David Contorno: A Change Agent Disrupting the Health Insurance Sector

The right to good health and health care might be a basic and primitive one for all of us, however, it is expensive for most of us. The healthcare plans that we take up hopefully to help us when we are in dire need of it, often leave us with less satisfactory results than promised.

Having sold “health insurance” most of his life, and seeing the rates go up and the benefits go down, year after year after year, David Contorno was concerned and decided to do something different.  He realized that our healthcare system is not broken, despite popular belief.  It is working exceptionally well for those that designed it. It just wasn’t designed and isn’t working well for providers, employers, or patients.  But it is making a whole host of shareholders and executives VERY wealthy. This is when he founded E Powered Benefits, an agency known for value-based, transparent, self-funded health plans that share their fees up-front, never taking health plan commissions, and creating care delivery relationships that incentivize high-quality & low-cost medical care for all patients.

Stepping into the Industry

David had his first job in insurance at 12. He was telemarketing life insurance to people at home to agree to a face-to-face meeting with the agent he was working for. He was quite successful at it. After that, he worked for a chain of camera stores for a few years. One day, he joined his roommate as he went in to work with his dad. The friend and his dad sold group health insurance plans to small and medium-sized businesses. That was David’s first entry into the area of insurance he is still in today. That occurred nearly 30 years ago.

Today, as the Founder of E Powered benefits, David and his team build customized health plans for all sorts of employers around the US that cost somewhere between 40%-60% less than they are spending today and at the same time, give their employees and family members a path to get many services and medications with zero out of their pocket. This includes plan creation, benefit creation, risk mitigation, employer/employee education, day-to-day administration, and the renewal process.

“Our plans are completely transparent. Whereas most employers are paying millions into a black box, our plans allow for complete transparency.  In addition, we ONLY get paid by the client for the health plans we build.  We post our fees on our website.  And we tie our money to delivering savings by capturing a small piece of how much we save the employer from their prior plan,” he shares.

The agency specializes in working with Employers that truly care about their employees, but recognize the need for creative solutions that help bend the trend on rising health insurance premiums and at the same time, increase employee satisfaction with the benefits package we are all paying a lot of money for. In addition to directly building plans, they have several outlets through which they teach others (essentially their competition) to do the same.  David’s wife and business partner have created a full-day course that he helps teach, as well as an annual in-person conference called the ‘You Powered Symposium’ where they get several hundred of their industry peers, plan partners, and many clinicians together to teach, learn and share over a 3-day period.  David also created a mentorship program where he works with other advisors and their clients to teach the advisor how to build and manage these types of health plans.

Overcoming Challenges

The biggest challenge, per David, is overcoming several decades of people before him, many of whom are at large brokers or carriers, promising them way fewer savings than he can deliver, and never delivering on that promise, at least not long term.  So, he has to get them over the disbelief of much larger entities who have failed them.  In addition, he needs to get them to understand that healthcare and health insurance are not the same thing. 

“If you really want to simplify what we do, we just change who is cutting the check and how the amount of the check is determined. But it still strikes fear (often unjustified) in employer’s eyes,” he says.

Spreading Awareness

People, in their individual capacity, can also help themselves against the rising healthcare cost. David would like them to know that most hospitals are non-profit, and as such, they must follow IRS Code 501r, which requires them to have a financial assistance program that applies to insured or uninsured patients.  About 70-80% of America would qualify for most or ALL of their bill to be wiped out.

But the hospital often bonuses their financial counsellors to get patients to agree to anything but that. Like “Pay today and we will take 25% off” or “Can you afford $250 per month until this is paid?”.  They often even make it hard to find on their website. But if you know what to look for and know where you can save lots and lots of money on hospital bills. 

“That is just one of many examples to stop the system from taking advantage of you.  And please, do not feel bad for the hospitals.  They get billions of dollars in tax breaks, which means people who live in the area of a non-profit health system are paying higher taxes and/or rent,” he reveals.

Persistent Challenges

The industry, points out David, hasn’t changed for decades.  And the status quo carriers, brokers, etc are benefiting from the current system.  This is the one industry that he is aware of where:

1) As costs go up, the carriers and hospitals make MORE money, whereas in most businesses, keeping costs low increases profit

2) Neither the provider of the services (medical provider) nor the receiver (the patient) knows the price until after services are rendered. 

3) Although they do it under the guise of lowering costs, when health systems combine, pricing ALWAYS goes up. 

4) more competition in healthcare means higher costs, not lower costs. 

5) There is a positive correlation between supply and demand (as opposed to the inverse as we were taught in High School). For example, when a brand drug goes generic, and only one generic manufacturer makes it, the pricing is generally lower than when multiple sources manufacture it.  Another example….when a hospital puts in a new MRI machine, in which there was no shortage to begin with, they pay doctors using a system called RVUs (relative value units) to pump up the demand artificially by paying them more when they use the hospital-based MRI machine.

Lastly, there is one thing the healthcare system is desperately afraid of……people being healthy.

If we were all to suddenly get healthy, both the healthcare system and health insurance system would collapse nearly instantly.  Luckily, E Powered Benefits have developed countermeasures to most of these dynamics.

David highlights one example here. “Most people are unaware that an entity with every health plan, called a PBM (Pharmacy Benefit Manager) is actively marking up the cost of medications.

PBMs have become more profitable than the insurer (that usually owns them).  For example, Optum, Unitedhealthcare’s owned PBM, provides more profit to the company than the Insurance division.  The biggest source of that revenue is called “spread pricing”.

This is basically where the PBM charges a higher price to the health plan and the patient than they pay the pharmacy.  The difference is called the spread and is pocketed by the PBM.  Not only does this dramatically increase costs (I have seen markups of 500% or more) but it disincentives the PBM from doing this strategy I am about to share with you because they would make less money if they did (all the plans we build also have PBM’s but we only work with ones that do not allow those games to be played and get paid completely different and more aligned with lower costs).”

Recalling an incident, he says, “I had a small company in Utah reach out to me because they were facing a 40% increase from one of the national carriers.  And this carrier had the gall to say “You should be thankful its only 40%.  You have a haemophiliac in the group taking a medication costing your plan $100,000 each month”.  The first thing I did was look up the actual cost of that drug, and it was $22,000.

That means that this carrier was making an extra $68,000 every time this little child needed his medication.

But, $22,000 a month for a group this size is still too much.  So, I had to do some digging (the manufacturers don’t make this easy to find, but nearly all name-brand drugs have this program) and I found the details on the PAP (patient assistance program).  Now I am not talking about a coupon.  I am referring to a program where the manufacturer must send you the drug for free.

There are two requirements both of which must be met.  First is income based and while it does vary from drug to drug, about 90% of US households would qualify.  The other requirement is that you do not have ANY coverage for that drug.  So, you are either uninsured or your plan specifically excludes that drug.  If I were to ask the prior carrier to remove this drug from coverage, meaning they wouldn’t fill it anymore and therefore not make the extra $$ each month, what do you think they would say?  (I’ve asked, and they say no for a whole host of untrue reasons). But because the PBMs we work with do not get paid that way, we remove the drug from the covered drug list, and we have a navigator that gathers the paperwork and submits it on behalf of the patient.  Bingo!

A drug that was costing $1,200,000 per year is now free.”

Plans for His Team

In the coming year, David expects his team to grow through their teaching and mentorship programs. He wants an army of people out there building plans with similar results so that they can free up massive resources to pay people more, help them prepare better for retirement, and live a life, where going to the hospital doesn’t strike fear into them over the financial ramifications.

Message for the Budding Entrepreneurs:

As their company grows, make sure they have experts internally and externally that don’t allow bad results year after year.  They should apply the same intelligence, efficacy, and demand for information from their health plan as they used in their core business to be successful.

Quote: “There is only one way to pay less for healthcare…..you have to pay less for healthcare.”

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