Today on the Stride 2 Freedom podcast, we chatted with Dave Chase, the Co-founder behind Health Rosetta. Not only is Health Rosetta a robust forward-thinking company, but it’s also a movement, helping employers provide better healthcare to their teams while reducing costs by 20 to 40%–that’s huge! And a big deal for businesses looking to support their employees with health coverage and peace of mind.
During our chat, I learned how employers can gain control of their healthcare costs for the benefit of their business, but also for the hope and the health of their employees. I have known Dave for a long time as an entrepreneur, as a critic, and as a passionate champion to tackle the entrenched players that have made healthcare one of the most punitive pillars in our society. I’m really excited to share his insights with you!
One of many great pearls of wisdom Dave gave us may surprise you, but in his words, at the end of the day healthcare isn’t all that expensive–the money to provide quality healthcare is being allocated elsewhere. And unfortunately, as individuals, we’re paying high-end prices for scraps in health outcomes. So why aren’t we getting value out of our healthcare? You’ll have to listen to the episode to find out!
What’s amazing is that previously, small business owners, entrepreneurs, and companies that may not have massive budgets to provide health insurance options can do so within their means these days. The options may be limited when you have a small team, but the building blocks are the same. It’s worth looking into, as you may be able to provide primary care and catastrophic options to your employees more affordable than you originally anticipated. And Dave provides insights on how it’s achievable for more than just major corporations with large budgets.
Who should I interview next? Please let me know by clicking here.
In this Freedom Speaker Series episode with Dave Chase, you will learn:
- Why healthcare is affordable but pricing doesn’t match reality
- How small businesses can provide coverage for their employees
- How to navigate health insurance for businesses in the COVID era
- Why a system change model is essential to creating a snowball effect of change nationwide
We are fortunate to have Dave available to spend time with us on this edition of Stride 2 Freedom. If there is a speaker you’d like us to interview, click here and let us know. Stay well. Stay safe. Stay healthy.
Show Notes and Links From Episode:
Russell Benaroya: Hey everyone, welcome to the Stride 2 Freedom podcast. My name is Russell Benaroya, and I’m the co-founder of Stride Services, a virtual back office, bookkeeping, and accounting firm serving hundreds of clients around the United States.
This podcast is designed to help small business owners focus on growth and innovation. In other words, focus on those things that inspired you to start your business in the first place. We call it your genius zone. We do our job on this podcast when business owners feel like they have the trust and confidence to build the right team of partners around them that will help them grow. Thanks for joining. Let’s go.
This week, I’m excited to welcome Dave Chase to the Stride 2 Freedom speaker series. Welcome, Dave.
Dave Chase: Hey, thanks for having me, Russell. I really appreciate it.
Russell Benaroya: Such a pleasure. Dave is the co-founder of Health Rosetta, a movement, but also a company that’s helping employers provide better healthcare for their employees while reducing healthcare costs by 20 to 40%. Dave has been a provocateur for many years, challenging the status quo. He’s the author of two widely read books. One is The Opioid Crisis Wake-Up Call and The CEO’s Guide to Restoring the American Dream.
For this episode, we want to learn more about how employers can get control of their health care costs for the benefit of their business, but also for the hope and the health of their employees. I’ve known Dave for a long time as an entrepreneur, as a critic, and as a passionate champion to tackle the entrenched players that have made healthcare one of the most punitive pillars in our society. Let’s jump in and learn. Thanks for joining us, Dave. It’s such a pleasure to have you.
Dave Chase: It’s going to be fun to talk. We’ve had lots of good chats over the years.
Russell Benaroya: Well, I started off on your website using this calculator that you created. I put in some information about my company’s revenue and my profitability and the amount that I’m spending on healthcare today. I chose to take a more aggressive or innovative approach on your website and it said I could reduce my healthcare spending by 30%. How am I going to do that and maybe wrap that response into why Health Rosetta even exists in the first place?
Dave Chase: I think what’s surprising to most people is healthcare isn’t expensive. The clinicians are only getting 27 cents of every dollar that we ostensibly spend on health care. Where is the rest of that 73 cents going? That is not going to make us better. You could argue it’s made us much worse.
If you look at the data, the reason that the working middle class hasn’t gotten a raise over 20 years is healthcare. It’s not that employers aren’t spending more on employees. It’s just all gone to healthcare. If our lifespans had increased 50-100%, that’s a fair trade-off. Unfortunately, we’re paying Cadillac prices for Pinto health outcomes. Why is it that we’re not getting value here? It just comes back to the way we purchase, just doesn’t work and it’s not smart. That’s really what drove us.
That’s really why we started. We found that people, at the extreme, are spending 55% less with the best benefits package you’ve ever heard of. It’s absolutely possible. It’s happening every corner of the country, rural, urban, small companies, large companies, private, public. It’s not mainstream yet, that’s our challenge. I joked that you had, on the one hand, this near dystopian system that’s stolen the American dream and caused record levels of burnout, even suicide amongst clinicians. On the other hand, we have this almost utopian system where you get incredible outcomes and the clinicians are happy. It’s just a marketing problem. Everybody would want that.
Now, it’s a marketing problem of the century because there’s three and a half trillion reasons to protect the status quo, but that’s what we’re about. You only change those things with broad grassroots movements that have a very long time period. We’re on that journey.
Russell Benaroya: I listened to a Tim Ferriss podcast and a gentleman by the name of Jim Dethmer was being interviewed. He wrote a book called The 15 Commitments of Conscious Leadership. He said, “I’m a smuggler. Nothing in this book are original ideas. They have all existed, I have just figured out a way to make them approachable and actionable.” That’s what I took away from what you just said. There are success stories out there, I’m figuring out a way to make them more mainstream. What are those that have found success doing differently? How are you building the package to hopefully bring this mainstream to a critical mass?
Dave Chase: It’s a five-step, very straightforward process. I use an acrostic that spells out LOCAL. What’s more local than healthcare? What’s more local than an interaction between a patient and doctor? Yet you take the county I live in, about a quarter-million people, so about 2.5 billion is spent on healthcare. At least a billion of that is extracted out of our local economy. I think it’s one of these great opportunities for shop local, to come back to healthcare. It’s a straightforward process.
The L stands for “Learn to leave behind the status quo”. It’s just simply mindset shift. Most people think about healthcare the way they think about Middle East peace. It seems really impossible to solve and hopeless, and they just throw up their hands. We disabuse them of that notion, just burying them in avalanches of case studies.
O is “Optimized plan infrastructure”. How do you work with your benefits consultant and all the underpinning legal agreements? Embedded in those are things that tie your hand and enable profit sharing and price gouging. You just need to do spring cleaning on that.
The C is “Carve out PBM (Pharmacy Benefits Management)”. There are more shenanigans going on in the pharmacy drug supply chain that you can imagine. There’s really easy money to be found there. You do that and you fix that.
By the way, these first three steps, the employees don’t even notice at all, other than maybe in the case of pharmacy, their cost-share sharing goes down or away. If you’re concerned about this being disruptive to employees or whatever, those are invisible.
The fourth step is the first thing that’s visible but only in a very positive way, “Add value-based primary care”. There’s not a well-functioning healthcare system in the world, not built on proper primary care. Just as we destroyed the American dream over the last 20 years, we’ve destroyed primary care. So we rebuild it. The company that I talked about in my TED Talk that was spending 55% less, almost the only thing they’ve done is done primary care exceptionally well. They’ve cumulatively saved $400 million over the last 20 plus years compared to their benchmark companies.
The second L in LOCAL is “Leave behind value-extracting PPO networks”. In the hands of amateurs, that can have a negative experience on members. Basically, our program is about training and educating the people who put in the plans, the architects of health plans. We accredit them and give them the tools to make it easy to do. Those ones know how to do it.
It’s just a positive because you could be Johnny with a high school degree, you understand zero. Zero is, if you go here, often the same doctor, different facility, you’ll pay zero. In fact, the only paperwork you’ll deal with is a Thank You survey after that surgery or whatever you got. People understand zero. That’s what we do, is just streamline that stuff. Every 50 to 70 years, there’s a big transformation reset. We’re overdue, and that’s what’s going on now.
Russell Benaroya: If I’m an employer, do I come to Health Rosetta and say, “Hey, I want to reimagine my benefit design. I need some help to do that. Do you facilitate that?” Is that your role?
Dave Chase: What we end up doing with somebody or an expert in your situation, maybe you’re a large union trust or it’s a state plan or it’s a municipality, we basically matchmake the folks who know how to deal with that. Then we collaborate with them, and we support them. We’ve provided them some tools to make it easier to do it. Doing these plans is sort of like doing open-source software 15 years ago. You could do it, but it was a lot harder than it is today. You can go to Amazon today and you can have this open-source infrastructure just ready on demand.
Our job is to make it easier to do these plans because it’s more work than hitting the easy button with the status quo plan. That’s easy but it’s really expensive and damaging. We want to make it just easier and easier to do these high performing plans.
Russell Benaroya: Most of our clients are in the sub-10 million in revenue range, a lot of Main Street business, small business owners, entrepreneurs. Is this structure accessible and available to a $3 to $10 million revenue business as it is to 1,000 employee business?
Dave Chase: Definitely. We feel like we’ve got to practice what we preach. We’re all of seven people on our health plan. We’ve got a couple of international folks that are on our plan. The options are more limited when you’re seven employees, but the basic building blocks are the same. We start with proper primary care, we have a very high deductible plan for the catastrophic stuff. Then, essentially, we self insure for the stuff that’s below $10,000. We can afford that even as a bootstrap self-funded startup.
Now, when you get above 50 employees, your options become much more expansive. Obviously, different companies have a different number of employees per person, and that’s where we matchmake. We get a lot of people who’ve got four employees, seven employees, 14 and we’re like, “Your options are more limited, but we feel your pain.” In our case, the guy that we work with is in South Carolina. So you don’t need to have them down the street. In fact, the guy down the street, frankly, is operating with way too limited of a toolkit for you.
Russell Benaroya: What you’re saying is the ability for a company of 5 to 10 to 15 employees to self-insure, that has always felt like a thing that only is available to companies of 100, 200 plus, but the market has evolved to make it accessible for small employers? I think that’s a real lightbulb for many of us.
Dave Chase: Well, we’re not self-insuring for MS, but we’ve forced the equivalent of going to Jiffy Lube through insurance, which makes no sense. We don’t use our homeowners’ insurance to get a new fridge or paint our house. Those are predictable, budgetable items, unless you like paying a 40% insurance bureaucracy tax, why force that through insurance?
From an employee perspective, it can look like their traditional insurance in terms of how it’s processed, but from a company and financial management perspective, you’re really not accessing insurance. In fact, I would argue that what we think of typically as so-called insurance companies in the US, they really are just claims processors.
Even when you’re “fully insured”, I guarantee you, if you have a bad claims year, they’re going to claw back that revenue in the subsequent years. So you’re already carrying the risk. The real insurers, besides the employers and employees, are what I call stop loss or reinsurance companies for the shock claims. Some of the so-called health insurance companies still have that. If you do risk management like people do on property and many other things, this is not foreign. It just hasn’t been applied in this way here because of some of the history of how health benefits came into practice.
Russell Benaroya: If I called my broker today and I said, “Listen, there’s a better way to do this. I’d love to evaluate a different structure,” why couldn’t that broker help me accomplish it? Where are their hands tied for the most part?
Dave Chase: For the most part, we have a dynamic where there are people representing themselves as representing the interest of the buyer, but they’re paid by the seller. If I was to sue you, Russell, and also pay for your attorney, wouldn’t that sound weird? That’s how health insurance has worked in this country.
In fact, when you’re smaller and you’re in the carrier-controlled plans, the “fully insured” market, the worst job they do, the more they get paid. They’ll get paid a percentage of the premiums. Even when they’re larger and it’s less overt, they still benefit when spending goes up. Basically, if they haven’t brought anything to you in the last 5 or 10 years, in the real market, prices haven’t gone up in 5 to 10 years.
If you think about it, are nurses and doctors fundamentally paid differently? Have their inputs changed? No, there’s this whole fiction of medical trend. Other than the exceptions here and there like specialty drugs, there are a few things that have gone up. If they haven’t brought that to you in the last 5 or 10 years, you have to ask yourself, do they actually have the tools and motivation to do it?
The way they’re referred to in the industry is they’re called producers, which is a weird name for somebody who’s supposed to be a consultant. Who do they produce for? For the carrier. The carrier grants them the right to sell their product which they can yank in 30 days. For all intents and purposes, they’re the employee of the carrier. They’re not bad people. That’s just what they’ve known.
If you look at our community, almost all these people are people who had a moment of awakening, like, “I thought I was doing right by my clients. This is a disaster.” We’ve got a movement going. People are like, “Oh, my God, you can do this. Lots of people are doing it? How are they doing it?” That’s why we’ve had this explosion of interest. We’re actually in the middle of it right now where we accept new advisors. We’ve had 500 apply this go around. Other than email or a few social media things, it’s not like we’re really aggressively marketing at this point. It just shows.
We had a recent summit and there was an investigative reporter who was there that we invited in. He was like, “I’m really surprised at the makeup of the audience here. There’s way more middle-aged white guys than I thought there would be.” It’s largely a middle-aged white guy industry as far as the benefits consultants. No offense to them, I’m one of them. There’s a huge cohort of people who’ve been in the industry 20, 30 years, had this moment of awakening, and they’re like, “I’m going to make it right the rest of my career. I know where the bodies are buried. I’ve learned how to do it and I got to do things right.”
Their loyalty is to their clients and not the carriers. That’s where they’ve realized like, “I want to be paid by my clients, not by a seller of some services.” That’s a big change.
Russell Benaroya: Do you certify advisors as Health Rosetta certified in communities across the country so if I, as a business owner, want to find a broker that embraces this ethos, I can do that because I can find out who is in my local market and that they have the Health Rosetta designation?
Dave Chase: We have a map on our site you can go to, but you can just put in an inquiry. We’ll do some imagining because it’s possible that the person closest to you isn’t the best fit for your particular situation. There are situations like that. By and large, we don’t have people in all 50 states, but we have people who cover all 50 states. They are pretty scattered around.
Russell Benaroya: Because the compensation structure is probably different, meaning they’re not getting paid by the health insurance company anymore, how do those advisors then get paid?
Dave Chase: Generally, it’s a consulting fee or a management fee. Generally, the way things are paid for in health benefits is on a per member or per employee per month basis. Sometimes they’ll get paid that way, sometimes it’ll be a hybrid. They’ll get some baseline consulting and then they’ll have a performance bonus like if we drop your overall spending 20%, we’re going to share in some of that savings. Some people do it that way. We give people different ways of doing that. We don’t dictate how they do that.
Russell Benaroya: You are such a great storyteller, Dave. If you had to write the story of Health Rosetta over the next few years, what do you envision that story unfolding like?
Dave Chase: What I’m good at is relaying stories that are already happening. I can tell you the story of Tyler, Texas, and how Tyler is going to become the norm. I’d never heard of Tyler, Texas two years ago. One of the advisors that we’ve accredited down there, just absolute butt-kicker. What we see is something similar to what happened with Lead. Lead was for the built environment, they accredited professionals like architects like in a lot of ways we modeled after. What you saw with Lead was it was geographically concentrated in places like Portland, Austin, Boulder, and then it spread out. That’s really our model.
You see this rule of three, and this is what happened in Tyler, where you have three employers do it. They save huge amounts of money, you’re getting track record and understanding that market, that then helps you get to nine. At that point, the market starts to notice. Three, nobody notices. Some of the providers or maybe you have some direct contracts, and now you’ve got about 10 CEOs who are spending, I think the worst one performance-wise is spending 40% less than what they were doing before. Then you get to 27 and it’s game over. These CEOs can’t shut their mouth. The outcomes are improving for their employees.
One of the cool things that’s happened there is with the COVID happening recently, that benefits advisor, she and her husband own a restaurant. It’s a Wonderful Life type moments where when COVID hit, everything from chicken processors to a surgical hospital to telecom cooperative, all of a sudden, their restaurant just started getting orders through the roof for takeout because they knew Rachel and Robert own this restaurant. They looked out for them and now they were going to look out for them. Through the whole COVID thing, they didn’t lay off one person in the restaurant.
That’s what happens. It’s really about what I call community-owned health plans. You leave that renter mindset like, “I’m just going to rent a health plan from Wall Street,” to, “Employees are our most valuable asset and we want to steward that asset carefully.” It’s amazing. These people are able to pay for their kids’ college. A cashier who didn’t take a vacation ever since she’s gotten married and had kids because of the cost-sharing on her drugs, now they can take vacations.
Those are the stories that really impact me. These people are struggling. Over half of the workforce makes less than $20 an hour. The average family of four premiums are over $20,000 and the average deductible is a few thousand dollars. That math doesn’t work. We can make it work if we get rid of price gouging and profiteering and that’s what’s happening.
That’s really the system change model that we’ve applied. You find these microcosms of success, and then it’s mass replication. People see, “Look what’s going on in Tyler. We can do that in Denver. We can do that in Kansas City. We can do that in Ellensburg, Washington, or Spokane or whatever.” That’s really what we see, is just replication of what’s happening.
Russell Benaroya: As the CEO of a business, what do I need to be ready to do in order to embrace this change? How do you condition me to be ready to say, “Yes, take the next step, make this leap,” and be ready for a different way of acting, leading, functioning?
Dave Chase: Mr. CEO, you’re in the healthcare business whether you like it or not. Here’s how to make it thrive. It’s often the second or third biggest cost. Rather than turn off your brain when it comes to procurement of this important service, just do what you do in every other area of your business where you buy quality, you budget, and you have expectations. In a lot of ways, it’s been the supply-centric industry.
We’re both from the Seattle area so I’ll use this analogy of Boeing. If Boeing worked like most employers work on health benefits, they’d say, “Hey, aviation industry, we’re going to build a new plane. Send us your parts,” and then they try to put them together. That plane would probably never get off the ground. If it did, it would be a mess, which is basically what we do.
We’re like, “Hey, we’re going to do a health plan. Bring us all our stuff.” No, you say, “Here’s what we want. Here’s how we want to buy it. It’s a privilege for you to serve our most valuable asset, and here’s the way we’re going to purchase.” Even in the PBM arena, the big three PBMs that dominate 80% of the market, a lot of people think you can’t get any value out of them. One of the three, if you actually frame it right, you can get good deals out of them. Just most people don’t, and they don’t have people who know how to do that.
Russell Benaroya: What is something you wished folks would ask you about Health Rosetta or the industry at large that they don’t but you’d love for them to? I’m giving you the opportunity to do that right now.
Dave Chase: Probably the biggest thing is, why is it that a third of our dollars spent on healthcare, get extracted out of our local economies, out of our businesses don’t go to healthcare at all? The ultimate expression of humanity is our healthcare system at its best. Right now, it’s not a great reflection of our humanity on many different levels. Again, get back to the root.
We have incredible nurses and doctors and PTs and all that. Let’s free them up to do what they do best rather than have them be glorified billing clerks, which is sadly the position many of them have been turned into. That’s the biggest thing. Just ask why, and if you aren’t satisfied with the answer, ask why to some other people and ask again and again and again and you will get to the root.
Russell Benaroya: Dave, I want you and Health Rosetta to be wildly successful for the benefit of millions of people. Thank you for all the work that you do. If I were listening to this and I wanted to get off the phone and I wanted to take that first action as a business leader, what would you recommend that they do?
Dave Chase: They can go to our site, and they can download my books for free off our site. They can get a little sample. If they want a hardcopy, great. It’s good to get educated. Nobody’s born with this knowledge. You will certainly have your eyes open as you glance at that. We actually just produced an executive summary of The CEO’s Guide. We’ll make that available.
You got to hire the right person, or at least get a second opinion. We’re used to getting second opinions for serious issues in healthcare. You should get a second opinion on whoever’s delivering your healthcare benefits because chances are you could be doing a lot better. You can’t get from here to there without the right person on that.
Occasionally, people will bring that in house, but that’s very rare. There are great people out there, and we’ve helped matchmake four-person companies. On the other end, we’re helping people on 800,000 statewide employee health plans and everything in between. There’s not a place where you can’t do this. Even individuals, there are even some options you can go for. You just have to be willing to drive to the right answer because you’re not going to always get the right answer right away.
Russell Benaroya: Dave, I appreciate you so much. You’re right, it’s so easy to just push the easy button and go with the system as it’s currently constructed. If you just stop for a minute and approach this service as you would the evaluation of any other service, you’re going to have a framework. You’re going to put some rigor against it, you’re going to do your research. You, fortunately, have provided an avenue for us to do that. The more people that understand it, the more employees around the country are going to greatly benefit from health and happiness. Thank you.
Dave Chase: I have to jump in because you mentioned earlier on the calculator. I was just talking to the CFO of a company, Pacific Steel. They took their spending from over eight million dollars to under three and a half million while benefits improved. We applied this calculator that said, “What would you have to do in terms of increased revenue to have the same EBITDA impact as getting smarter on your benefits?” I wanted to fact check what I’d been saying. I said, “Tim, I’m thinking you probably would have increased top-line sales 20% to have that same impact.” He’s like, “No, actually more like 25-30%.”
That’s pretty tough for a mature, sizable organization. Use that calculator. There are very few things left that can deliver that kind of EBITDA right now, particularly in a tough economy. I definitely encourage people to play around with that.
Russell Benaroya: Love it, Dave, thank you so much. I’m going to add links for information access into the show notes. I just want to thank you for joining us today on this edition of the Stride 2 Freedom podcast. We wanted to talk health care with a very disruptive twist and you certainly delivered as you always do.
There is a way out. We can do this together. Thank you for not just giving us hope, but also the tools and the actions that we can take. Thank you for spending time with us on this edition of Stride 2 Freedom, Dave. We really appreciate your time.
Dave Chase: Really appreciate the privilege to be on your show. Thanks again.
Russell Benaroya: Thanks, everybody. Have a great day.