group. So I joined health compass around just about, just over 18 months now, I think officially spent my time previously to that immediately working for Darden restaurants, delivering benefits for our 180,000 employees. In that environment, over eight different recognizable brands, iconic brands, I would say, and multiple business units. Got my start in this career many moons ago. Now as a temporary employee, answering phone calls for benefits and understanding how difficult it was for the average employee to navigate that space, picked up a ton of knowledge while there and realized that those that were doing well really dug in and started to understand how things work.

And so was able to progress through the organization and eventually worked in the or mid market space at a small brokerage firm called Aon, which happens to be the third largest brokerage firm in the United States. So most of my experience in this business has been on the TPA and plant sponsor side, moving over now, leveraging my skills and experience in the broker consulting world. But as Donovan says, once you've seen how the sausage is made, it's very difficult to unsee it. So very excited to be on this journey along with you guys here today.

Perfect. Thank you for joining, Maurice. And so what we're trying to do for our audience today is give you a perspective on the employee benefits landscape, so that regardless of whether you're already in this marketplace or you're thinking about getting into this market, you understand how the various vendors interact with each other, what their financial incentives are. And through that process, you're going to be able to identify the opportunities to really add value to your client conversations and potentially increase your revenue through that. So that's the goal for today. Let's dive right in. Just a couple of notes here. Just like in any industry, there are certain accreditation certifications, designations, degrees, et cetera. If you're keeping score at home, these are the highest certifications and designations in the employee benefits industry.

Health Compass is one of a handful of benefits firms in the country that have the highest designations and certifications in the industry. We also went out and got the highest certification given by the Society of Human Resources Management. We did that specifically to see what HR professionals are being trained as it relates to benefits. And it turns out they're not getting trained on benefits at all. Okay, so that's an opportunity for us and for you. Okay, just a little bit more about us. Some accolades. Our thought leadership can be seen in national publications like Yahoo. Finance and trade publications, et cetera. And we are definitely making a name for ourselves because we have found a variety of ways to eliminate about $1,500 per employee per year in waste and put that back on our clients bottom line while improving benefits for their.

Okay, so, hey, Donovan.

Yes, we are just in time for poll number. Oh, yes indeed, folks. Poll number one is live and active on your screens at the moment. Have you considered offering employer services to your clients? Yes or no? And this poll is active on your screen for 60 seconds, folks. Make your selections now. And remember, this is polling question three of five. And for CPE today, you only need to answer three of the five, so you have a bonus question thrown in there today as well.

Perfect. Now, Chris, throughout the course of this conversation here, will the attendees be able to ask questions in the chat?

They can ask questions in the Q and a area. That's where you will see those.

Okay, perfect. So I would love to be able to address some of those questions.

Please do.

Okay. As we go through this. So it's just not a monologue for the next 30 minutes or so.

Understood. Okay, folks, would close down polling question number one in 5432 and one. And the majority of the attendees, at 77%, have answered no to the polling question number one. So back over to you guys. Perfect.

Thank you very much, Chris. So let's just level set and make sure everyone's clear on the business challenges that most companies are facing right now. I think we're probably all aware of these things, but just in case. Tightening capital markets, the cost of money is certainly much higher than it was 24 months ago. And so all of a sudden, hey, a lot of businesses are now interested in actually bottom line performance, right? Not just top line growth. So that's certainly a change in the marketplace. Tightening labor markets. Right. Labor costs are increasing tremendously, and labor certainly seems to have more of an upper hand coming out of COVID So that's certainly changing the dynamic as it relates to employee benefits and how employers structure their human capital strategy. What else? We have rising operating expenses as well.

So the inflation rate is much higher than it was 24 months ago. And so this is really changing how business leaders are thinking about what they do and their go to market strategy, et cetera. I'm sure all of you are seeing this firsthand since you're under the hood of these businesses evaluating what they're doing. Okay, so let's just take a giant step backwards, though, and discuss why do benefits programs exist? So now that labor markets are tighter, companies are starting to remember why they have these programs. They have these programs so that they are able to attract and retain the talent that they need to achieve their business objectives. Right? So if we go, all this all dates back to the new deal, right? During the New deal, when there were wage controls, the labor markets negotiated a tax advantage.

And so they said, hey, if we provide benefits, can we provide these benefits on a tax advantage basis? And so that was the deal that was struck back in 1945. I think really, if an employer is financing, procuring and managing these programs effectively, then ideally benefits become the most economical way to attract and retain talent. That's because at least right here in Florida, obviously the payroll taxes vary by state, but every dollar invested in benefits equals a dollar twelve invested in wages, at least here in Florida. So that's a nice tax advantage. And if you do run these programs well, then you reap the benefit of that tax advantage. So that's why we do this. Okay, what is a benefits package?

Most of you know this, but just for those that may be new to this space, here are the core pieces of a basic benefits package. You have your health plan. If a company isn't offering a health plan, they're not going to be taken seriously by the vast majority of employees out there. And so, yeah, health plan is the core of it. And then you have more ancillary benefits like life insurance, vision, dental, disability insurance, and then there are just an endless plethora of point solutions that you can add into your benefits portfolio. Beyond that, we're not going to go down that rabbit hole. Let's just move on.

Hey, Donovan. Donovan. Before taking another deep dive into this, folks, we are ready for poll number two now.

Okay.

All right, folks, poll number two is live and active. How many us employees receive healthcare through their employer annually? Very interesting question. Make your choices. Now, folks, in this poll is indeed active for 60 seconds. And just so that you all know as attendees, Maurice is doing a great job answering your questions in the Q and a area as well. So if you have any questions, put them there and he will address them as quickly as possible. And if not, we will be sending a full report to them after this course for you folks to see as well. And maybe you connect that way. About 30 more seconds on poll number two, folks.

Okay, I'm going to turn off my ring light just because this thing is just giving me such a headache right now. I don't know. I don't know if they make different quality of these things, but, man, mine is killing me right now.

I got you. Understood. Thank you for chime in so quickly. 15 more seconds on poll number two of five, and we'll close this poll out now, folks, in 5432. And one closing out poll number two, with the attendees coming in at 45% saying answer B, 160,000,000. So back over to you guys. What do you think?

Perfect. Thanks so much, Chris. And we'll answer that question right now. You're exactly right. Over 160,000,000 Americans are covered with health care benefits by their employer. Yes, that's a big number and a growing number. So if you're a business, how do you purchase benefits? How do you actually do that? Well, here's what the typical supply chain looks like. So employers, 81% of employers purchase benefits through benefits brokers. Okay, so obviously, Aon, Gallagher, Marsh, Brown, and Brown, these are some of the bigger benefits brokers in the country. And 81% of employees leverage them because, let's face it, they don't have the in house expertise to know how to finance, procure, and manage these programs effectively. And so they outsource it, just like they do accounting services. Right? They use outside accountants. They use outside legal services. And so it's the same thing in benefits.

There are exceptions. Like if you're Walmart, you're doing this in house. You're not using an outside benefit term. But most companies are not Walmart, so they're using outside firms. What do other businesses do, the remaining 19% or so? Well, some of them use professional employer organizations, right? They use companies like adp or paychecks who have this turnkey back office HR payroll benefit solution. And sometimes that's a good fit for organizations. Now, funny enough, PEOs, professional employer organizations like adp and paychecks, they use brokers, too. Okay, so if you think you're bypassing the broker layer by using a PEO, you're actually not. You're just adding another layer. And then the remaining very small businesses, let's say sub ten employees, some of them will not offer group coverage.

They will opt to subsidize an individual plan and send their employees to the ACA Affordable Care act exchange where they can purchase an individual product. But that is a very small percentage of employers that do that. Okay, so brokers, they go to these carriers and negotiate with these carriers and get benefits through these carriers. This slide specifically talks to the health plan. Okay, so here are your main carriers that we've all known and seen on spreadsheets endlessly for as long as you've been in this business. And everybody knows who they are. And then ultimately, what do you want?

Basically, employers are trying to purchase health care for their employees, but they have to go through all these layers to actually get to what they want, which is, hey, we want a good price from the local hospitals, we want a good price on prescription drugs, et cetera. But this is a very broad overview of the purchasing supply chain. And Maurice, if there are any questions throughout this, feel free to interject. If we need to clarify any of these pieces. We'll do. Okay, fantastic. Amazingly, you don't see too many people driving cars like this anymore. And the reason is that we generally have better cars, right? So this was a pretty cool car in 1990, but most people don't drive this anymore because we just have better cars.

But when it comes to health plans, we're still driving the health plans that were developed in the 90s for the most part. And that's a problem as we're about to see. So let's dive into what a health plan consists of. Let's break down how it's actually used up. And again, all of this is designed so that you are empowered to either make yourself more effective in your conversations with your clients or help you navigate how you want to enter the employee benefits space. So if we look at a premium dollar, right, a health insurance premium dollar, let's say this is 100 life group. A premium dollar can be divided into what we call variable costs or fixed costs. Okay? So on the variable side, we have claims, we have medical claims, and we have prescription drug claims.

We've lumped that into the variable costs because some years those costs are going to be through the roof, depending on what people need. And other years they'll be kind of low. So we don't really know where that's going to end up year to year. On the other side of the scale, we have what we call fixed costs. And so this might be about $0.20 on every premium dollar for a 100 life group or so. What's included in the fixed costs? In that bucket? We have your administrative costs, right. Someone has to administer this health plan, execute the plan, document, process the claims, the eligibility, get the ID card sent out, et cetera. You've got your broker compensation in the fixed costs. You've got your insurer profit in the fixed costs. You've got your stop loss insurance in the fixed cost.

So wait, there's insurance in an insurance product? Yes, there actually is. And this is the insurance piece. It's called stop loss insurance. Other people might know it as reinsurance or umbrella insurance. And so it's a very important piece, actually. And despite the fact that a lot of employers don't know that it's in there, it's always in there. And it's in there because what it does is it caps the employer's liability on a month to month and annual basis. So it's a very important piece of the plan that goes into the fixed cost bucket. Okay. Looking at it a different way, if we look at a sample ID card, you have four foundational vendors inside of a health plan. You've got your administrator, like UnitedHealthcare in this case. You've got your stop loss insurance, like UnitedHealthcare.

In this case, you've got your network, which is also built out by UnitedHealthcare, in this case. Now let's pause and talk about networks for a minute. When employers generally talk about networks and brokers talk about networks, usually they're talking about access, right? Which healthcare providers are deemed in network and which ones are deemed outside of network. And the reason that they say that is actually because what makes a healthcare provider in network is that there's a contract between the plan and them. And that contract says, here's what we're going to pay you. Okay, here's what the unit cost is for X, Y and Z services. So while most people just talk about the access that networks provide, in my opinion, a more important conversation around networks should be, okay, what are we actually paying these healthcare providers as a result in these contractual terms?

More on that in a second. You'll notice there's another logo right above there with Optum next to it. And Optum is one of the big three pharmacy benefit managers. And you've probably heard a lot of noise about pharmacy benefit managers in the past couple of years. They're coming under scrutiny from the Federal Trade Commission for Unfair Trade Practices, et cetera. By the way, these big three pharmacy benefit managers control 80% of the market right now. Okay? So the big three are Optum express scripts and CVS caremark. By the way, all of the major carrier health insurers have purchased these companies. They own these companies now. Okay? And they've done that for a reason. We'll get to that in a little bit. Okay, this is a very busy slide, but bear with us for one moment.

The boxes that are in yellow, prior to the Affordable Care act, these are the functions that a health insurer actually maintained. They administered the plan, they developed the networks, and they provided the stop loss insurance. In the post ACA world, where all these companies have been incentivized to vertically integrate, they've all bought pharmacy benefit managers, and in some cases, they're buying up the healthcare supply chain as well. They're buying up physician groups, et cetera. So they're vertically integrating. This is sold as being advantageous towards patients because now we have an integrated care model. That's what they call it from a marketing perspective. But if you look at the financial results and the clinical results, it's just not there. This is terrible for consumers, this consolidation.

And actually, if you listen to the earnings calls of these publicly traded health insurers, more than half of their profits are coming from pharmaceutical sales. Okay? So one way to look at it is that, hey, health insurance is actually just a loss leader now to sell drugs to employees. All right, so moving on. How are health insurance rates created? This is a really important piece. And on the left hand side, we're going to talk about the things that employers have no control over. No one does to a reasonable extent. You don't control how old your employees are for the most part. You don't control where they live. Right. So rates are determined by zip code where the employees live, because they're more likely to use hospitals where they have contracts with. And if you live next to a very expensive hospital, well, guess what?

You're going to be rated up for that. Okay? You don't really control what sex they are, and you don't really control what health conditions they have, and you certainly don't control their lifestyle. You can have all these wellness programs to try to promote, encourage them to eat more broccoli and do more yoga, but at the end of the day, that stuff doesn't work. And there's 20 years of data that supports that it doesn't work. So these are the things you don't control. Let's talk about the things that you do control and can control as an employer to affect the overall rates of your health plan. Health care prices. How much does your plan actually pay for hospitalizations, surgeries, labs, imaging, prescription drugs? How much do you pay for those things? The employers actually control those things. You can if you know how participation.

How many people are on the plan? Do you have 50% participation. Do you have 90% participation? That matters. And you as an employer, can control that access to care. How easy is it for your employees to access the care they need? Are diabetics being asked to pay a $3,000 deductible before the plan starts contributing towards their diabetic supplies, or do you just give them the supplies? These things are important. Waste, fraud, and abuse. You, as a plant sponsors, your clients certainly can control the amount of waste, fraud, and abuse in their health plans. That's a big lever. Okay. Any questions, Maurice?

No, not at this time. None that are unanswered, at least.

Okay. Clear as mud. Perfect.

Clear as mud.

All right. I love it. Okay, so we're going to break down. Very broadly speaking, there are three kinds of health plans from a funding perspective. Okay? And you can slice and dice each of these 17 different ways, but here are the three broad kinds. You have your classic fully insured model, and you see this a lot in groups that are less than 500 employees. And what this means is that, hey, the carrier says, okay, you're on the hook for $80,000 a month. That's your maximum liability. You pay that $80,000 a month, and you sleep good at night, that's your maximum liability. Okay? And the carrier doesn't care if you have tons of utilization, if everybody gets cancer or nobody uses the plan at all, you're going to pay that $80,000 a month. End of story, case closed.

Okay, well, what that means is that you're actually, in many cases, you're paying for a lot of care that never gets consumed and I would call that waste. Okay, as we move from left to right, we're moving down the innovation or maturity scale of a plan. And so employers eventually they'll get hip to that hey, average claim year, we're paying money for things we never actually use. Let's stop doing that. So maybe they move to a level funded model. What that means is that they're still going to be paying the same $80,000 every month, but on an average year where the utilization isn't that high, they're going to have money left over in their claims bucket at the end of the year. And if you're on a better level funded product, you, the employer, retain 100% of that claims reserve that's left over.

Okay? Now there are some level funded products out there where for whatever reason the carrier thinks like they are entitled to keep some of that leftover claims reserves. I don't know where they get away with that from, but some companies do that. They're not the best products moving on through the innovation scale you have move on to a partially self funded program. This is for companies that have been around a little bit longer, they're a little more mature, they have a better cash position. And what's the difference here? So the difference between the level funded and the partially self funded model is that instead of funding to the Max every month like you do in a level funded product and hoping that you have left money left over at the end of the year, that's yours.

In the partially self funded model, you're just paying your claims as you go. Okay, some months, in this case you might have $30,000 in claims. Some months you might have $70,000 in claims. Okay? But again, companies that have a better cash position, they're comfortable with that. And there are quite a few advantages to that actually. But if you're a newer CFO and you're kind of risk adverse, you probably would opt for the level funded model just so you can sleep better at night. So that's just a very broad overview of the funding types that are out there. Okay, let's talk about the profit levers inside a traditional fully insured health plan. This is again our 100 life group who spends $10,000 per employee per year. And by the way, pepy per employee per year.

That is a very common KPI to measure in a health plan. Okay? So if you see a pepy spend of north of $10,000 per employee, there's usually a problem there. And that means there's an opportunity to really affect that plan and optimize what's going on. So anyway, let's talk about this slide here. So you see here, horizontally, there is a blue line about halfway up the screen. That is the maximum amount of liability that this plan pays. So in this case, the employer is on the hook. They spend $80,000 a month all in. That's claims. That's fixed costs and variable costs. And let's see, the first two months, they actually had a little bit of money left over in their claims bucket. That's that green there. That's the money left over in their claims bucket.

And the third month, oh, my goodness, somebody had a surgery. And the claims went way past that $80,000 threshold. But you know what? That's why they have that stop loss insurance in there. So the stop loss insurance pays everything over above that blue line. Okay? You don't even have to worry about it. No big deal. Okay. Then you go on and go on until you hit September again. You had another stop loss claim. And then October, a very small stop loss claim. This is pretty typical of 100 life group in a fully insured chassis. But check out the profit centers for the carrier in this model one, they're keeping the claims reserves. And now somebody in the chat might be arguing right now, hey, what about the medical loss ratio rules?

The carriers are supposed to spend $0.85 on every premium dollar on claims on medical and prescription drug claims. And if they don't spend 85% on claims, they have to give the difference back as a rebate to the group. Doesn't that happen? Well, it does happen here and there. But here's the problem. In these fully insured products, there's no reporting. There is very little reporting. And the reporting that companies get is not actionable. There's nothing they can do with it. So what I mean is that nobody knows if the carriers are actually fulfilling the, are actually paying out based on the rules, the medical loss ratio rules embedded in the Affordable Care act. Nobody knows if they're actually doing it. There's no way to audit it as an employer.

And going back to my new favorite quote these days from Mark Cuban, where he says, where there's mystery, there's margin. And this is the perfect example of that. We just don't know. But we'll just assume that there's some extra margin being built into there. So anyway, that's one profit center. The next profit center is on the stop loss piece. And this is where the carrier is making an underwriting profit on the stop loss insurance. And that's totally fine. This is what real insurance is. You price it a certain way and so that you can be competitive in the marketplace and hope that there's money left over after you pay all your administrative costs and claims. And that's your profit. That's the underwriting profit. Okay, perfect. But check this out.

Look at the Rx claims this carrier is making because they own the pharmacy benefit manager. They're making $110,000 on prescription drugs for this 100 life group. So let's just take an example. Humira, often used for rheumatoid arthritis, is the best selling drug in the history of the world. About two people out of every 100 employees are taking this drug. It costs about $80 to $100,000, and the pharmacy benefit managers are getting it for about $45,000 a year. And so they're marking it up another $45,000 or so. And so that's a huge profit lever for the pharmacy benefit manager insurance carrier. Okay, but here's the deal. Aren't the pharmacy benefit managers supposed to be the ones approving or denying drugs? So you've got the Fox guardian, the hen house.

What incentive do they have to deny a drug when, hey, if we approve it, we're going to make 45 grand on this one drug for the year, right? That's a big problem. Okay, let's bottom line this. Check this out. Total profitability on this 100 life group. The carrier is making $286,000 on this group. That's a 28% profit margin. Basically, you've got a high volume, high profit margin. Business or product. This is a home run for any business. If you can do high volume and high margin, that is a home run. And it gets better for the carriers because guess what? We're going to increase all of that by 10% every year. What a business. But this is also an opportunity, if you know how, to navigate all this and extract the waste out of these plans.

And that's where you can come in as an accounting firm.

Okay, we do have one question here, Donovan. Just around that slide, should the employer expect to receive any leftover money in a level funded arrangement? Only if they renew?

Great question. Some of the weaker level funded products require that the group renews in order to get their claims money back. That is terrible. But yes, you're exactly right. That is a clause that is often kind of hidden in the contract. And then the other one that's in there is that, hey, and it's probably the same carriers that are doing this that say, hey, if there's anything left over, we keep half of that. We keep 50% of that excess claim reserved. But as an employer, I would avoid that like the plague. There are better options out there in lots of cases, not always. Awesome. Great question. Keep them coming. Okay, so if you listen to the earnings reports of these carriers, it's pretty amazing what's happened since the Affordable Care act was implemented in 2011. Here's just a snapshot of UnitedHealthcare.

You'll notice in 2019, there was a judge, a state level judge, who tried to get the ACA thrown out or whatever and said it was gone unconstitutional. And you can see the shareholders got a little bit jittery there. But other than that, wow, it sky's the limit. Okay, now, how does this relate back to the whole reason that we have employee benefits programs within organizations to help us attract and retain talent? Well, correlation is not causation, but anecdotally, you could say, jeez, look at how deductibles premiums have outpaced workers earnings and overall CPI since 2010 on the left hand side. And look at the quit rates since 2010, how they've risen almost completely in line. Again, this is not a direct correlation or causation, but if employees aren't taking. If they. If they can't afford to, you know, pay their.

Their basic needs, they're feeling, you know, they're getting squeezed. They're going to be looking for other opportunities to make more money. And so I think this plays into that story, and so we need to be aware of that. Okay, so why is all this happening? What are the opportunities here? Well, again, 25% of what most employers spend on healthcare is considered complete waste. That equals roughly $300 billion a year, or about $2,500 per employee. Per year. Whoa. Okay. What are the reasons for this? Companies pay for health care that employees never actually consume. There are a lot of businesses that do that. If you're fully insured, you're definitely paying for healthcare that employees never actually consume. If you're self funded, lots of these self funded plans don't even audit their claim properly.

There are lots of auditing firms out there, but most of them don't know what they're doing, so they don't have a true and effective audit done on a regular basis. That's all just waste. Number two, companies overpay for the healthcare employees do consume. What do I mean by that? Well, Maurice and I are sitting right here in Orlando, Florida, where healthcare prices vary 1000%. I'll say it again, healthcare prices vary 1000%. It's like, hey, your employees can go buy gasoline for a work trip for $3 a gallon, or they could go get it for $300 a gallon, and we don't know. Well, bringing it back to healthcare, we have health plans that aren't managing this effectively. Their employees are either getting MRIs done at Advent Health for $6,000 a pop, or they can get them done down the street for $600 a pop.

Now, a lot of what we consume in the healthcare space, these are commodity services, imaging labs. There are thousands of these done, millions done every year. And these are commodity services for the most part. And so this is a huge opportunity. Apply the same purchasing discipline you have to every other part of the business and apply that to healthcare, and you can really move the needle. Okay? And then it gets worse. We'll throw some salt in the wound here. Clinical harm. Let's look at the clinical outcomes of the current system. Medical error. And you have to use air quotes when we say that because it's such a crazy euphemism. But medical error is the third leading cause of death in the United States. Okay, so more than 200, the most conservative estimates, state that 250,000 Americans die every year of medical error.

And so to me, it's like having a pandemic every year, only nobody talks about it. We just accept it.

Hey, Donald, we got another question here. So, obviously, the opportunity is $2,500 each year per employee per year in waste. On average, our clients are saving around $1,500 per employee per year. How much of that, can you speak to that a little bit more about why that number is south of the 2500? And then how much of that opportunity is in prescription drugs overspending?

Yeah, great question. So I'll take it one at a time. If the average waste is $2,500, why are our customers only achieving $1,500 per employee reduction on average? Well, it really ties back to how much are they willing to learn as an employer at the employer level, how fast can they learn, and how much are they willing to change? And so a big part of our process, we're not a product company. We're completely agnostic to the marketplace. We are a process driven organization. So the first part of our process anyway, is discovery, just like any consulting firm. Who are you? What are you trying to do? We can't, in good faith, give recommendations on strategies or products before we understand who you are at a very deep level.

And so what we do, as part of our discovery is we take them through a series of surveys that help us understand what their business objectives are, how they define risk. Right. Everyone defines that word differently. How do they define that word? And then lastly, what is their tolerance to change? And so if we look at an innovation scale from zero being the car that was built in 1990s, the health plan that was built in the 1990s, and 100 being, let's say, Rosen hotels down the street, who's saved over a half a billion dollars over the past 30 years? Most employers, they want to move more incrementally. Okay? So if we try to take one from zero to 100 in 90 days, that's going to be a bumpy ride. Now, you can do that.

And we had a school district right down the street, Osceola school district, that did do that. They've got 10,000 employees. They've saved $41 million over the past three years. But it's a bumpy ride. And so every organization has to gauge for themselves how much change they're willing to embrace and take on, and that's going to correlate to how fast they optimize and the savings that they have. So that was the first question. The second question was around how much does the prescription drug managing, the prescription drug piece, how much does that move the needle? And that's a great question. So within the average health plan, prescription drugs account for about 25% of the total spend is on prescription drugs. About 50% of that 25%, let's say 12% of total spend is on specialty medications. Okay.

These drugs that, let's say 5% of the population are taking, they're driving 50% of that prescription drug spend. So if you really hammer down on the. And honestly, I'm glad you asked about this specific aspect of a plan, because this is very low hanging fruit. And so if you really optimize that prescription drug piece, you can save five to $800 per employee per year right off the bat with virtually no disruption, like very little. So it's very low hanging fruit. In fact, we helped a teachers union in central Florida here with 10,000 employees. Also, we helped them encourage. They got their district to finally go to RFP for our new pharmacy benefit manager for the first time in seven years. And just by moving.

And the PBM that they picked wasn't even our favorite, but the one that they picked is saving the district $3.6 million this year. So it's low hanging fruit. And again, apply the same purchasing discipline you have to healthcare that you have. In every other part of your business and you'll see results. So hope that answers the question. Anything else? Okay, we're coming up on the hour here, so I'm going to move kind of quickly and I want to give an overview of the role that the brokerage community plays and what employers expect brokers to do. Because maybe you're thinking about partnering with a benefits firm or something. I don't know. But you should at least know what employers expect them to do.

Employers expect brokers to maximize the return on their benefits investment, just like they expect you as an accounting firm to, of course, keep them in compliance, but also make sure that they don't pay more taxes than they should. Right. So employers expect benefits brokers to maximize the return on their benefits investment, keep them in compliance, educate their population about the program, and leverage technology to administer the program, reduce risk, blah, blah. Okay. But the problem is that benefits brokers don't work for, unlike accounting firms, where you get paid directly by your client. Right. Benefits brokers get paid by vendors, they get paid by the insurance companies, they get paid in commissions and bonuses. And so check this out. This is insane. Brokers make more money when the employers costs go up, not down.

So if brokers actually do the thing that employers expect them to do, which is maximize their ROI, they actually get financially penalized for that. So that makes no sense. So the analogy I love using is that imagine if you as an employer, you're working with an accounting firm who got paid by the IRS instead of you. How much more in taxes would you end up paying in that scenario? Probably quite a bit, especially if the accounting firm got paid a percentage of the taxes that the employer paid. Whoa. Takes a moment to wrap your head around it. It's just such a crazy notion. All right, so, yeah, brokers have no financial incentive to help employers achieve what they want to achieve.

And this is a really big reason why the average employer wastes $2,500 per employee per year, because no one shows them how to do it, how to optimize. Okay, we're going to skip this slide.

Hey, Donovan. I'm going to give you a quick break here, folks, and we're ready for poll number three. And that poll should be live on your screens right now, folks. What concerns do you have as a CPA to offering employee professional services? Keeping up with compliance? Not knowledgeable. Don't see it as profitable or no concerns. I'm offering these services today. Make your choices now, folks. And this poll is active.

It.

30 more seconds, folks. On poll number three. Continue making your choices now. Thank you guys so much. We'll close this poll out in 5432. And one closing out poll number three, the attendees coming in with a very narrow majority at 34% saying not knowledgeable. So Donovan and Marie Speck, over to you.

Okay, thank you, Chris. And just for my knowledge, do we have a hard stop at 03:00 eastern or can we go over a little.

Bit if we need to, as close to 03:00 p.m. Hard stop as possible?

Yes. Okay, perfect. Thank you for that. Okay, so we've talked about the landscape of employee benefits, all the challenges, all the bad news. What can you actually do? How do you get out of this? And, and the answer is, again, the antidote to, you have to get a better benefits firm. Employers need better help, and you as an accounting firm, you might be able to play a part in that. And so our answer to that is that we developed the fee based benefits consulting model. And what that means is that we just don't accept compensation from vendors. We don't accept compensation from the IRS, to use the analogy.

So what that does is it means that we are free to take an agnostic perspective on the marketplace of strategies and solutions and give our clients unbiased advice about how to maximize the return on their benefits investment. And some of you are probably thinking, well, jeez, isn't that just, that means they have to spend more money on another firm to get that unbiased advice? Well, it's actually no, and here's why. So just to tutor our own horn a bit, when we take companies through the RFP process for new vendors, we tell the carriers, hey, just net out all the commissions and bonuses out of the rates. We replace those commissions and bonuses with our transparent fee.

And even though our fee really is very similar to what they're paying in commissions and bonuses, what it does is that it allows us to be truly agnostic to the marketplace. And so if somebody wants a really innovative health plan, we don't have any problems with steering them in that direction. So that's really the key to unlocking all of this is financial alignment. So sitting on the same side of the table as your customer. All right, so what does that look like in practice? Fee based firms like us, like health compass, we work with these traditional carriers all the time, as do commission legacy benefits brokers. But because we're agnostic, we can also look at all these other solutions that are in the marketplace that most employers are never even seeing. Now, this doesn't mean that you should be buying.

All these solutions are a good fit for every opportunity, but you should at least know that they exist and your broker should be vetting them on your behalf. And from where I said, our job is to really protect employers from vendors whose financial interests are diametrically opposed to theirs. So other than having a much bigger marketplace to choose from, how do we affect change? How do we eliminate this waste? Well, we help employers innovate, take them from the 1990s up to the modern age. And again, we can't affect the things on the left side of the screen, but we can affect how much they pay for health care, right, the actual unit prices of the hospitalization, surgeries and drugs, et cetera, the participation rates, the access to care, and how much waste, fraud and abuse is in the plan.

We can affect all the things on the right hand side. And here's the net result of applying this purchasing discipline on an average 100 life group you're looking at, if they move incrementally through the innovation cycle, they'll save about $1.9 million over the next five years compared to what they would have been normally doing. That's the opportunity. I'm moving fast here. This is just an example of our benefits management calendar, what that looks like here are the things that we actually do to manage a program on a month by month basis and with anything. The challenges with change are time, right? Do you have the time to change anything? Takes a little bit of education, engagement, et cetera. Challenges with not changing are reduced profit margins, reduced business valuation, higher turnover, higher organizational stress, weaker customer experiences.

It's in the employer's hands what they want to do. Are they happy with the status quo, cursing the darkness? Or would they prefer to have an organization, a CPA firm, a fee based benefits firm, sitting on their side of the table to collaborate and solve these business challenges.

And Donovan, this is poll number four or five now, folks, want to launch this poll for you guys as well. You guys can have a brief moment of Q and a here as well. Poll number four is indeed active, though, on your screens. What role can a CPA play in helping their clients achieve better ROI on employee healthcare investments? Make your choice now, folks. And of course, this poll is active for 60. And go ahead, folks. With the time remaining, we can have some Q and A if you'd like.

It.

30 more seconds on this poll, folks. Closing out poll number four of five, folks, in three, two and one closing at this point, Donovan, I'm going to go ahead and launch poll number five of the five, you can give your final words of wisdom in the essence of time as well, folks. Poll number four is closed. And Donna, if you have any final words of wisdom before I give a final wrap, go right.

Sure, sure. I would encourage you if you're already in the employee benefit space or you're thinking about entering the employees benefit space, or if you have customers that are looking for other options as far as how to maximize the return on their benefits investment. Reach out to myself, Maurice, or Michael Salcida, who could not join today, but he's our chief strategy officer. Yeah, reach out to us. We're happy to have a conversation. We also have a great resource on our website at ww dot healthcompassconsulting.com. And that's a buyer's guide. It's a 43 page document that tells employers everything they need to know about selecting the right benefits firm for their organization. We think that's critically important because it unlocks all these other opportunities. But, yeah, happy to have a conversation with any of you.

And, yeah, nice to see you all and appreciate your hospitality. Chris, awesome.

Poll five is active, folks. In the last remaining minute of class or so. Last two minutes, actually. Go ahead and make your choices now, folks. The poll is active. And the question is, would you like to schedule a call to learn more? And your options are indeed, yes, please send me a link to schedule. Yes, please give me a call. Please email me more information or not at this time. Make those choices now, folks. And again, if there are any questions, please send them right now.

In the Q A side. Thank you all so much for your time today.

This must be a very sharp group, it looks like, apparently. And see what do we have here? We do have some attendees that are saying thank you guys for coming in for a fantastic presentation. We surely appreciate that. Folks. We are going to indeed close down poll number 505 for CPE. And just remember, you only need this answer three for your actual credit today. But we do have some extra polls in the day for you guys, and I will give a final wrap up here as well. Folks, we here at CPA Academy, thank you so much for coming in and spending time with us today. This was a fantastic presentation. And please come back again to see Donovan and Maurice on the future webinars. And we look forward to seeing you guys again as well.

Folks, please have a wonderful rest of your day and take care. Thank you guys so much.

Awesome.

Thank you.

Thank you.

Thanks, Chris.

Take care.

You guys are welcome. Take care.

Bye, Maurice, how do we get out of here?