Prescription for Growth

The debate surrounding health care reform—both before its passage in March 2010 and through the recent mid-term elections—has been riddled with hyperbole on both sides of the aisle. But there is no question that the legislation already has triggered substantial changes in the insurance industry, and it will only continue to do so.

One such change is the rush by many independent agencies with significant employee benefits volume to diversify their book of business to offset the financial hit that is seen as inevitable by most in the insurance industry.

So it’s a little surprising to hear a benefits agency talk about the opportunities offered up by the legislation—and the firm’s decision to actually deepen its commitment to this uncertain segment of the insurance business.

But that is exactly what Farmington, Conn.-based Ovation Benefits is doing. Beyond its core business in benefits brokerage and consulting, the agency now offers a full suite of benefits administration, compliance and communication services in 50 states—focusing intently on providing sustainable health care cost savings through risk reduction and health improvement.

As a result of the reform legislation, says Bill Carew, president & CEO of Ovation, the agency expects to see reductions in its core commission levels and a dramatic increase in the amount of administrative support the agency needs to provide customers to understand and comply with the law. “This pressure on our margins will substantially and adversely affect our industry if we maintain the status quo,” Carew says.

Full Steam Ahead
While many agencies responded to the new environment by pursuing diversification, Ovation is entrenching further in the health care business.

“We said, ‘We like health care, and the problems within health care are not going away,’” explains
Carew. “So we decided to focus on the root cause.”

That cause, says Carew, is the “tremendous problems in the health of our population and the burden of illness for employers. With the epidemic of obesity and chronic disease, the problem of rising health care costs will get much more difficult for employers. So, while the market for traditional brokerage services undergoes this systemic transformation, we are looking to add value to the system by helping individuals to adopt positive improvements in behavior that drive better health, higher productivity and lower healthcare costs.”

After all, he says, “No one likes or wants to be obese,” but too many don’t know how to live a more healthy lifestyle. Plus, agencies like Ovation need to carve out a more differentiating value proposition.

“We’re seeing the commoditization of our work, and that commodity is getting squeezed,” adds Carew. “We’re middle men, and if we don’t add value, we’re out of business. [So] Ovation has merged market-leading benefits management with the science of good health.”

Beyond Wellness
Ovation has responded with an enhanced offering, says Carew that is “more than insurance, and it’s more than wellness. It’s about health improvement.”

The difference? Health improvement aggressively targets the highest-risk individuals—those with the greatest likelihood of developing such chronic conditions as heart disease, diabetes and cancer. As Bill Mauke, who leads Ovation’s health improvement unit, likes to say, “The heart is at the heart of this.”

Ovation recently launched Take Charge, a fully-integrated program for more proactive risk managers. Delivered through Health Navigators, a former partner that Ovation recently acquired, Take Charge assesses client workforces through Health Risk Assessments (HRAs) and Biometrics screenings. Through a simple blood draw, Ovation is able to identify the 10% to 15% who “spike out” in terms of their risk for these cost-driving conditions.

Those individuals are then invited to join an eight-week, on site, paid education series that offers nutrition information and tools that help change they way they live.

Carew points to the 80-20 rule as the basis for Ovation’s approach. “Twenty percent of the people are driving 80% of the cost. We want to get to that next 20% before they are too far gone.”
Carew points to a recent client with 120 people on staff who had exceeded $25,000 in health care costs in one year. Says Carew, “We target the next hundred.”

The data-driven program, Carew says, goes beyond placing insurance coverage, to deliver sustainable health care cost savings, measurable improvement in health outcomes and high rates of employee engagement and satisfaction. “In other words,” he adds, “not your father’s insurance agency.”

New Decision-Makers
That level of commitment isn’t for every client, concedes Carew. “But we don’t need to be all things to all people, ” he says “We go where we can have the greatest impact.”

And that means targeting a specific kind of employer. “Our view is that the overall cost of health care will increase 10% to 15% in the next five years,” he says. “But it is the passive organizations that will see the biggest increase. There is another segment of employer that is best-in-class in performance—that is progressive and strategic. They’re our target.”

Relating his niche to property-casualty, Carew likens this progressive employer to the workers’ comp customer that emphasizes safety, ergonomics and other methods of loss control. This ideal client won’t think simply about the insurance coverage provided, but will fully leverage the many tools available to reduce the health issues that plague the system as a whole.

Such customers are looking for more than mere wellness newsletters (although Ovation provides those, too). They need reliable, sustainable means to improve the health of their workforce in order to demonstrably reduce cost, increase productivity and reach hiring and employee-retention goals.

And the decision-maker at such organizations, says Carew, is increasingly the CEO—not the HR manager or even the CFO. “It’s very much a cultural commitment,” he says, “and the top leadership’s involvement is the first criteria for success. The CEO is leading the charge.”

Even with a company’s top leadership fully engaged, sustaining employees’ healthy living is “the essential challenge,” says Carew. “Helping employees and their families sustain these changes is the hardest thing in the world to do.”

But it’s worth it, says Carew, because “the work we do is not only saving money, it’s saving lives.”

Van Aartrijk (peter@aartrijk.com) is an IA contributing editor.

Nabbing the Next Generation
For Ovation CEO Bill Carew, the value of social media is a matter of numbers. “If there are four generations currently in the workplace, social media gets us at 1.5 of them,” he says. With so many boomers aging out, we’d be crazy not to have a strong social media presence.”

The firm’s overall online positioning began a couple of years ago with a new website that looks unlike those of most insurance firms, with edgy photography and graphics that appeal to younger audiences. The site is linked to multiple social networking applications, including an active Facebook account and Carew’s blog.

In the first quarter of 2011 the firm rolled out Ovation Nation, in which six or seven Ovation employees contribute content ranging from diet and exercise to health care reform policy.

“We’re like that commercial [for East Coast clothing store Syms],” says Carew with a laugh. “‘An educated consumer is our best customer.’ Smarter buyers are going to build relationships with us and give us a level of trust. Social media is an innovation occurring within the business world.We need to communicate better with the people we serve.”

—P.V.

Ovation Benefits
Farmington, Conn., and Atlanta
FOUNDED: 1987
GROSS REVENUES: 2008, $6.5 million; 2009, $7.2 million; 2010, $8.0 million
EMPLOYEES: 45
REVENUE PER EMPLOYEE: $178,000
BUSINESS MIX: Employee benefits, 100%
CLIENT COUNT: 230 firms and 120,000 insureds
RETENTION RATE: 98%
CARRIERS: All (benefits is an open market)
TECHNOLOGY: Homegrown
CONTACT: Bill Carew, president & CEO; 860-982-5576; william.carew@ovationbenefits.com; www.ovationbenefits.com.

What We Learned
Although Ovation Benefits saw an overall increase in revenues through the current recession, CEO Bill Carew says he regrets “not peeling back our own growth plan quickly enough during the financial crisis and ensuing economic downturn.”

The firm “tried to grab additional market share while the rest of the world was distracted by the collapsing economy,” Carew says. “Slower sales in this period produced a cash drain that we underestimated for five or six months, and we spent the better part of 2009 strengthening our foundation to prepare for our next wave of expansion.”

—P.V.