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Beer Business Finance
Beer Business Finance
Captive Insurance: The Beer Distributor's Secret Weapon
Health insurance costs are spiraling out of control for many beer wholesalers, with annual increases of 5-10% that seem impossible to escape.
But what if there was a better way?
What if you could not only stop these relentless increases but actually reduce costs while improving benefits?
Erin Butler from BevCap Management reveals how beer distributors across the country are doing exactly that through captive health insurance plans.
This isn't just a minor cost adjustment – it's a fundamental reimagining of how wholesalers approach healthcare coverage.
The numbers speak volumes: traditional fully-funded plans average $1,590 per employee monthly, while BevCap's captive members pay just $861.
For a 100-employee distribution business, that's annual savings approaching $900,000.
The captive model works particularly well for beer wholesalers because of their homogeneous workforce – predominantly younger males who typically require less healthcare.
By pooling resources across multiple distributors (currently covering about 15,000 lives), the captive gains extraordinary leverage with providers while creating a protective buffer between individual businesses and catastrophic claims.
Beyond pure cost savings, distributors gain unprecedented transparency and control.
Members receive detailed claims data that traditional insurers withhold, enabling informed decisions about plan design and cost containment.
Innovative approaches like direct provider contracting and specialized pharmacy management have yielded remarkable results – pharmacy costs alone have dropped 40% for participating members.
The most successful wholesalers in the program take an active role, educating employees about benefits, implementing preventative health initiatives, and participating in the collaborative governance structure that guides the captive.
This engagement transforms healthcare from an uncontrollable expense into a strategic advantage that strengthens both the bottom line and employee satisfaction.
Ready to explore whether a captive health insurance plan could benefit your beer distribution business?
Contact Erin Butler at BevCap Management to receive a personalized analysis of your potential savings and learn how joining forces with other wholesalers could fundamentally change your approach to employee healthcare.
Connect with Erin Butler at BevCap to learn more: ebutler@bevcapmanagement.com, c: 817-343-4651
Today on the podcast, you're going to hear the audio version of our recent workshop with Aaron Butler from BevCap Management. We talk all about health insurance and how to save a lot of money for beer wholesalers. So the problem is that we're often stuck in these traditional health insurance models. We don't have a lot of control. The renewals are really high. Every year it goes up 5%, 8%, 10%, and there's no transparency. We don't have any data to make better decisions about this particular cost. So that's the problem. We just feel kind of stuck. The solution is these captive health insurance plans that BevCap models out and can manage for you, create for you, are a much more cost-effective alternative, and wholesalers pool their resources to lower costs and improve your plan customization and really gain control over the insurance spend. So it's pretty remarkable. So one thing for you to do. Next, if you're in a fully funded plan, I would really encourage you to reach out to BevCap, learn more about these captive plans and see how it can help you. And just one thing to remember is you don't have to accept these rising health insurance costs as a given. There really is a better way, and this captive insurance model provides that. And this captive insurance model provides that and I can speak to that from personal experience as CFO for a beer wholesaler is we save just tremendous, tremendous amounts of money. So I also have a model, a calculator that you can use, that I'll include, that you can download and just do the math. I mean, for me, cfo, the numbers are super important and it's just kind of a no-brainer to look at ways that you can save a tremendous amount of money and get yourself a much better plan in the bargain. So for now, please enjoy the audio version of our workshop with Aaron Butler from BevCap Management.
Kary Shumway:Hello and welcome to the Beer Business Finance Podcast, where we combine beer with finance to help you create delicious profits in your beer business. I'm your host, kerry Shumway. I'm a certified public accountant, a former CFO for a beer distributor, and I love numbers. This podcast will provide you with useful financial guidance that you can implement right away in your beer business to make more money. In addition to this podcast, please visit beerbusinessfinancecom. Here you'll find free tools and resources, information on upcoming courses and you can sign up to receive the weekly Beer Business Finance newsletter for free. Each week we cover a specific financial topic to help you improve the financial results in your beer business let's get started. The financial results in your beer business let's get started. Just a quick note, we'll be right back to the podcast. I want to let you know about the Beer Business Finance Association. This is a network of financial pros just like you, looking to improve financial results, increase profitability, connect with your peers and share best practices. Our mission is to help your beer business improve financial results through transformational financial training, support and networking with your peers. If you'd like to learn more, please go to bbfassociationorg or simply email me at kary at beerbusinessfinancecom. That's K-A-R-Y at beerbusinessfinancecom. All right, thanks everybody for joining us today to talk about one of my favorite subjects and I know yours health insurance.
Kary Shumway:So as Aaron and I were sort of preparing for this discussion, I was just sort of describing when I was CFO for a beer wholesaler, when I would meet with different vendors and suppliers. I was pretty much focused on is this going to save us money? Like how is this going to work? So I didn't really dedicate a lot of brainpower to all the details until I could understand for myself. Yeah, this is actually going to have a great return on investment. Or we're going to save money or we're going to get a better outcome from it. So I needed, like, the hook right away. So what we're hoping to do is to give you guys on the call and the people that are watching it later kind of that hook. So I'm going to show you a very simple spreadsheet here in a moment. But before I do that, erin, why don't you introduce folks, introduce yourself to folks on the call today?
Erin Butler:Yeah, absolutely I'm. I am also very excited, like Carrie, to talk about the hook, so to speak. I consider myself a pretty straightforward, straight shooter kind of person and I always try to think about the person I'm talking to, like do they want the fluff or do they really just want the numbers? And so that's a lot of. What we'll be talking about today are the actual numbers and how we get to those numbers. But I think I've met many of you.
Erin Butler:From some of the names I'm seeing here on the screen. It looks like a lot of people we've worked together with in the past. So, if you don't know me, my name is Erin Butler. I serve as the executive over our beer wholesaler, captive, and a cell that they recently launched called Allied, which is their friends and family division, and that one's heterogeneous, so it's for friends and family of the beer distributors, but could be in any industry. But today we're really going to talk about the OGs. We're going to talk about the founding fathers, which happen to be our beer distributors and those wholesalers.
Erin Butler:So I joined the team only about a year ago, but my background actually is in medicine.
Erin Butler:I've been running hospitals, surgery centers and spine surgery practices most of my corporate career and so I have first-time or real-hand experience around what claims can look like when they're being billed out to a standard bucca so the big carriers versus whenever it's being managed on a one-on-one or direct contract basis, as we do with our beer distributors through our captive model. And so had the opportunity to join the team a year ago and it's been a fantastic transition because unfortunately, on the clinical side, I kind of always felt like I'm not making a difference yes, from a medicine standpoint, but we all know that insurance and costs have really changed the healthcare setting and doctors are having to do more with less and it's causing a lot of friction in the marketplace. And so this felt like a very proactive step for me in my career to really make some change in the future for healthcare. So I'm glad to be here and talk a little future for healthcare. So I'm glad to be here and talk a little bit about the program.
Kary Shumway:I'm glad you're here too, I think so. The problem that we face, and have faced for a long time, is that these health costs just they never go down. They keep going up and up and up and the stats are all over the place. But you know, and results will vary, but five to 10% a year, year over year, unrelenting, and it feels a little helpless. So for people that are, you know, in those fully funded situations you're kind of I was there and I know that you feel kind of stuck, like I don't know what to do. You know, what we could do is you could shift a little more cost to the employee, right? So if you're paying as the employer, you're paying all these fees. Maybe it's an 80-20 cost share or 70, you can shift more, maybe move it to 65-35. That doesn't help you, it doesn't help your employees, it's not a good situation. But often you're looking for the levers to pull and unfortunately that sometimes seems like the only one. So today we're going to talk about other levers and what that solution could look like and really what that could open you up for is really more cost-effective alternative Wholesalers pooling their resources to improve that plan customization, to gain control over the insurance spend. So it's so important you get better benefits out of this thing. You really do, and I want to share a quick story just from my personal experiences. You know we had it. We were not in the BevCap captive, but if had I known about it or if it was around back then I would have jumped in headfirst. But we had a self-funded plan and we saved a remarkable amount of money and got tremendous benefits in the bargain, and those two usually don't go hand in hand, right. It's like you usually get what you pay for not in this instance. So I'm going to show you the spreadsheet here in a second. But what I want people to kind of take away from this call is that you don't have to accept these rising healthcare costs. It's not a given. So there is a better way and this captive insurance in my opinion. I've lived it. Aaron's going to speak to it in more detail but you can cut costs, you can get a better alternative for your employees and you can take back some of that control of your health care spend. So all good things.
Kary Shumway:So with that, I'm a numbers guy. I imagine folks on the call are numbers driven as well. So I just want to share what I think is a very simple spreadsheet but kind of cuts right to the point, and this is one of the things. We've termed this a workshop. So I would like I know folks on the call are able to participate or not.
Kary Shumway:But take this model, so you're sitting there. What do you guys spend for your current per employee per month? Now, how many employees do you have? And I'm just going to run a quick little exercise here. So this is data that Aaron's going to get into in more detail. But your traditionally fully funded plan on average is going to cost you about this $1,590 a month per employee or about 19 grand per year. Results will vary, but that's about the average. If you've got 100 employees, you're looking at about a spend of $1.9 million for your premiums a spend of $1.9 million for your premiums. The captive plan on average for the 24-25 year runs at about $861 per employee per month or about $10,000 per year per employee. With 100 employees, it's a million dollars. So the savings is remarkable and this isn't like an outlier example. This is exactly what we experienced in our beer wholesaler business.
Kary Shumway:So this does a bunch of things. Number one that's a huge number. It allows you to maybe do different things with your cost share. Maybe you pay 100% of it now for employees. Think about how amazing that would be. But everybody benefits. So again, for folks who are kind of listening now or tuning in later, I'm going to send everybody this spreadsheet. It's pretty straightforward, but punch in in blue If we don't know exactly, because I don't expect people to have this top of mind. But what is your per employee per month spend? Now, pop it in that little blue section, how many employees do you have, and then you can kind of calculate what this would mean for you. So pretty simple, pretty straightforward, but pretty powerful, I think. So, erin, you can tell me if I'm missing anything on that or if that's about right.
Erin Butler:Oh, I love it. It's the KISS principle, right. It's like we just need to keep it simple. And it's difficult because a lot of times, based on your incumbent carrier or even your brokers, the data is reported very differently by different groups, and so all those variables can come at you in forms of different reporting.
Erin Butler:That doesn't make it easy to compare apples to apples, and that's honestly one of our bigger challenges is, whenever we intake information, it may be less than what we would like to do the deepest dive to get really accurate numbers, and so you're really kind of hamstrung by how much data you can really get by your carrier. And then, of course, us converting that to a format, and we'll talk a little bit about that too converting it to a format so that we can compare it to your incumbent, and that's something that we do. But, just like you said, you might not know the PEPM on a monthly basis off the top of your head. Typically, that is a number you do see a lot of. So just that's what you're looking for per employee, per month rate to be able to plug in here.
Kary Shumway:Yeah, exactly and you can look at it too and other like just pull up your income statement, look at the trailing 12 months what was your cost for your health insurance, what's your shift with the employees or the cost share, and you can get a pretty close number there too. But bottom line is there's pretty remarkable opportunities. So I'm going to hand this over to Aaron, but before I do I want to encourage you. Know your time is valuable. You guys have taken your time to be with us today and we really appreciate that and we want you to get value out of this. So it's important to both of us that we hit the topics that are important to you guys.
Kary Shumway:So if you want to unmute or turn camera on or obviously put it in the chat, questions are welcome. We're not going to do this like way to the end. If you have questions like ask now, if you have questions as Erin goes through her presentation, just jump in. So that's super important is to make sure you guys are we're addressing the questions concerns that you guys may have. So that's that. And then the last thing I'll say is, if you could in the chat, I'd really like to know what people are doing now. So either you're fully funded or you're in self-insured, or you're in a cap. What are you doing now?
Erin Butler:You know, and I'd like to know that too. Carrie, It'll help our conversation, because the next, the really the first slide in the deck is just laying the foundation of the different types of programs. So if everybody here is like, yeah, we've experienced self-funded, then you know it might not be applicable. So, yeah, if you guys don't mind just telling us what you're currently doing, that will be a great way to get started.
Kary Shumway:Yeah, I'd love to see that. So, kelly, bob, lindsay, terry, jeff, if you guys could just quick drop in the chat, are you fully funded with your insurance? I'm insured GAP plan.
Erin Butler:And what is a GAP plan? Maybe you could speak to that, erin. I'm not sure what that is. Well, you know, I like to compare it to you know, whenever we all get 65 and it's time for us to go on Medicare, you know it covers two parts, but not necessarily the whole, and so you can pay for additional insurance to cover any of those particular gaps, and there are all types of gap plans. So probably a little more context there for us to get in to those details.
Erin Butler:But fully insured is definitely what I picked up there. I found that recently more people are moving into the self-insured market. I was really surprised by some of the data I've seen out there and I think brokers are starting to realize that the costs are so high. Oh, another fully funded, okay, thanks, robert. Yeah, that the costs are so high that they're taking what they feel as perceived as a risk and going to self-funded because they feel like they have no options because of the costs. And I'd really like to change the mindset around there, as really it's a strategy, but you do have to have some key tools in place to ensure that you are unlocking those benefits so you're not taking on more risk and potentially higher costs.
Erin Butler:Right, we want to actually see those two shift differently. So it sounds like we've got some fully insured individuals. Yeah, self-insured. Lindsay said Okay, oh, yes, kelly, we're with BevCap. I love it. See, that's the kind of mindset we want. We might even just turn this over to Kelly when we're done because, realistically, these are the people that make our captive work. It's the fact that they constantly are learning, they're always involved and they're engaged in helping direct bedcap management in getting the best resources for the captive. So I love that, kelly.
Speaker 3:Definitely interesting. It's the first time I've dealt with like a self-insured company, so there's a lot of a lot of. It's a big learning curve, especially with some of the other pieces of it, so I've learned a lot over the past seven years.
Kary Shumway:But it or someone has a massive, something you know tragic happen, or they get, you know, need a lot of medical attention, and those claims can get big. So that's the one thing. That's a good point, too, kelly. It's like it's not like a free lunch, right this is. There's tremendous opportunity to save and to get a better plan, but it requires work. It requires work, it requires plan design.
Kary Shumway:Look at what are these. What are the components of the plan that we need to tweak based on historical results or kind of what's coming. But you have all the data to kind of understand the dynamics of what's going on within your employee group in terms of these issues that might be coming up. You have the data to also provide preventative measures, etc. So there's certainly things to consider. We were, from my personal experience, able to construct it in such a way that we were always shielded from the real downside and always benefited from the upside. And sure, there were years that were better than others, where we didn't save as much this year because of X, y and Z. But yeah, I think that's a good point. The takeaway is you do have to work at this.
Speaker 3:Some of the things that we implemented, too, we would have. We have a trainer that comes in and does workouts with our employees, and then we have a chiropractic services our employees can use and just little extra things like that, that and that. Before COVID, we had a masseuse come in and you know things like that just to help with, you know, day-to-day taking care of yourself. So I thought that was really cool that we had those available to employees.
Kary Shumway:Yeah, absolutely yeah, and those are the things that make a real difference. It's like doctors appointments in this, yeah, we have to do that, but when you can find those kind of creative ways, I guess I would say value added ways, like ways that are like that's actually kind of awesome. And then there is a there's a physical and mental health component to that too. Nurses come in on a regular scheduled basis to do these tests. You know, we just don't. We're not very good. I'm not very good at, you know, going to the doctor a lot, you know. But if somebody is going to come and say, hey, come in here for 10 minutes and we're going to do this, this and this, and you really should have these sort of diagnostic, preventative things like, yeah, okay, that, you know, make it, you make it free, you make it convenient. And we had just countless stories of employees that were able to catch things early and deal with them.
Speaker 3:So that's like the other benefit of it too.
Kary Shumway:So lots to dig in, yeah we do that too.
Speaker 3:We kind of have a wellness plan once a year. If you go and get your blood work done and they, you know, check your cholesterol levels and do all that. We offer a discount to employees too if they do that. That's another thing that we do, yeah.
Kary Shumway:It's amazing because it's like it's the right thing to do, right, and then it's also the right thing to do from a financial perspective. You know you do the right thing, first because these are the people that deserve this care. But to have the benefit of, oh, if you're doing this preventative care, you're catching stuff early, it's going to be less expensive.
Speaker 3:Exactly.
Erin Butler:I think what's kind of caught people in that area is. For those of you who are fully insured, you might have experienced what I call the wellness dupe. It's true, I worked for Cigna and let me tell you what our wellness program was. They had a mandatory meeting once a year in a tiny break room, they brought donuts and coffee and we watched a lady draw on a whiteboard about drinking more water, exercising and eating balanced food. And it was so basic. It was so basic and it really actually did not feel helpful. And so, yes, a lot of these big carriers will say, okay, we'll give you a X credit for making sure you do this, but was it really driving people to change their health care or how they pursued their health care? And we found that it wasn't.
Erin Butler:And so, kelly, I love what you're touching on, because it actually does take really creative things or listening to the employees and what they want. Like, yeah, we're beer distributors, we're lifting heavy boxes. It would be great to get an adjustment at the end of the day and maybe avoid some sort of soft tissue damage or muscle skeletal injury. Because I'm limber, I've been, I've been stretched. We know people who have PT on site. Uh, much like you guys, kelly, what we have individuals that um create wellness programs that use biometric screening markers, so really they get like a full body scan that actually assesses their um potential for high acuity care in the future. So disease states and gives them that information with additional follow-up, and these are unbelievable.
Erin Butler:You know advancements in science. I mean we have cancer screening kits that companies have paid for their employees to proactively find out if they're at higher risk for or propensity of getting cancer later in their life and how they can avoid that future right, does that help us on the claims? Absolutely. But if an employee wants to know that this is available to them, an employer wants to offer that. Man. What a great tandem, you know symbiotic relationship that's been developed, and I think that's a shift that people historically have not thought about as they think of healthcare is like we have to provide this service. It's basic, it's very expensive and we don't want to know anything about what's going on with our employees. But, as Kelly can attest to, it's very different here. Here we look at ourselves as advocates of the plan and ensuring that they have all the clinical support they need for whatever they're going through, and it's a very proactive involvement said so for folks who might have jumped on a little bit late, if you wouldn't mind.
Kary Shumway:What we're trying to do is just kind of get a sense as to where folks are at in terms of their health insurance plan now. So either you're, just broadly speaking, fully funded or self insured, maybe you're in a captive. So we've got we're all over the map right now. We've got Kelly, who's who's in the BevCap group, a couple of folks that are fully insured, one that is self-insured. But for others that have jumped in, we'd love to hear where you guys are at, and then I'll just quickly reshare our little calculator, because we do call this a workshop.
Kary Shumway:So if you're listening at home and later on and want to check this thing out, just plug in your own numbers and see what this might look like. This is your traditionally fully funded plan On average, what it costs per month per employee, and then what your annual cost might look like if you have this number of employees. Here's what the BEVCAP is averaging for the last year or so and that kind of saving. So again, as a CFO, you've got me. I'm at the edge of my seat and now I'm ready and I want to know more. So with that, erin, let's get into it. Let's get into the good stuff here.
Erin Butler:Perfect? Yeah, absolutely. So I did a brief overview but I'll just kind of again 10,000 foot view. My name's Erin. I'm here as an advocate for the BevCap Captive Group, so that is a beer wholesaler-owned health insurance program. So the beer distributors actually founded BevCap Management. They started on the general line side, so property and casualty insuring those trucks that are on the road and they really said we want to tap into the health side. And, realistically, the owner of BevCat Management, lance Abbott, really struggled to do that for many years because employee benefits are so complex. It's kind of notoriously been a black hole, right. What's the data? What are the numbers? How can we really prevent? It feels like we're just taking on a lot of risk. But these beer distributors had a great relationship with Lance and they said let's go and partner and do this on the health side. And we have just been astounded by our performance and I'm going to show you that here in a minute.
Erin Butler:But our main goal, right, is just to have a best practice health plan that really is managing the risk and we're using cost containment strategies to be able to do that. It's very collaborative, so everything's run and led by the beer members, so a C-level executive or HR leader will be a participant at executive committee meetings. We have various vendor and research and development committees, and then, of course, we have annual board meetings. So we hear from the actual beer wholesalers of what they'd like to see as forward thinking within the program, and, of course, also our job as BevCat management is to come alongside them, vet out some of the potential vendors and prospects and partners to ensure we're delivering high quality care as well as the best customer service for our partners. So that's our main goal.
Erin Butler:At the end, though, what really matters to you guys as the employer is like what are we providing our employees? And it really has to be an elevated experience. Right, we do things like unique plan designs. You guys get to decide, you get to build your own, which is really exciting. If any of you guys are up kind of near the border more in the northern side of the states, you obviously probably have unionized employees. That can be really difficult to have. A competitive plan that goes with a Teamster plan.
Erin Butler:We've been able to get really creative and have $200 deductibles, $300 deductibles things people have not heard of in many, many, many years. Right, I think most of us here are pretty used to the standard high deductible health plan or an HSA and for most families that really is just catastrophic coverage, right? I mean, who has maybe $3,000 as an individual and maybe $12,000 for a family? Who has that kind of money ready to go? Most people do not, and so when they look at their benefits it's more like, okay, I'm going to take this amount of money out of my paycheck each week or bi-monthly to prevent something catastrophic from happening, but people are still paying a lot of out-of-pocket and they're having to eat up those deductibles. So having lower deductibles can be a great way to incentivize and or retain really good employees, great talent. So it's another strategy there.
Erin Butler:So, having said that, I saw a few more people popped up on here and said fully insured. So I'm actually going to move us to the next slide and I'm going to do a very high level review of like market strategy as a whole in health insurance. So I, like my little red people at the top there, you're seeing that we're going to start from kind of infancy, our crawling stage, and we're going to progress to sprinting. So, just like exercising, we're getting more fit so we're able to accomplish more. So, as a fully insured individual.
Erin Butler:Many of you guys are on this plan. You can see at the bottom they're kind of broken into brackets. It's a very insurance controlled type of model. But I will say it's low risk. So if you've got a lot of wild claimants going on, a lot of high claims, your population really isn't managed. It's not under control. Maybe you're really really small, maybe you have like 50 employees or less. Sometimes fully insured can be a better fit. If you have major cash flow issues, sometimes fully insured can be a better fit for a short period. But you also have to realize when you're fully insured you have no transparency. So you really don't know what's going on. You're playing a flat monthly fee for your services. So let's just say you spend $100,000 a month for your company for a fully insured health insurance, but your claims were $50,000. Guess who's keeping that 50? The insurance company.
Erin Butler:So by moving under like a self-insured and a captive, the model is set that oh, there's 50,000 left over that gets returned back to our captive members so they get their premiums back that they don't use. So that's one of the main reasons they wanted to design and manage their own health insurance plan. So that's fully insured. You see, level funded and partially self-insured. These are still typically offered by the traditional BUCAs. That would be like your Cigna, your Blue Cross, blue Shield. It's another way of finding some cost savings for you under a traditional model, with a little more transparency and a little less insurance control. You get a little more control. But whenever we look at it, when we're actually budgeting it or comparing it to a self-insured or self-insured with a captive, it still very much functions like a fully insured model. So there are some benefits to it, but typically it is usually provided by large carriers and still very limited in its ability and performance. So now we're talking about getting to the guy who's kind of walking, maybe starting to even jog, and that's being self-insured. And I'm going to say self-insured with a cap is what we're going to primarily talk about today.
Erin Butler:And then very last one over here I'll just touch on briefly is reference-based pricing. I don't know if anybody's heard about it. We actually do do that at BevCap Management for one of our other sales. This is really a great strategy. You have high, high risk, but a lot Okay. Look, lindsay says they're doing reference-based pricing and typically it has to do with building out your own network. You're creating all your plan partners and the facilities and hospitals that are within your network. One of the challenges can be balanced billing. So sometimes patients or your employees will get bills from the hospital saying, hey, you guys are out of network, you may owe this, and then you just have to work with your HR team to be able to get that taken care of, and so it just takes a little more of an administrative lift. But once you get it nailed down, you certainly can be sprinting. So kudos to you guys, lindsay, and what y'all are doing over there.
Erin Butler:I have found people try reference-based and then they find out maybe just a little bit too much work from the company standpoint and they slide kind of back into that self-insured. I am biased. I do love self-insured. I like self-insured with a captive, and the main reason is you can be self-insured, but why would you not take the additional protection that a captive offers? So I really just look at it as, because I'm super conservative, I look at it as I can be self-insured, but I get this tertiary level of protection that I wouldn't get if I was on my own. So let's talk a little bit about self-insured with a captive, because we are talking about beer distributors.
Erin Butler:Y'all are beer distributors, so we're going to show you our numbers. So this is our actual performance. So it's our 11 year historical model. The red line there is the annual trend for the market. So your compound annual growth rate for the market on average is an 8% increase year over year. You can see that has not changed, though many of you, I would imagine, have experienced things like 20% increases in renewals or, if you're lucky, you get even a cap and maybe you can't be increased over 50%. But realistically, as Kerry was saying, how can a business budget for a 20% or 50% increase on a multi-million dollar line item in their company? It's almost impossible. So you've got to have something that is operating in a much more, even predictable, way. So look at the beer distributor captive here at the bottom. That's the dark navy blue, not two things you'll notice there. Right, the compound annual growth rate is 3.4% as of this last year, with our latest per employee per month rate, but not only lower than the market. You can see we've actually had flat or decreasing renewals, which, again, is also really unheard of.
Erin Butler:I think one of the reasons you'll see that we perform better than the market is that we are homogeneous. So that means we're 80% male dominated business we have. Usually our males are 40 and under, so they're pretty darn healthy. They usually don't go to the doctor unless they break something. Not saying that's a good thing, but we do know that they do that. And so it's a healthier pool which motivates stop loss carriers to offer better rates.
Erin Butler:Not to mention, we are giving you guys the law of large numbers when you enter into a captive. So instead of one solo person seeking self-funding insurance saying, yeah, I've got 200 employees, can I be self-insured? Well, they're going to base that dollar amount, that premium, off of the risk pool of those 200 lives only. But if you're in a captive and our captive has about 15,000 covered lives, that risk pool now has been spread amongst 15,000 lives. So we typically get better premium rates offered to our members than you would if you were to go straight to the market for self-insurance. So I'll pause there. A lot of information. I'm going to show you a case study next, but any questions?
Kary Shumway:I think, this kind of speaks for itself. Yeah, this line's not good, this line's better.
Erin Butler:Yeah, pretty straightforward. This next one is actual beer distributor. I've obviously taken their name out for anonymity reasons, but that is the. The beer distributor is the Navy and the gray now is the captive. So there's a little switch there. There's a lot of story back here on this. So in general, right, what you saw in that last slide, the captive compared to fully insured market, there's about 46% savings on average, so huge, and I'll show you where those it comes from two buckets, right, it's going to come from your medical expense or your pharmacy expense. And so those of you who are like, well, I'm not in the market, I'm self-funded, or I might even be self-funded with a captive, that's where I would say all right, let's tap into is it heterogeneous or homogeneous? I think there's a lot of benefit in the homogeneous, specifically for beer distributors, because of the 80% young males. And so then the other part would be if you're just self-funded, why wouldn't you be in the captive? So you're going to ask yourself well, why don't I get more lives covered? So I get better buying power, so I have the law of large numbers on my side, plus, you are going to have a captive layer of overage coverage. So realistically, that would mean if, let's say, you have an individual specific deductible of $100,000, you are responsible for up to $100,000 on any one of your employees. Anything above that, if you're self-insured, would go straight to your stop-loss carrier. The captive is that third layer in there that says, okay, anything above $100,000, the captive will cover up to $350,000. And then it would go to the stop-loss carrier Again. Why does that matter? Because if you can prevent stuff reaching your stop-loss carrier, then you get favorable renewals. So that's why you're seeing such great performance here, because the captive is covering a shared risk, all to prevent the stop-loss carrier from experiencing those high-cost claimants. And that's why we get favorable renewals even when we have a rough year. The past two years we've had a ton of cancer patients that have come through with their claims hitting us, and so we have had a high year, but we still got a lower PEPM overall. So this beer distributor.
Erin Butler:The story here is when they came in, they were right about the market rate. The leadership was really overwhelmed. They had a lot of internal changes and what happened was they said we're taking on this new plan, we want to be at BevCap, but they did not put any time or energy into educating the employees. They just left it as a regular plan. Here's your new car, just go out and see whoever you want. So, though they saw some savings, by year two they realized it was still not as significant as the rest of the captive, and so at that point their leadership team said okay, we need to do a full out blitz. They decided to go in and do mid-level management across the board, required training on the benefits, specifically so that their managers could catch maybe babies that were being born before HR would find out. So catch them earlier on so that they can get a fetal maternal advocate associated with that mom and get them the additional care needed. So they required that. They then had some really creative strategies, such as $100 bills sitting on HR's desk if you come in and listen and learn about your health plan, and they rolled all this out from a top-down standpoint and you can see by year three they dropped all the way down. I think that's kind of the exciting part is, they were able to get some better performance over the course of time by doing more education.
Erin Butler:Now, as Carrie mentioned, it can still be affected by unexpected health issues, right, you could have someone who breaks their back and there's going to be a large acute case that's going to drive up costs, like you saw in 2019 to 2020. So those things can still happen in there and so you will always have variability. But overall, your renewal is going to be based on your own performance, at least in terms of your stop loss carrier. But then the captive as a whole gives you an aggregate which usually will bring down any of those high outliers down to the median or the average. So this is one example of how one beer distributor has performed over the course of their time within the captive. We have about a 95% re-renewal rate within the beer distributor captive. Okay, so how do we do it? This is just a very high level snapshot.
Erin Butler:As Kelly can attest, there are a lot more things behind the scenes here, but I would like to say it's front end and back end. So one of the things I think a lot of people in the health insurance world they're either TPAs or maybe brokers they'll say we are going to do claims adjudication on the back end, but many times it's not proactive. So it's a very reactive process and so you're still seeing high claims come in with really no change to stop those claims from happening in the future. So one of the things that we've done is actually moved in like nurse clinical review before the claims have settled. So like, let's say, they initially go in for a consult and they receive a certain diagnosis that warrants probably a long-term chronic treatment, whether medical or RX. That nurse is going to get involved to ensure that authorizations are being approved correctly in the process so that we're not paying for things on the plan that aren't actually covered. So both front end and back end claims adjudication with real individuals.
Erin Butler:Then we also layer on different contracts. So specifically I like to talk about our direct provider contracting. So that's going to be that little plus sign in the middle. It talks about surgery and advanced imaging. This one's been around from the beginning but it is really exciting one. That's where I came from prior with Sonospine. But we have an incentive to get the employees to utilize the lower cost options by making it zero cost to them. So if they go to any of our imaging or surgery centers that have direct provider contracts, they do not pay those deductibles.
Erin Butler:So you know, we sometimes catch people that will go maybe Dr Smith right down the road recommending a total hip replacement and they the nurse and advocates reach out to them and say, hey, we see this might be happening. We'd love to get you a second opinion. Always recommend it with Dr Jones down the street over here. They're part of our network. Would you like to do that? It's always optional, but most of the time when you tell an employee they don't have to pay their $3,000 deductible, they end up choosing to go with the provider. That is zero cost.
Erin Butler:And we're not talking shoddy strip center kind of doctors. We're talking about centers of excellence, physicians that are really business-minded. A lot of times they own their own surgery centers, so they're incentivized to keep the cost down. So they're incentivized to keep the cost down. They're not just bringing in the Cadillac of hardware that is just really inflated in terms of price, but bringing in the tried and true equipment that they know works, has been proven and approved by the FDA and ultimately reduces the overall cost very significantly. For those of you who don't know any hardware like a new hip or a new knee or a spine 360 cage, that equates to about 40% of that surgery's cost. So the implantable hardware is a huge driving factor in your high cost. When you see musculoskeletal claims come in on the back end. So that's one of our favorite programs.
Erin Butler:I'll just touch on one more before we move to a real life example around pharmacy and that's renal dialysis. So in general, any sort of dialysis, but end-stage kidney disease, of course, diabetics. The dialysis is usually ongoing or chronic long-term unless a transplant is going to happen, or chronic long-term unless a transplant is going to happen. And dialysis for an annual term of care across the United States is almost about half a million dollars annual in expense Huge. We have a carve-out in our contract that means we only pay 120% of Medicare. So that really means for an annual spend of somewhere around $100,000, $120,000 max for dialysis, and so that really protects a lot of our employers when they do have one of those high-cost claimants that pop up on their plan. So you can see we've got cancer infusion. There's a lot of things we can do there, all based on place of service. Each of our members have care navigation so they have dedicated nurses that will guide the employee down their clinical path and help get them to the right providers that are within our network.
Erin Butler:So I want to touch on pharmacy because I know we're 20 minutes out here. So pharmacy is a big area of opportunity. How many of you saw in the news about JP Morgan just recently where the employees were suing JP Morgan for not fulfilling their fiduciary responsibility regarding their pharmacy benefit manager program on their health employee benefits plan. Scary stuff, real scary, unfortunately. Pharmacy benefit managers and actually this is that if anybody was at NBWA last year, there was a carve out section from a pharmacy benefit manager that a pharmacist specifically said I wanted to know how many ways could a PBM overcharge an employer for a specific drug and he calculated 68 different ways he could mark up that drug and it would never be detected by the employer. And so astronomical costs In pharmacy benefit manager Is a huge problem and a lot of it has to do with the actual product Cost itself.
Erin Butler:And, as many of you guys have heard, you can get specialty drugs In Canada At realistically half the cost and it's the exact same drugs, same labelings. I mean it is just coming internationally and, don't worry, as of today, trump has made a carve out for these specialty drugs and bringing in pharmaceuticals internationally will not be affected, at least as of today. So that's very exciting for our members because we brought in WellDyne just a year ago because we wanted to see better performance on our pharmacy benefit claims and it was sure it was bumpy bringing in someone new initially, but in six months we saw about 36 percent savings and now that we've had a full calendar year we're at 40% savings on average per member within our group, which equates to millions of dollars saved within our captive. And this matters so much because, yes, it's product costs. That's what you're seeing on this slide right. Talts is a really expensive medication. You can see there's 37% savings just by utilizing our specially RX participating providers.
Erin Butler:And so this next slide, carrie, if you don't mind progressing us forward, is an actual example of savings for a beer distributor that just recently joined us. What's interesting about this beer distributor is they only have a little over a hundred employees. They were spending almost a half a million dollars annually on PBM costs pharmacy costs for their employees, and so this one was really interesting because we were able to get the actual data, meaning we had NDC code, so we knew the actual drugs. We sent this to WellDyne and said what can you do? And they said you know, aaron, obviously tread lightly here, but in general, something seems very off. This is not just standard markup. It almost feels negligent in this case. And so you can see here estimated savings not including the additional international drug importation program of 80% just by switching pharmacy benefit managers.
Erin Butler:And one of those things is that I think a lot of people think, oh, I get rebate credits. We need to add in the rebate credits. This is a lot of savings for me, no, it's not. If you have a lot of rebate credits, that means you're spending a lot on pharmacy costs. So it's actually a double-edged sword. That's not necessarily a good thing. It's an indicator that we need to be looking at our drug costs. We've been looking at our pharmacy benefit manager and seeing what type of contract do we have. So our captive has a hundred percent pass-through contract, which basically means it's a kind of a cost plus drug program. It costs $10 for this drug. We mark it up to $15 for our margin. That's what you pay, and so you guys get to see that every single month on your reporting. And then, of course, you pay in advance and then you get the rebate every three months and it goes right back into ACH to count. So you get to see real time what the rebates look like. The clinical savings is also huge too. So here you're seeing clinical savings about $22,000.
Erin Butler:What we have found is, in general, pharmacy benefit managers historically approve about 90% of the requests for medication that come in. And I know you're thinking well, we don't want to say no to drugs that are important, totally agree. You guys actually get to build out your own plan design and you get to prove what drugs you're going to cover and which ones you're not, or for what diseases, and maybe certain diseases you're going to exclude. But we adhere to that very tightly so you're not paying for drugs that really should not be utilized on this plan, or there's a safer, more effective drug, and many times our pharmacy benefit manager will reach out to the MD that's treating the individual to ensure this is the right drug in the right dosage. So they're proactively doing that and because we do that, we have closer to like a 70% prior authorization rate, so we catch a lot of missed things there and so there's savings there as well. So you add all this up this small group just in pharmacy. If they had the exact same drugs from 2024 and 2025, they're going to save $380,000 right off the top line by being under our contract.
Erin Butler:So I think that this is an area that really needs to be scrutinized, not only for, you know, obviously, cost savings, but for the fiduciary responsibility for you providing to your employees and we proactively do that with our members right, so we have fiduciary in a box. Jamie Greenleaf, roll out a program for our members to potentially sign up to get that additional protection on their plans, or roll out communication so they can check for gag clauses within their pharmacy benefit manager plan. Find out how much are you paying for your broker. These are things that you're all supposed to be aware of as a way of protecting you from any sort of litigation in the future by providing an employee or employer funded health plan. So I try to touch on a couple ways we can affect the medical claims and a big way we can affect the pharmacy claims.
Erin Butler:So this last slide, at least in terms of numbers, is really just kind of a recap of what Carrie showed. So if you are distributor A and you're fully insured, go look up what your PEPM costs are per employee, per month costs, put it into Carrie's calculator and find out how much are you really paying compared to the market rate. You could be somewhere a little higher. You could be somewhere a little lower. Now distributor A in this example here with 100 employees at a paying full price within the market is going to pay about $1.9 million. If a distributor B in this example under the Bed Cap Captive Group, we're averaging 861 PEPM with the same 100 employees. So that's barely over $1 million. So that's $874,000 savings. If you had these two examples and again you can be somewhere in the middle. But something I want to touch on is that we have some of our beer distributors are at 80%, even 60% of their expected claims, so you can be below this $861 PEPM number.
Erin Butler:It's all about tapping into the programs, the benefits and, of course, not having a drastic healthcare year where somebody gets cancer and or some congenital long-term disease gets diagnosed within the plan.
Erin Butler:So this is just a great way to understand the opportunity from a financial perspective. This last slide really is just touching on how do we do it. We talked about the plans and the programs, but I want to give the credit to people like Kelly that's on this call. It's really the members saying we want to be involved, we want to know what's going on. Bevcap kind of guides us to what we need to look at. We're not expected to be the professionals in this situation and to know everything, but we roll up anything that needs attention to these various committees that you're seeing on the screen here, and then from there they go out and help educate their other peers so that the group as a whole performs really well. So it is the best performing captive that we have and, like I said, we have about four or five other captives under BevCat management. But we always like to talk about our beer distributors because they do such a great job with culture management and top-down leadership.
Kary Shumway:It's great stuff. You know, the more you're speaking, the more I'm thinking like, in our businesses, it's our job to manage the costs right stuff. You know, the more you're speaking, the more I'm thinking like, in our businesses, we're. It's our job to manage the costs right. It's our job to manage payroll. It's our job to manage, you know, fleet maintenance, on and on and on everything in here. But I don't know, for some reason, maybe health insurance is like, well, there's really nothing we can do about it, so we'll just hope it doesn't go up again. But you're basically saying no, no, no, we can manage it, and it's actually a requirement too, you know for your captive folks is to come in it is.
Erin Butler:We do a board vote for anybody who's interested in joining. We'll take this up to our SDC committee and they'll vote about bringing you on. So it is a two-way street. You're absolutely right. We want to make sure you're a fit and have the same, the same mindset, because our responsibility is to the captive as a whole, to ensure that we keep seeing these kinds of results.
Kary Shumway:Yeah, the other thing that sort of struck me as you were talking is like and we've talked about this before is just an remarkable lack of transparency in the health insurance sort of environment. Right, it's like where's the information? So, fully funded right, there is no information. Self-funded captives you get all the information, and so we always talk about making data-driven decisions. Well, how can you make any decisions if you don't have any data? Yes, and this is just the last thing I'll say is right, if you look at your P&L, it's probably the second or third most costly thing in our business. So and this is why I keep you know, speaking about this and having you on and I really appreciate you know all that you're sharing it's just like this makes so much sense to at least try. You know I get to explore it and see if it's right for me and for me personally. You know it was just remarkable experience, savings and a better plan, and so just all the things, very, very cool stuff.
Erin Butler:Yeah, absolutely, I'm happy to do it. I mean, I really consider myself as I mean, we're not brokers. My goal is really just to educate people of the options that are out there. Um, at least as it pertains to, you know, self-funding, self-funding within a captive, reference-based pricing Uh, and so what I always recommend for people is just don't close the door to getting a in an illustrative proposal from anyone anywhere, and I really think it it should be something you do annually because of the way inflation is increasing the healthcare rates I think it's two times that of the economy. So to stay up to date, you really have to go to market every year, and I think you guys have all probably experienced this on the call.
Erin Butler:A lot of times, you don't get the data until a month or less before you have to make a decision, and that doesn't give you enough time to really do due diligence and ensure that you've really looked at what's the best plan for us to go forward. Many times you feel trapped that you have to accept the renewal that's been given to you and so typically for you know, a BevCaptive member to join us. We like to start six months out. We like to meet each other. We like to, we love to see your, your business, your place of business, meet your team. Let's get your data. We'll do a deep dive and we'll get you the exact same assessment Like where could we save you in your, in your drugs?
Erin Butler:And and then create that illustrative proposal so you can see where you are today, where we believe you'll be within the captive. And sometimes it might not be the best fit and that's totally okay because you did your part right. You looked, you explored, you now have an option. So I would just say you know, always keep your eyes open, get those. If somebody is willing to work with you and get you a quote, or your broker's doing that, get multiple quotes. I absolutely recommend doing that.
Kary Shumway:Yeah, absolutely. And I'll be even more on the nose on this and I'll say call Aaron, so why not? Why not, you know? The other thing I would say is, like you mentioned this a few times, it was the law of large numbers, right, and this is what we do, this is what beer wholesalers do. It's all about economies of scale and that's why our businesses work, and this just sort of fits right into that as well.
Kary Shumway:It's like it's very hard if you've got 50 or a hundred or 200 employees to go out into the market and command any kind of, you know, pricing efficiencies. It's just, it's not really going to work. But, as you'd said, it was 15,000 covered lives. Is that approximately right? Yeah, so if you're going out to the market with 15, well, that's a whole different discussion, and so you're able to negotiate all of these things that you've talked about. So it is, you know, we're all in this together, right, but we're very often all trying to do it on our own, and you know, at least in a circumstance like this, is a lot easier and a lot more cost effective if we, you know, band together and get those price sufficiencies. You know, band together and get those, those price sufficiencies Speak a little bit about, and I'll leave a little space here too for people if there are there any questions, any comments, feedback.
Erin Butler:I often say any complaints, grievances.
Kary Shumway:Hold the grievances. Do I get a vote? No, we want grievances too, but what I was going to ask you to speak to, if you would, is so best practices right, that's another big thing for our industry. We're always like how can we do better? What are the best practices? So you guys hold, effectively, a best practices conference, for lack of a better word. Could you speak to that a little bit?
Erin Butler:Yeah, yeah, oh, it's so fun. I absolutely love it. It's like this perfect blend of business work and fun. Leslie she's been a part of BevCat for a long time. She puts on these conferences for both the general lines property casualty as well as employee benefits and we have breakout sessions for both. So we'll usually bring in keynote speakers to just talk about overall market awareness and general strategy and then we break out into smaller groups around really forward-thinking ideas. You know AI within the workplace, risk safety management obviously different things we can do with our trucks, prevent accidents and attorneys to come in and talk about mitigating liabilities, and so we really love our best practices conference. It's open for potential prospects.
Erin Butler:All of our current members definitely attend. We talk a little bit about all the captives that we have. So we have broker engagement as well. That will come and get themselves educated on what our captives look like. But we handle anywhere around 200 to 300 individuals historically coming to our conferences every year. So we just had it last year in April of this year in Florida and next year it will be in April as well and it'll be back here in Texas where our corporate office is at the Gaylord Texan in Grapevine. So definitely can share that with you, carrie, if you want to take that little flyer out and disseminate it to our group. But that's just another way of sharing ideas between our groups to ensure that we really are on the cutting edge of insurance and safety and employee benefits for all.
Kary Shumway:It's great stuff. I love it. You know, frankly, you had me at 46% average savings. You know captive, so you're the numbers guy.
Kary Shumway:You really need to hear anything else, but hopefully, hopefully, others on the call got a lot of great information for this. So thank you so much for your time and expertise and hopefully sharing an idea that's going to be remarkably valuable for people. And I'm going to switch ahead to see if on your deck oh, we don't have it, but would you, could you drop in the chat or or maybe I'll send it to everybody, but do it, do it as well. Just real quick. What's your contact information is what's the best way to get in touch. And then I'll just say one more time for folks that are fully funded or looking for different options, or even if you're in a self-funded group and maybe you're looking for something different, I mean, this is what BevCat does.
Kary Shumway:I mean they specialize in beer wholesalers. It's a captive group. The best practices. I think is just a wonderful idea and, again from personal experience, this just makes a lot of sense. So if you want better benefits, you want to save a lot of money, you want to be able to manage one of the biggest expenses in your business, this is a great way to do it.
Erin Butler:Agreed. Yeah, thank you so much for bringing this together, carrie, really appreciate it. Hi to everybody that I can't see, but I look forward to getting a chance to speak with you.
Kary Shumway:Absolutely so. Thanks for everybody for taking your time today and we know it's valuable and hopefully you get something of value out of today's presentation.
Speaker 3:Thank you, you're welcome.
Kary Shumway:Thanks, everyone have a great day.
Speaker 3:You too.
Kary Shumway:Thank you for listening to the Beer Business Finance Podcast, where we combine beer with finance so that you can improve financial results in your beer distribution business. For more resources, tools, guides and online courses, please visit beerbusinessfinancecom and don't forget to sign up for the free weekly Beer Finance Newsletter. Until next time, get out there and improve financial results in your beer business today.