Sometimes, looking at a problem from a different perspective can create an entirely new market.
Alex Tolbert wasn’t the only person puzzled by the relatively slow adoption of health savings accounts when they were introduced about a decade ago. In many ways, they offered a stronger product and had the potential to take billions in costs out of the system while educating a significant portion on the population how to better control their spending.
Single, in his mid-twenties and working on his JD/MBA at Vanderbilt University, Tolbert launched Bernard Health in mid-2006 and began cold-calling employers to try to help them get a handle on their health care costs. His efforts to sell them on HSAs didn’t take hold very often. For many business owners and HR executives, it was and still is easiest to stick with the safety of the same-old amid the hubbub of running their businesses.
“I was not touching them,” Tolbert says. “But I recognized the opportunity to build a company that is a trusted advisor.”
Tolbert says the topic of health insurance “is much more akin to a tax problem than a car insurance problem.” Good advice and planning, he says, can make a big difference, but most marketing campaigns these days — call our 1-800 number now! — serve up a one-size-fits-all answer to a complicated question.
So Tolbert set about building a fee-based model that focuses —on both the business and consumer sides — on navigating the thickets of health insurance with staff who are paid salaries and aren’t dependent on commissions. Key to that was a massive amount of legwork and preparation. Tolbert invested heavily up front to build a database of the dozens of different insurance situations people can find themselves in — from single and healthy to Medicare-eligible and about to retire. For each, Bernard developed a path of questions to get to the most appropriate coverage.
Before, Tolbert says, “it was like going through the wilderness for the first time, every time.” Now Bernard employees can explore a customer’s situation without being tempted to sell them a particular product because of the commissions involved. Those go into the corporate pot.
The numbers are impressive: Whereas less than 10 percent of all insured Americans have HSAs, many companies working with Tolbert’s team can claim adoption rates of 80 percent. On average, clients save $2,000 by working with Bernard and the company has opened two retail stores in Nashville as well as locations in Indianapolis and Cleveland, Ohio.
The early returns on that retail strategy helped Tolbert recruit $1.9 million in capital early this year that will double Bernard’s store base by early 2014 and take it into a still-unnamed fourth city. Leading the investment round was Kevin McNamara, the former CFO of Medicare Advantage insurer HealthSpring.
Broader geographic expansion — as opposed to saturating Bernard’s hometown — is a very intentional path.
“Health care can be a very regional business, but we wanted to prove that this can work not just in Nashville,” Tolbert says. “What we’re doing is a very federal move. HSAs were created under federal law. Nothing else in insurance is like that. So if I’m working with someone in Missouri, I know what their HSA looks like.”
And while Bernard has created a new delivery model, the market also is coming to Tolbert to a large extent. Health care reform is pushing many players in the system to re-examine their spending and the growing cost of coverage is forcing some employers to drop their sponsorship of insurance plans. When they do, employees inevitably have a lot of important questions.
“The market value now for a consultation on this is essentially zero,” Tolbert says. “That’s only going to go up.”