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Everything (And More) You Always Wanted to Know About Exchanges/Marketplaces

Categories: Articles

Everything (And More) You Always Wanted to Know About Exchanges/Marketplaces

Before we talk about Exchanges and Marketplaces, it is helpful to look at where we have been and gain some perspective. The key question to ponder before you read any further – Why do employers provide group health insurance for their employees? Employers let their employees do everything else….employers pay their employees a salary, and employees go out and buys their own mortgage, car, TV, choose their own investments, etc….SO WHY DOES THE EMPLOYER CHOOSE THEIR HEALTH INSURANCE FOR THEM AND THEIR FAMILY?


Most of us are familiar with (Federal or State Government Insurance Marketplaces/Exchanges) that rolled out October 1, 2013 with many malfunctions and was built for Americans to purchase health insurance. Meanwhile, there have been lots of conjecture, lots of buzz, myths, along with news stories about the so called “private exchanges” making them a very hot and often misunderstood topic.

Most recently, when Walgreen Co. announced in September 2013 that it was moving its 160,000 active employees to Aon, a fully insured private exchange, large employers took notice. Petco and Sears along with others also implemented private exchanges. Wall Street responded as well, sending the stock price of Benefitfocus, which provides the technology platform for a private exchange, up 102 percent from $26 to $53 in one day. Later in 2013, Towers Watson acquired Liazon on November 22, 2013 for $215 million because they were a leader in developing and delivering private benefit exchanges.

Most private exchanges, however, have been in existence for a number of years and are hardly new, pre-dating the enactment of the Patient Protection and Affordable Care Act (hereinafter referred to as the “new health care reform law”) serving group retirees and the individual market for years. Due to the combination of the Affordable Care Act insurance coverage mandates, the allure of a defined contribution model to cap costs and large, well-known companies signaling the OK to make the move is shifting the benefits landscape.

What is the difference between a Public and Private Exchange?

There are significant differences between the public and private exchanges. While the highly publicized public exchanges are government entities (either federal or state-run including the Small Business Health Options called SHOP Exchange), the private exchanges are run by private companies. Public exchanges offer medical, dental and/or vision insurance while private exchanges offer medical, dental, vision and other insurance products like life, home, automobile, and pet.

Public exchange consumers are primarily individuals buying insurance on their own and small businesses with up to 100 employees (federal subsidies are available to individuals with household incomes up to 400 percent of the federal poverty level who are not eligible for employer coverage).

Private exchange consumers are active employees and retirees of the sponsoring organization, and their dependents.

What is a Private Exchange?

A private exchange is a technology-enabled marketplace – an online or cloud based solution – that does exactly what you currently do for your employees but on a technology platform used for buying and selling health insurance policies. At its core, a private exchange is a private business – typically operated by consultants, brokers, or insurers – that sells insurance products to health care consumers through an on-line product. What makes private exchanges unique is their ability to enable the health care consumer to shop from among a wide-variety of major medical health plans and supplemental insurance products (e.g., hospitalization, disease, disability, or dental coverage) through the use of creative, interactive technology. There are two distribution models:

Single Carrier: Employer/facilitator selects one plan; enrollees access all available plans from the single carrier. As an example, an employer may only want to offer Blue Cross Blue Shield to its employees. BCBS may then offer several plan options.

Multicarrier: Enrollees access all available plans from all carriers. The user interface is similar to online comparison-shopping websites like Travelocity, where consumers choose a plan based on side-by-side comparisons. This is more of the “wild west,” with insurance companies competing side by side for member enrollment.

Whether there will be multiple carriers on all private group exchanges is a mixed bag. From a medical standpoint, fully insured plans will likely only have one carrier option, though there’s some flexibility with self-funded plans to offer multiple carriers. On the smaller end of the employer spectrum, we suspect most exchanges will stick with one carrier for now.

Many in the industry, including brokers, are still trying to “sweat out” the definition of a private exchange. One thing I am certain of what a private exchange/marketplace is not. A single carrier can’t offer an online marketplace because that’s not a marketplace. When a carrier will coexist with their competitors, then I will acknowledge that is a marketplace, but if I am limited to one vendor then I would not call it a marketplace — it’s not a supermarket, I don’t have five brands of cereal available.

Types of Private Exchanges

There are two primary private exchange models:

Individual Market Segment: Competes against public individual exchanges that offer significant subsidies. Growth opportunities are questionable.

Group Market Segment: Greater flexibility and ability to offer ancillary products. No subsidies on the public group exchange to compete with. Appear poised to grow rapidly.

Tax Treatment of Employer and Employee Premium Contributions on Exchanges

A GROUP Private Exchange’s tax implications will work the same way they do today from the employee’s perspective and the Private
INDIVIDUAL Exchange’s tax implications will work very differently than the Group Private Exchange:


Private Exchanges Use a Defined Contribution Approach

The private exchange model deploys a defined contribution approach in which employers provide a fixed contribution with employees paying more or less for their share of the total premium depending
on the level of coverage they choose. This is very different than the defined benefit model most employers have used for years – pay a fixed percentage of the premiums.

Many of you may recall the retirement plan revolution that took place in the early 90’s with defined benefits becoming legacy plans and employers shifting to defined contribution plans i.e. 401(k) plans with employers agreeing to match dollars the employees contribute only; otherwise, no employer contribution was available. Through this approach, an employer can cap or de-link their future medical insurance costs it will pay for health plan coverage for its employees making it easier to plan their budget forecasting. At the same time, exchanges typically offer employees more plan choices than their employers previously provided enabling employees to right size their coverage – choosing what coverages are right for their needs and budgets.

Because defined contribution will not slow down the cost of insurance, employers will be faced with potentially having to raise their contribution or pass the increases on to be shouldered entirely by their employees. This will not work without the employers shielding some of the increase from the employees. This method while more innovative will not get employer and employees off the health insurance escalator that is becoming steeper year by year.

Why are Insurers hesitant to participate in SHOP and Small Group Private Exchanges?1

While most health insurers are flocking to the large group private exchanges, many of these same carriers have been hesitant (to put it kindly) to participate in government subsidized exchanges, individual and small group. Why – if there are a large number of new customers where the government is paying a large percentage of the premiums – wouldn’t all major insurers want to participate?

Didn’t all the major cellular providers jump to participate in the government subsidized Lifeline program?i Like the Lifeline program, funded by the Universal Service Fundi fee added to the bill of

paying wireless customers, a risk corridor is being applied to carriers in and outside of the government exchangesiii to offset the possible adverse risk selection in government exchanges. However, unlike the Lifeline program, insurers have to provide “unlimited minutes” to all consumers at a predetermined cost. Not knowing if only those who will use unlimited minutes are going to sign up, insurers are justifiably concerned.

According to a white paper in 2011 by the NAIC on adverse selection and health insurance exchanges, there are several areas of concern for insurers participating in public exchanges, such as permitted variation between the plans offered in versus outside of the public exchanges and ability of an individual to choose a lower benefit plan when healthy but move to a higher level benefit plan when sickiv. Even though there are mechanisms to minimize the risk of adverse selection between the small group public subsidized market and the private market, one fear is that the public exchange market may become “the equivalent of a state high risk pool.”

However, many of these concerns do not apply to the small group private exchange market. Insureds/Employees in private group exchanges are not eligible for tax credits, so there is minimal risk of adverse selection from subsidized individuals selecting the richest plan because they have little “skin in the game.” Further, unlike, their government counterparts, private market small exchanges do not have to offer the richer Silver and Gold plans (70 percent and 80 percent actuarial value respectively) nor do they have to offer employee choice within a tier. Lastly, small group private exchanges, unlike their large group counterparts, can still impose certain participation and contribution requirements.

Large groups certainly have a reduced risk of adverse selection when compared to small group plans. However, with the full implementation of ACA, small group insurers must now consider all small groups to be member of a single risk pool.v The single risk pool requirement, along with the factors noted above, will spread the risk and minimize adverse selection in the small group market. So why aren’t insurers willing to join small group private exchanges? Aren’t small groups in a community rating environment a de facto large group? As such, why aren’t insurers willing to offer their small group plans, alongside with other insurers, to any willing private exchange?

Since the option to provide pre-tax dollars for individual insurance through an HRA, Section 125 plan or PRA has been closed, employers have little option but to consider employer-sponsored coverage. Further, because small employers are not subject to a penalty for failing to provide “affordable” coverage, employers can set the minimum contribution required by the carrier to the lowest cost Bronze plan, allowing employees whose income may qualify them for subsidies, based on the Silver plan, to obtain coverage through government exchanges, while providing employees pre-tax dollars for other qualified benefits. This is a win-win for small employers if managed correctly: tax-free income for employees for premiums for those that do not qualify for government subsidies and an opportunity for employers to set the contribution to allow employees that qualify to still obtain subsidies. Insurers will gain by keeping insureds while avoiding government exchanges.

Administration and compliance help are the missing link for small businesses moving to a defined contribution model. While many of these employers see the benefit of continuing coverage, they are desperately looking for a solution to provide coverage while minimizing their involvement and the increased administrative and compliance burdens. Hence the intrinsic value of a private exchange – a “place” for small employers to outsource not just “a defined contribution” but plan selection, notices, enrollments, administration and government compliance.

Will private exchanges step up to the plate to help small employers by offering multi-carrier exchanges where employees select the carrier and plan that works best for them? In spite of the single risk pool and commoditization of products in the small group market, the answer right now seems to be “not yet” – but shifts in employer demands may soon change their mind.

Private Exchanges are Gaining Steam

Several analysts have weighed in with prognostications of how the private exchanges will play out:

  • 24 percent of employers will offer benefits on a private exchange in the next five years. (NBGH/Towers Watson)
  • 70-80 percent of employers prefer private over public platform. (Booz Allen)
  • 44 percent believe private exchanges will be preferred way of purchasing. (Aon)
  • 1 in 4 consumers will receive employer health benefits through insurance exchanges within five years. (Accenture)
  • The number of consumers expected to enroll in private exchanges will reach 40 million by 2018, surpassing the 31 million individuals likely to enroll in state-funded public exchanges. (Accenture)
  • 95 percent of employers said they would continue to offer health care in
    the next three to five years, 33 percent may use a private exchange to
    provide the benefit up from 5 percent currently – a survey released earlier
    this month by Aon Plc, the London-based insurance broker

Why Would Employers Consider a Private Exchange?

There are four reasons employers would make the move to a private exchange, and the first and most prominent reason is to cap costs and take variability out of the budget process. Making a move to an exchange:

  • Shifts from a defined benefits to a defined contribution model, which caps its health care costs at a desired threshold and improves control of future liabilities.
  • Avoids excise tax on high-cost coverage (Cadillac tax), which starts in 2018. This is a nondeductible 40 percent excise tax on the portions of health coverage costs that exceed $10,200 per year for single coverage and $27,500 for family coverage. Mercer estimates that 40 percent of companies will pay this tax on at least one plan if they don’t change the current benefit design.
  • Simplifies benefits distribution and administration, freeing up HR resources to focus on other mission-critical tasks.
  • Provides potentially more benefit choices for employees and illustrates cost transparency. Employers can choose from a menu of insurance carriers, which would help service a geographically diverse employee base.

Questions Employers Must Ask Themselves About a Private Exchange

Before moving to a private exchange, employers need to assess the opportunity by asking these questions:

  • What are our peers and competitors doing? Are there indications that our industry is leaning toward a defined contribution model?
  • What criteria would we look for in an exchange? What’s important to the business and our employees?
  • Are our current plan offerings and provider networks similar to what is offered on an exchange? Would there be a big gap we may need to address?
  • Will we get plan selection data from the exchange in a timely fashion?
  • How would moving employees into a private exchange affect company culture? Would we create recruitment and retention challenges?
  • What kind of online decision making tools to aid employees with their decisions will be available?
  • Will there be any benefit education meetings face-to-face or all online with no human interaction?
  • What kind of support will employees get? Is there a way we can “test drive” the quality of the exchange’s web services and/or call center?

Private exchanges appear poised for further growth. The question is how quickly will employers migrate. It’s one of many questions in this changing, dynamic health care market.

Additional Employer Issues that Private Exchanges Create

  • Plan participant communications. Private exchanges add a new layer of complexity for employees and retirees, in terms of benefit offerings and the selection process, while a shift to an exchange model will raise questions and concerns among affected participants. Communications need to be crystal-clear and employees must be able to articulate basic elements of the plan before roll-out.
  • Who owns compliance? Employers need clarity around who owns the various documents required by Employee Retirement Income Security Act and the Affordable Care Act, including the Summary Plan Description and the Summary of Benefits and Coverage.
  • Monitoring private exchange vendor performance. Employers will need to be fully educated on the defined contribution approach and have both an efficient RFP process for private exchange vendors and a robust supplier management system to monitor vendor performance.
  • Data consistency from employer to private exchange to payer and back. All players in the benefits management data lifecycle – employers, private exchange vendors and payers alike – will need solutions to ensure consistent plan data, including cost-sharing information.


Private exchanges appear poised for further growth. International management consulting company, Oliver Wyman, predicts that 40 million Americans will receive health insurance through private exchanges by 2018. The question is how quickly will employers migrate. It’s one of many questions in this changing, dynamic health care market. Exchanges, whether public or private, are not a magic bullet for the ever-increasing health care costs. It is unrealistic to believe that this will be a linear model like the CBO predicts. From my viewpoint, The Affordable Care Act will continue to be a wild ride as we are left with an incredibly complicated set of rules, taxes, exceptions, and more twists and turns than the lines at Disney World. My quote below reveals the biggest issue that ACA did not address which will continue to cause skyrocketing health insurance increases for all Americans:

I have evaluated many of the “private exchanges” offered by many different vendors, and we have established a “private exchange” that will facilitate the defined contribution administration details and give employees the opportunity through you (or as individuals) to elect the plan design they feel best meets their unique needs and budgets. This may or not be attractive for your use, but in a word, we will be ready to support whatever direction we agree is best for you and your employees.

1 Communities: Regulatory & Compliance – Why Health Insurers are Leery of Playing in SHOP or Small Group Private Exchanges – The Institute for HealthCare Consumerism –
i The Lifeline program provides qualified low-income Americans with a prepaid wireless service plan. See

About the Author: Carl C. Schuessler, DHP, DIA, GBDS is the Managing Principal of BenefitStrategies, LLC. an Insurance and Employee Benefits Brokerage and Consulting firm. We specialize in Insurance, Risk Management and Employee Benefit Consulting. BenefitStrategies helps improve your cash flow, save money and retain top talent with well-structured employee benefit and financial planning solutions. With more than 20 years of experience in employee and executive benefits consulting and financial planning experience, he guides large firms, privately held companies and executives through the challenges of evaluating planning opportunities. We pride ourselves on our ability to be creative in designing innovative, optimum plans and helping companies and individuals make the most of their financial resources.

For more information:
Carl C. Schuessler, Jr., DHP, DIA, GBDS
Managing Principal
BenefitStrategies, LLC. • 2776 Ridge Valley Rd. • Bldg. 100, Site. 150 • Atlanta, GA 30327
Direct (404) 941-5519 • Mobile (404) 277-7852 • Fax (928) 833-2265

5 Things a Health Insurance Exchange Won’t Accomplish

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With the arrival of Federal, State and Private Health Insurance Exchanges, people expect many things to come.  Here is a list of things that Health Insurance Exchanges will NOT accomplish:

  1. Lower Healthcare Costs—healthcare costs have been rising for those with insurance already.   The general consensus from Warren Buffett to healthcare policy experts is that Health Reform, Obamacare, and The Affordable Care Act (ACA) will not lower healthcare costs.
  2. Fix the Moral Hazard that exists when people consume healthcare—the Moral Hazard is that people do not measure value (price and quality) well when someone else (i.e. insurance) is paying the bills.  A better way of saying this is below:

    MANAGED CARE HAS BECOME PRE-PAID HEALTH CAREAll anyone knows about their insurance is three things:

      1. Their copay to see a doctor
      2. Their copay to fill a prescription
      3. Their payroll deduction for insurance premiums



      1. Disconnect between employees’ out of pocket costs for their health care and the real costs of those services.
      2. No incentive for employees to understand or care about the costs of their health care
      3. Employees are motivated to utilize their health plan lavishly in order to maximize their perception of the benefits provided by their employer.

    We must convert everyone from Healthcare Users to Healthcare Consumers!

  3. Remove the Externality that exists in healthcare—an Externality is when the decisions of one person affect another person without that effect being taken into account.  For example, playing loud rock music affecting a neighbor, or in Healthcare the doctor and patient being wasteful and as a result causing everyone’s insurance premiums to rise.  It is critical to educate employees that their medical purchasing decisions have a direct impact on their peers’ future premiums.
  4. Decrease the Confusion in Healthcare—if anything, an online Health Insurance Exchange may increase confusion.  The fine print of health insurance policies, the foreign medical terminology used by doctors, and the cryptic codes used in medical billing require healthcare consumers to have expert, personal guidance—not a website of choices.
  5. Decrease Out-of-Pocket Expenses for Healthcare Consumers—According to an article in Forbes, the average premium for a silver plan will be $328 per month with deductibles ranging from $1,500 to $5,000.  The article goes on to say that the deductibles will be more than twice the average deductible in employer-sponsored coverage.



So when considering a present-day Health Insurance Exchange, keep in mind you will NOT:

  1. Lower costs
  2. Correct the skewed incentives
  3. Align behavior
  4. Reduce confusion
  5. Decrease employee out-of-pocket cost.

Now, could Health Insurance Exchanges be fixed over time?  Yes, but not in their current incarnation.

“Nobody spends somebody else’s money as wisely or as frugally as he spends his own.”
Milton Friedman
Economist and recipient of the 1976 Nobel Memorial Prize for economic science

About the Author:  Carl C. Schuessler, DHP, DIA, GBDS is the Managing Principal of BenefitStrategies, LLC. an Insurance and Employee Benefits Brokerage and Consulting firm. We specialize in Insurance, Risk Management and Employee Benefit Consulting.  BenefitStrategies helps improve your cash flow, save money and retain top talent with well-structured employee benefit and financial planning solutions.  With more than 20 years of experience in employee and executive benefits consulting and financial planning experience, he guides large firms, privately held companies and executives through the challenges of evaluating planning opportunities.  We pride ourselves on our ability to be creative in designing innovative, optimum plans and helping companies and individuals make the most of their financial resources.

For more information:

Carl C. Schuessler, Jr., DHP, DIA, GBDS

Managing Principal

BenefitStrategies, LLC. • 2776 Ridge Valley Rd. • Bldg. 100, Site. 150 • Atlanta, GA 30327

Direct (404) 941-5519 • Mobile (404) 277-7852 • Fax (928) 833-2265

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Managed Print Services – A New Year’s Resolution for Your Office

Categories: Articles

With the start of a new year in progress, it is the perfect time to look into how your business can improve. Resolutions don’t have to simply be personal aims, and with savings to be made and efficiency to be improved, these resolutions can have a real impact on your business.


Effective Document Management

In an office, there can be hundreds of company files used on a daily basis which, if left unmanaged can become a real pain, not to mention the security problems an unmanaged system creates. With a system such as eCopy, you have a mechanism for all notes and work to be stored on a firm’s central servers, providing the ability to convert scanned documents into a searchable and editable format for improved archiving, document retrieval, and productivity.

Document security is a vital aspect of company life, and through taking measures like implementing a pull-print environment, each print job has to be authorized at the device, reducing the potential for sensitive documents to be forgotten about and left on the printer, and the ability to print securely to share workgroup devices.

Systems such as Equitrac utilize ‘anytime anywhere’ software which includes mobility features; with the ability to securely print to a user’s terminal of choice across a firm’s corporate network. Flexibility is also a key aspect to the solution and with additional Airprint technology implemented; staff are able to print directly to networked devices using tablets or smartphones.


Managed print services

In the business world, printing is essential, there’s no avoiding racking up some costs when it comes to getting a hard copy of some documents. Spending too much on printing is easily avoidable though.

On unmanaged systems, it is estimated that a number in the range of 20% of printed work is forgotten, lost or trashed unread. How many times have you headed over to the printer, only to have to rifle your way through dozens of sheets waiting to be collected? For many mid-sized businesses, this adds up to vast amounts of wasted paper and more importantly, costly ink. This is clearly a huge area in which you can make potential savings. Smart printing systems provide pull-print functionalities so that all documents are either retrieved or not output at all.


Print fleet

If your company is behind the times when it comes to your print devices, then you might want to think about swiftly addressing that point. You may assume that using personal printers or old models are a better option for your business, however in terms of costs and security this is not the case. Using an outdated print fleet not only raises the cost of printing per sheet, but also means the solutions identified above aren’t available.

Primarily, your business should conduct a detailed site audit, identifying which devices are unnecessary and inefficient, and where there are opportunities to save costs.

It is often beneficial to replace all desktop printers with shared workgroup Multi-Functional-Devices (MFD), which can significantly reduce power consumption and save on costs. MFDs can also be set up to reduce paper output, color and toner usage and expenditure.


Rich Simons heads the Sales and Managed Print division for EDGE Business Systems.  He helps improve efficiencies for medical practices providing analysis, customization and recommendations to create an efficient work environment for all document processes.  Feel free to connect at     

Employers Seek to Enhance Retirement Readiness

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Employee retirement readiness is a top priority among more than three-fourths of employers participating in Deloitte Consulting’s Annual 401(k) Benchmarking Survey, 2012 Edition. Only 12% of plan sponsors said that most employees are or will be “financially prepared for retirement.”

Employers are attempting to address this situation by implementing retirement readiness assessments; nearly two-thirds reported conducting such assessments in 2012.


Automatic enrollment is among steps taken

Other steps taken by sponsors include offering automatic enrollment. About 86% of those whose plans have this feature see a positive effect on employee participation rates. More than 50% of plans offer a Roth 401(k) option to enhance participation. And almost two-thirds are offering individual financial counseling and advice, demonstrating the focus that plan sponsors are placing on participant education.


Planning tools are not being used

Unfortunately, the survey results also revealed that participants aren’t using education tools and other planning resources to the fullest. This has led to employers encouraging providers and recordkeepers to develop innovative approaches like podcasts and webcasts, where participants can get education on demand, and more extensive social media and mobile applications.


Visit for more Deloitte survey results.

Monterey Wealth is eager to assist your company with retirement plan benchmarking, investment analysis, and employee education/communication strategies.  Jay Cohen, President and Founder, can be reached at 404-201-2284 or at  For more information on Monterey Wealth, please see their website at

For Plan Sponsor Use Only- Not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., P.O. Box 1456, Tualatin, OR 97062; 877-306-5055;

© 2014 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law, or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.


Tracking #1-226613

When You Can’t Hire High-priced Marketing Experts, Fractional CMOs Provide Wholesale Value

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As the marketplace and your customers become increasingly sophisticated, “outsourced Chief Marketing Officers (CMOs) offer small- and medium-sized practices both high-level marketing counsel and the resources to execute marketing plans without paying six-figure salaries.

In what other ways can a fractional CMO bring value to your practice? As objective, third-party advisors, fractional CMOs provide:

  • strategic insight into how to reach your short- and long- sales and business objectives.
  • knowledge of and experience implementing effective marketing tools.
  • recommendations for marketing vehicles that are best suited for your practice and industry.

The primary financial benefit of engaging a fractional CMO is reduced overhead costs. Engaging fractional CMOs when needed or on a project basis can save your business monthly expenses associated with employing full-time marketing professionals. Also, if your practice’s business is seasonal in nature, you can retain outside marketing counsel just prior to and during peak times and cut back during quieter months.

A Harvard Business Review blog post from earlier this year takes a more focused look at the role of today’s CMO, whether an employee or an outsourced company, one step further. The article examines the value of CMOs and how they are increasingly driving the strategies for practice technology. It states that CMOs who are focused primarily on digital marketing efforts, “…have the self-awareness and the confidence to take bold action even when the context has shifted beyond their sphere of influence and scope of expertise. That is leadership.”

Fractional CMOs are inclined to push the envelope, which is a distinct advantage for companies that are experiencing little or no revenue growth, are traditionally risk averse, and/or employ leaders who resist change. Taking risks and getting out of your comfort zone are necessary qualities companies should look for in marketing leaders.

During your practice planning sessions, consider whether utilizing a fractional CMO could help you optimize your marketing strategy and execute digital campaigns that advance your practice’s leadership.

As the digital marketing agency for B2B and B2C clients who have limited marketing staff resources, NicheLabs is a fractional CMO, trusted advisor and results-driven service provider.  For more information, please contact Hal Schlenger at or 770-335-0077.

As we continue to feature digital marketing advancements, connect with us on Facebook, LinkedIn or Twitter to receive alerts when new information posts, or subscribe to our monthly newsletter to read summaries of our weekly posts.

Health Care Reform Review and Commentary

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I don’t eat breakfast much, but when I do, my favorite place is the Sandcastle in the Village on St. Simons Island, Georgia. However, every time I eat there, I have a dilemma. All I really want is 2 eggs, toast and bacon. This runs about $5.25, but they also have this wonderful breakfast buffet. I mean it is really good. As many eggs as you want, 5 kinds of meat, grits, hash browns, corn beef hash, 4 kinds of juice, waffles, pancakes. I mean really good. The buffet costs $7.25 only $2.00 more for all that choice and bounty.

Remember – all I wanted was 2 eggs, bacon and toast, but I always rationalize getting the buffet. I end up spending more than I intended, and end up paying for a lot of stuff I don’t need or want (or even eat). I end up eating way more than I wanted (or needed). It ruins the rest of my day.

The cost of the buffet is based upon average consumption – and I am a small eater. I pay a lot for what other people are eating. What would happen if a lot of really hungry people were allowed to at eat the buffet for free (because of a special government program)? Now, I am paying for what they eat through taxes. Also:

  1. Average consumption at the buffet would go way up (these are hungry folks).
  2. This would cause the average cost of the buffet to go way up (for me as well – as I must still pay my share for what others are eating – and extra taxes).
  3. The line would get rather long – delaying my meal.
  4. Ultimately, the buffet would run out of items – including stuff I would like (or need) to eat.

Now, imagine the restaurant saying the buffet was the only choice – no al a carte. AND, only certain items were available on the buffet – not all there is now.

*****Welcome to the future of healthcare in America *****

While doing research for this paper, I read all I could get my hands on. My perspective was from the initial objectives for Reform. Remember those? Provide broader access to healthcare for the “uninsured”, and to lower the cost of healthcare for all. Even at the beginning of our year long journey, I thought those two objectives were at odds with each other, but like most Americans, I moved forward in faith that these disparate objectives might somehow be reconciled to one another.

As I read the words of the Patient Protection and Affordable Care Act (PPACA) Bill, I can’t help but wonder when our elected leaders lost total sight of the ultimate objectives. Neither of the primary outcomes will be achieved. From my viewpoint, we are left with an incredibly complicated set of rules, taxes, exceptions, and more twists and turns than the lines at Disney World.

In order to understand my interpretation of “Health Reform” more appropriately termed “Health Insurance Reform”, it would be instructive to establish my understanding of how this was all supposed to work. You have heard this from me before, but I will reiterate here in order to establish a proper framework for what follows.

Principles and Characteristics of Insurance:

  1. On a Macro level, insurance is a mechanism wherein many people pool their risks by paying a relatively small amount in order to cover the claims of the few that actually experience the event which they paid to insure themselves against.
  2. On a Micro level, insurance is “exchanging an unforeseeable, unbudgetable, financially catastrophic event into a series of affordable payments” (premiums).
  3. Insurance is typically used to protect against infrequent, but intense claims. Think of your homeowner’s insurance policy. I have paid my insurance premiums for years and years, and have never filed a claim. However, if I need it, a homeowner’s insurance claim is likely to be a big event.
  4. The price of insurance is predicated upon the risks in the pool and the overall claims arising from these pooled risks against which the insureds have paid their premiums.
  5. Ultimately, insurance is not a product – it is a “cost plus” service. The insurance company gathers funds from the members of the pool and pays out to those few with claims. Of course, the insurance carrier should also perform services that will help to impact claims costs. The carrier adds the cost of its overhead to the total claims for the year (including a “safety margin”), discounts these costs for earnings on any reserves previously established and this becomes the premium for the coming year.

Healthcare vs. Health Insurance:

Now, we come to “health” insurance. Prior to the early 1990’s, in Atlanta, we looked to the insurance carriers to provide “insurance”. There were no physician visit copays and relatively few prescription drug cards (those having arisen in the late 1980’s). Insureds did not engage the insurance company at all for physician charges, only for hospital-based claims (inpatient, outpatient surgery, advanced imaging, etc.). The insurance company was there for facility based charges, and for physician charges that exceeded our deductible. Deductibles during these years were commonly higher than deductibles today as they were for catastrophic coverage.

With the advent of Health Maintenance Organizations or HMO’s, it was decided that insureds could drive care into the discounted networks if we added a “Healthcare” component to the mix, and thus were born physician copays. After 1990, “Healthcare” and “Insurance” were merged to create Health Insurance. No longer did you need to pay your deductible up front, but rather, for $5 (initially), you could see a network doctor. Of course, at this time, drug card copays also flourished.


This gave rise to two systemic problems:

  1. Routine healthcare does not meet the essential definition of insurance. It is not unforeseeable – as we know children (or ourselves) will need some level of routine care each year. It is not unbudgetable (routine preventive healthcare services cost less than a $100 – even today). While routine healthcare may be inconvenient or irritating, it is not financially catastrophic. If insurance is a cost plus service, why are we paying the insurance company to process $100 claims (at a cost of $125), rather than expensing this directly? Of course this anomaly was exacerbated by a tax code that made the extra cost tax deductible – and by a robust economy.
  2. Routine healthcare is not an “infrequent” event. It can almost be “daily”. Insurance companies then had to get into the “claim processing” business in addition to being in the risk acceptance business. Routine preventive healthcare services required enormous increases in personnel, technology, etc. As such, the administrative overhead increased dramatically.

At BenefitStrategies, we believe we need to go back to looking to the insurance companies for insurance and go back to personal responsibility for routine healthcare issues. However, having someone else pay for our colds and flu symptoms is imbedded in our system. Further, we cling to unrealistic (unsustainable?) out of pocket limits. If we then add defensive medicine (due to tort law suits), improvements in technology, and mostly a system that provides services to all while only charging the few, it is no wonder American Healthcare is in a mess.

I have long been a proponent of health care reform. With 15 – 20% of the population having access to healthcare without paying into the system, it is no wonder that health insurance premiums have skyrocketed over the past 20 years. Add the 30% of the population covered by Medicare and Medicaid (which do not pay their fair share either), and it is hard to solely blame insurance companies for the cost of insurance.

So, health care reform was intended to address 2 issues:

  1. Get more people “insured”. The current legislation does not get more people insured (remember the definition of insurance – paying into the system and receiving benefits?).The current legislation merely lets people that were getting free healthcare at the emergency room seek free healthcare at the physician’s office (or ER if they so choose).If these folks could not afford insurance now (or chose to not buy it), they are certainly not going to pay into the system in the future. If the Congress was concerned about the “uninsured”, why do these folks have to wait until 2014 to be covered? How many unfortunate folks will die before 2014?
  2. Lower the cost of insurance. The Administration would suggest that getting more people insured will lower cost. Do you think the new entrants to the insured roles are healthier? Are they less healthy than those that sought health insurance (and had to be healthy to get it) currently? If we add millions of “less healthy” folks to the risk pool, and they still do not pay into the pool, how are costs going to go down?

Provisions that suggest costs will not go down include but are not limited to:

  1. Insurance companies can no longer underwrite insureds, but can only price their products based upon the (inflated) claims. Rates can no longer be based upon age. Do you think premiums for a 60 year old will go down? Or do you think premiums for the 25 year old will go up? But this is OK, because the 25 year old can pay a $95 fine and not buy insurance until needed. This is cheaper than an $1,800 annual premium.
  2. We are removing pre-existing limitations. Good for the insured, but costly for the risk pool when the unhealthy pay fines to the government until they are seriously ill and only then join the risk pool – and with no pre-existing limitations.
  3. Preventive care will be covered without any cost. Good for the insured, but expensive. Further, those not inclined to “get a physical” still will not – as the plan will pay unlimited amounts to fix them when they get sick.
  4. No internal limits on services. Good for the insured, but costly, as there are no restraints on unnecessary service (except perhaps rationing).
  5. I won’t go into the impact on waiting lines, etc. as the patient load for physicians’ increases exponentially.

Finally, until we address the overall health characteristics of our nation, claims will continue to skyrocket. Obesity and Diabetes is pandemic in this country and until we get the Cheetos out of their hands, nothing is going to change. Currently, 70-75 cents of every dollar spent on health care is spent on treatment of a preventable disease. Preventable diseases are those associated with a well-researched and widely accepted set of modifiable health risk factors (nutrition, weight control, exercise, cholesterol level, blood pressure, etc.).

Society at large is beginning to understand the long- and short-term consequences of poor lifestyle choices which brings me to the biggest problem with this Health Insurance Reform: Lifestyle Behavior is the single greatest determiner of health status which remains wholly unaddressed by the current healthcare reform legislation. Consumerism in healthcare is about behavior change—people taking personal and financial responsibility for their health and wellness. A better way of saying this is:

“Nobody spends somebody else’s money as wisely or as frugally as he spends his own.”
Milton Friedman, Economist and recipient of the 1976 Nobel Memorial Prize in Economics

In summary:

In the beginning, our system was a brilliant conception. However, it went wrong in the early 1990’s, and we have inherited an entitlement culture and have paid the insurance companies too much to do which they are ill designed to do. Then, Federal and State regulation added to the problem (Georgia mandates 138 healthcare items that have to be covered by insurance – whether or not the employer wants it covered). Ultimately, it has been access to healthcare without having insurance that has tipped the system over the edge. We now have more people taking from the system than we have paying onto it.

This version of health reform fails to address any of these issues, and will not achieve either of its primary objectives. In fact, I believe this bill is the result of a failed effort to install a single government based single payer system.

As this concept was politically untenable, I believe the bill as passed intends to destroy the insurance company based system altogether over the next 3 – 5 years, so the government can make a case for taking the whole arrangement over. If you think not, note the sections of the law that require Insurance Companies to pay out 85% of premiums in benefits. This leaves 15% gross margin with which to run their business. Could you do that? From where will funds come to establish claim reserves? To invest in technology? To cover their employee and equipment (and benefit) costs?

By 2012, the Director of Health and Human Services is empowered to decree what plans will be available for purchase, what rate increases will be allowed (we already have a Federal “rate increase regulation” Board being established), and it would appear that the system of fines and taxes established is disconnected altogether from healthy outcomes.

When the “exchanges” are established, there will be little incentive for employers to maintain health programs on behalf of their employees. It will be permissible to provide “fairness vouchers” or pay the fines and tell employees to get their own insurance. In the beginning, this will be cheaper. However, the cost will be paid somewhere, somehow. If the employer payroll tax is going up, employers will (rightly) decide to not pay this AND support an employer paid option.

I have attached a “best efforts” summary of the Health Reform Provisions and mandates and their impact on employers, individuals, and insurance companies. There are a lot of questions that remain, and a lot will not be known until the Director of Health and Human Services decides what is best for us.

About the Author: Carl C. Schuessler, DHP, DIA, GBDS is the Managing Principal of BenefitStrategies, LLC. an Insurance and Employee Benefits Brokerage and Consulting firm. We specialize in Insurance, Risk Management and Employee Benefit Consulting. BenefitStrategies helps improve your cash flow, save money and retain top talent with well-structured employee benefit and financial planning solutions. With more than 20 years of experience in employee and executive benefits consulting and financial planning experience, he guides large firms, privately held companies and executives through the challenges of evaluating planning opportunities. We pride ourselves on our ability to be creative in designing innovative, optimum plans and helping companies and individuals make the most of their financial resources.


For more information:
Carl C. Schuessler, Jr., DHP, DIA, GBDS
Managing Principal
BenefitStrategies, LLC. • 2776 Ridge Valley Rd. • Bldg. 100, Site. 150 • Atlanta, GA 30327
Direct (404) 941-5519 • Mobile (404) 277-7852 • Fax (928) 833-2265

Windows XP and Office 2003 Put your Practice at Risk after Apr 8, 2014

Categories: Articles

We would like to provide an update as it relates to the ‘end of life’ of Microsoft Windows XP and Office 2003. There has been a lot of buzz recently and it has been getting a lot of publicity in the news, generating many questions, prompting us to put together this information.

Windows XP was released August 2001; before Facebook or Twitter was even introduced to the world. Microsoft will end support officially on April 8, 2014 for Windows XP and Office 2003. Additionally, many Internet Explorer (IE) applications will be moving to and requiring Internet Explorer 9.0 to function; this is also not available with Windows XP. We have all grown to love Windows XP and these technology changes make a large impact to us all and preparations need to start occurring for anyone who has and uses Windows XP in their businesses today.

First and foremost, with Microsoft ending support and security patches, this will make XP computers more vulnerable to attacks and malware, even if these devices are not connected to the internet and are connected to a private network. Because of the end of security patches, after the end of support date, XP will no longer be an acceptable as part of your practice’s HIPAA compliant solution.
Many software vendors have already released that they will be requiring Internet Explorer 9 in future versions which is an additional reason why XP computers will need to be retired.

Upgrading the operating system OR replacing the XP machines will need to occur to protect the security of your systems and to meet basic HIPAA security compliance. Some computers may have hardware capable to run and upgrade to Windows 7. If the hardware is not powerful enough for the Microsoft upgrades, we recommend to pull, shred the hard drive, and recycle the old PC; replacing it with a new computer running Windows 7 Professional or Windows 8 Professional.

Many computers may have a Windows 7 Professional license running XP and can be upgraded. This can be checked by looking at the top of the computer at the Microsoft certificate of authenticity which will provide the version of the license.

Below are a few links from Microsoft which include so of the above mentioned dates and support.

Lump Sum Distributions vs Pension Plans

Categories: Articles

The Markets

If you found holiday songs or Beatles tunes humming through your head last week, it may have been your subconscious processing world and market events.

Over the river and through the woods/To Grandmother’s house we go… Janet Yellen, current Vice Chairman and nominee to be the next Chairman of the Federal Reserve System, testified at her confirmation hearing before the U.S. Senate’s Committee on Banking, Housing, and Urban Affairs on Thursday. Her comments were widely interpreted as indicating that current stimulus measures will remain in place. This made investors happy and helped push global stock markets higher.

In the United States, the Dow Jones, S&P 500, and NASDAQ, all appear to be headed toward milestones. The Dow is nearing 16,000, the S&P is closing in on 1,800, and the NASDAQ is approaching 4,000.

You say you want a revolution/Well you know/We all want to change the world… China’s third plenum of the 18th Central Committee, which also is being referred to as a blueprint for reform, a reform manifesto, and the Decision on Major Issues Concerning Comprehensively Deepening Reforms, is ambiguously phrased, according to The Economist. However, it appears to encourage:

“…Experimentation in everything from trading rural land to the freeing of controls on interest rates. Barriers to migration will be further broken down and the one-child policy relaxed. A widely resented system of extra-judicial detention, known as laojiao (re-education through labor), will be scrapped.”

China’s leaders also promised to elevate the role of markets in the economy. That news helped push Shanghai Composite Index higher last week.

HAVE YOU BEEN OFFERED A LUMP SUM DISTRIBUTION? Not too many employers offer pension plans anymore. You know, pension plans. The kind of retirement plans that employers used to offer; the type where employees generally didn’t contribute and the benefits they received in retirement were determined by their salaries, length of employment, and other factors.

If you’ve ever worked for a company that had one, it’s possible that the offer of a lump sum distribution may be headed your way. If you accept a lump sum distribution, you’re choosing to receive a pile of cash today instead of monthly or annual pension payments in retirement. Basically, you’re agreeing to take responsibility for investing the money and generating a stream of income during retirement so your employer doesn’t have to do those things.

Why are companies offering lump sum distributions? The Pension Protection Act of 2006 (PPA) established new accounting rules. Companies with pension plans must recognize their plans’ funded status on their balance sheets each year. Since balance sheets are scrutinized by analysts and investors, and lots of pension plans are underfunded, companies decided it was time to take action.

How underfunded are these plans? A Wilshire Associates report cited by Reuters found the difference between the amount that S&P 500 companies will owe to retired workers and the amount those companies have set aside to pay retirees is more than $1.5 trillion. How much is that? Well, if you took one trillion one-dollar bills and strung them end-to-end, the chain would stretch further than the distance from the earth to the sun!

Anyway, having an underfunded plan became a corporate finance headache. Two-thirds of companies that have pension plans are trying to limit the effect of those plans on their financial statements (69 percent) and cash flows (58 percent), as well as reduce the overall cost of their plans (41 percent), according to a recent Towers Watson survey. CFO Research in collaboration with Mercer said employers plan to do this by:

  • Adopting more conservative investment strategies
  • Transferring pension obligations to insurance companies by purchasing annuities
  • Offering lump-sum payouts to retired and current employees

In many cases, accepting a lump sum payout rather than having income from a pension may have a significant impact on your retirement.

Think About It

“The average 401(k) account balance fell 34.8 percent in 2008, then rose from 2009 to 2011. Overall, the average account balance increased at a compound annual average growth rate of 5.4 percent over the 2007-2011 period, to $94,482 at year-end 2011… The median 401(k) account balance (half above, half below) increased at a compound annual average growth rate of 11.5 percent over the period, to $42,082 at year-end 2011.”

— Employee Benefit Research Institute, June 2013 [12]

How Do You Know if You Need to Restore Your Pluck?

Categories: Articles

If you are full, well-rested and financially strained, you survived yet another Thanksgiving holiday. As we begin December and look ahead to January, we shift our focus to 2014 planning.

Keith Finger, a B2B marketer and NicheLabs partner, shared his thoughts with us, which we would like to share with you. In his post, Keith highlighted the importance of tapping customers and prospects to for valuable insights into both what we are doing well and what elements of our marketing approaches need tweaking.

How do you obtain reliable, external input? NicheLabs welcomes you to share your thoughts on this topic one-on-one, as well.

Is Your Marketing Plan a Turkey?
It’s November and hopefully you’ve done some planning for 2014. I’ve found that companies frequently make strategic decisions based on their unique view of reality, and without any external input. Of course, the way we look at our own businesses is vastly different from how prospects and even customers view us.
So how do you get reliable input? Here are some thoughts:
1. Do NOT talk exclusively with customers. They know you and may not give you the candid input you’d receive from non-customer. While customer feedback is important, don’t rely on it exclusively for planning purposes.
2. Do NOT rely on focus groups. It’s all too easy in a focus group for a few outspoken people to dominate the discussion and cause others to stay quiet or change their opinions, even with a good moderator. They’re also expensive.
3. DO talk with companies who are not your customers. This is the best way to get info on unmet needs, perceptions of the marketplace, competitors, etc.
4. Do NOT gather info from prospects you’re also selling to. It’ll make the sales process awkward.
5. DO gather info using one-to-one interviews, conducted by an inquisitive marketer. Find people to interview using LinkedIn and association websites. Send an email asking for their input for research and be sure to state the length of the call and assure them it is not a sales call in disguise.
6. DO interview at least 10 people. Twenty is even better. You need enough info to allow you to see patterns and make some judgments on actions to take. If you get an especially insightful response from one person towards the end of your calling, contact previous respondents to get feedback and confirmation.
7. DO prepare a basic list of questions but don’t read them off like a bad telemarketer. Be conversational. Also, it’s okay to veer off-course and probe particularly insightful responses.
7.5 One more point: hire a facilitator to run planning meetings. You’ll end up with better results if everyone participates and someone doesn’t also have to also run the meeting and log comments.

Comments? Questions? Click reply or drop Keith a note at or contact Hal at NicheLabs or 888-978-9254

You are not Planning to Move but don’t Overlook Your Renewal

Categories: Articles

By Stan Sharp

With new regulations coming from seemingly every direction, the looming implementation of ICD10 and the far reaching effects of the Affordable Care Act practices often overlook a significant source of bottom line savings, their lease renewal. When your practice has a lease which is a year from expiration you should begin the process of planning for a successful renegotiation.
That process involves many of the same elements you consider in looking for new space. You must first examine the clinical needs of your practice at that location in terms of your current needs but more importantly in terms of your needs over the renewal term. Based on that evaluation you must determine if your current space is able to meet those needs. If your current space does not meet those needs you must determine what changes are needed and the cost and practicality of those changes. You will be signing a long term high dollar commitment which will have a significant impact on your practice’s bottom line. Many practices fail to start the renewal process early enough and they fail to consider the renewal as an opportunity to plan for the efficient operation of that location into the future. The renewal gives your practice the chance to consider how changes in healthcare will change the requirements for that particular location in terms of the amount of space needed and in the layout of the space.

To examine your current and future needs you need to begin asking questions.

  • Do you plan to add or reduce the number of providers at that location during the term of the renewal?
  • If you plan an increase or a decrease in the number of providers how will what effect the number of exam rooms, restrooms, and doctors offices needed?
  • What changes should or could be made to the support areas based on the changes to the clinical areas which would necessitate either an increase or a decrease in the space needed?
  • Will changes in your practice change the number of staff needed (either by addition or subtraction) throughout that office?
  • Have equipment changes either in the front office or elsewhere caused the need for a redesign of the effected area?
  • Has the patient base either current or projected changed in such a way as to necessitate the need to re-examine the geographical location of that office?

Once you have asked sufficient questions and obtained sufficient answers you can determine whether your current space can accommodate your future needs both in terms of square footage and layout. This information can then be used to make design changes to your current office and to select alternatives to your current space which meet your current and future needs. The alternatives you select serve a dual purpose. At the end of the analysis one of them may provide a better alternative than your current space and they will provide valuable leverage which you can use in negotiations with your current landlord.

Once you have picked realistic alternatives you should work thru the process just as you would if you were looking for a new space in a new area. You request proposals from your current space and the initial alternatives you selected. Based on a comparison of the responses you will choose one or two of the alternatives as finalists. These finalists are then asked to prepare preliminary floorplans and construction pricing so that each of the finalists can provide an updated proposal which reflects the lease cost and the construction cost for that alternative. Using these proposals and the updated proposal you received from your current landlord, which reflects any proposed tenant improvements, you will negotiate between options to achieve the best possible offers from each. Remember that negotiation is a process not a one time request for terms. After you feel you have negotiated the best terms obtainable from each of the options, including your current space, you compare the options and select a winner. Once chosen you negotiate a final lease document with the winner.

The process of negotiating between your current space and the alternatives provides critical leverage to make sure that whether you choose to remain in your current space or choose an alternative you have a space that will meet the changing needs of your practice over the renewal term and you have negotiated the most cost effective terms. Too many practices skip this process and as a result leave significant money on the table but with prior planning you can make a positive difference in the outcome of your next renewal.

Stan Sharp is founder of HealthOne Realty Advisors. He can be reached at 770-578-4996 .

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