Fast Break: Benefits Strategy for the Road Ahead

Welcome back to Fast Break, where we break down the trends, ideas, and strategies shaping the future of business. Today’s episode is a really special one. We’re diving into the release of Momentum, M3’s annual benefits trend report, a comprehensive look at the regional employee benefits landscape and what it means for employers navigating rising costs and evolving workforce expectations.

To unpack it all, I’m joined by two fantastic guests, Ryan Barbieri, EVP of Employee Benefits here at M3, and Jill Palmer, Director of Operations and Strategic Partnerships at C2.

Ryan, Jill, welcome to Fast Break.

00:45 Ryan Barbieri Jill Palmer

Thanks for having us.

00:46 Matt Cranney

Let’s start with quick introductions. Ryan, why don’t I come to you first?

00:50 Ryan Barbieri

Sure. Thanks, Matt. So I’m Executive Vice President at M3, as you had mentioned. I’m responsible for three of our business units. So at M3 Insurance, our employee benefits group, also executive sponsor for Ethica, which is our pharmacy consulting company. And lastly, M3 Financial, which is qualified plans, wealth management, things of that nature.

I’ve been with M3 for about 11 years, a little over 11 years. And prior to that, I spent 11 years with a large international brokerage firm.

01:19 Matt Cranney

I’ll also brag with my colleague a little bit. Ryan’s also an Ironman, for anybody listening that loves that stuff.

01:25 Ryan Barbieri

That was a couple of years ago, Matt.

01:26 Matt Cranney

Hey, they still can’t take that away from you.

So Jill, our listeners are obviously maybe familiar with M3, but maybe not with C2 as much. And so in your introduction, can you help us understand a little bit more about C2, its history, and how it affects our listeners here in the Midwest, as well as giving us your background?

01:48 Jill Palmer

Yeah, thanks, Matt. I’m happy to give that background. I will say I’m not an Ironman, but in terms of my background and my experience, I’ve been in the industry for 18 years.

I started at one of our member firms, the Partners Group in the Pacific Northwest, and I transitioned to C2 when it was started in 2012.

So to give you a little background about C2, C2 Solutions is a partnership of seven independent employee benefit consulting firms, and we help empower our members to remain locally operated and independently owned while gaining access to shared resources, strategic partnerships, and industry expertise.

And because our firms are looking across markets, not just one geography, we can help Midwest employers make decisions with much broader view of where risk and opportunity are headed.

02:32 Matt Cranney

That’s awesome. Jill, what is a memorable moment from your time at C2 that you would call out for our audience as being one of maybe the best things that you’ve experienced there?

02:45 Jill Palmer

Man, that’s a hard one to answer, Matt, because there’s been a lot of change within the last 14 years of being at C2. I would say in terms of the biggest, you know, aha moment is our growth that we’ve had.

We started with five. We’ve added new member firms, continue to grow and really help elevate our firms to kind of reach that next level.

03:02 Matt Cranney

Ryan, before we move on to talk about Momentum, maybe you could offer just a couple of insights from the M3 perspective about C2?

03:08 Ryan Barbieri

Yeah, I mean, as I talk about it a lot, M3 is obviously a very large, is a very large presence in terms of our, the amount of work and customers and volume and so forth that we drive here locally and in the upper Midwest.

But more and more we continue to compete with, large national brokers because there’s been a lot of consolidation in our space. One of the great powers of C2 is giving, really strong regional brokers and consultants the opportunity to operate on the national scale, leverage collective volume with one another. We’ve got offices through our partnerships from coast to coast.

But I think the biggest thing that I enjoy the most is the friendships. When we come together as a C2 board, which we’re going to be doing next week, you know, there’s a lot of embracing.There’s a lot of talking about, you know, families and things of that nature. And it’s really, it’s a special group.

04:08 Matt Cranney

That’s awesome.

04:08 Jill Palmer

Yeah, and just to lean into what Ryan said too, the fact that we only have 7 firms, we’re able to get a lot done. We’re able to move swiftly and react as the market is changing. And so that’s been really powerful to see amongst the seven firms as well.

04:20 Matt Cranney

Awesome. So we’ve given our listeners a really nice background about you all, about M3, about C2. So Ryan, obviously this episode of Fast Break is going to come out around the launch of Momentum, and we referenced that in our introduction. But for listeners who may not be familiar, what is Momentum and why does M3 put this report together every year?

04:44 Ryan Barbieri

As one of the largest brokers in the region, we have access to just a plethora of data and it’s right at our fingertips. So about 20 years ago, we made the decision to start pulling together all this information and aggregating it into a report that really provided some insights on what we saw happening.

And my word choice is really intentional there, saw being more of a rear view mirror look. And that was our annual health trends report.

And as our business has changed and M3 has made a significant investment in digital capabilities, you know, we’re now able to provide real-time benchmarking to our clients and, you know, really challenge us to rethink what our annual report, you know, could look like.

So A couple of years ago, we made a fairly big pivot to taking that information and providing these insights and what we see happening. So again, think looking out the front windshield and it’s really actionable data and really incredibly powerful. And we think helps us provide some really great insights to the marketplace.

05:52 Matt Cranney

So in your words, right, it’s not, if people are looking like, oh, it’s just a report, it’s really not just a report. The inspiration behind it is that it becomes a decision-making tools for our clients. Is that right?

06:08 Ryan Barbieri

Yeah, that’s right. And at M3, we talk a lot about playbooks. And I think this can be sort of an annual playbook, right? And that our client executives can take to, you know, client meetings and incorporate that into strategy building.

06:23 Matt Cranney

I love it. It’s also big to call out. You referenced that shift from maybe not reactive, but certainly sort of responding to what’s already happened in the data, to shifting to guide our clients and prospects on what invariably is outside of payroll, probably one of their biggest spends as a business. Is that right?

06:45 Ryan Barbieri

That’s right. Yeah, for sure.

06:46 Matt Cranney

So let’s get into the details. Let’s dig into some of the big takeaways. So from your vantage point, what stood out most as we were working to put together this report and in this year’s momentum.

07:01 Ryan Barbieri

Probably not a surprise, but costs continue to rise. And big drivers are cost of services, frequency of conditions, and severity of conditions. And I think the three big ones that kind of bubbled up to the surface.

So cancer continues to be the biggest driver that we see in claims data. It’s actually making up almost 26% of all claims by dollars. So it continues to rise.

The second, mental health, and you read about it all over the newspaper, on the news. Obviously, this is a big growing concern. What we see in our data, the prevalence of these claims is going up nearly 10% now year over year. So this is frequency, not just dollars.

And then the third category is musculoskeletal claims. Sometimes it’s abbreviated MSK. So we see outpatient claim volume go up significantly and procedure costs are going up. So just in terms of, some of the cost drivers and claim drivers, that’s what we see.

Second big trend, not a shocker here either. Pharmacy’s a big driver today, much bigger than it was, you know, five years ago. Specialty drugs, these are the major driver now and accounting for over 50% of pharmacy spent, which is absolutely bonkers.

Lastly, we’re seeing employers really search for non-traditional or unique ways to try to manage the cost pressures, because it is getting really, really significant.

As you mentioned, when you’re looking at 7, 8% year over year increases and what’s arguably the second highest expense, as you mentioned, behind payroll, something’s got to be done.

So employers are really looking for a lot of really unique ways and non-traditional ways to help manage some of these costs.

08:57 Matt Cranney

Jill, I want to come over to you. And obviously, you know, we have our purview across our data set from our clients, but you have a purview that is much wider than ours, working closely with partner firms all over the country, as Ryan said before, coast to coast. Are these trends showing up in real time outside of Wisconsin? Is there anything you would challenge? Is there anything you would add? I’m curious.

09:22 Jill Palmer

Yeah, no, I mean, we’re definitely seeing these trends showing up nationally. One of the unique aspects of my role is that not only do I have relationships with the member firms, our carrier partners, but we have different peer groups within our member firms.

So these are conversations that we’re having both on like the population health peer group. We have a finance and actuary peer group that meets and has these discussions. We have our pharmacy peer group. So this is happening and discussions are being held at every different level of the organization.

So to make the answer longer, but the external data and employer benchmarking are telling the same story, that larger claims are happening more often, they’re costing more. And when they happen, employers are feeling that pressure everywhere.

10:01 Matt Cranney

A follow-up to that, and we used this language before, but would you say that from your perspective, as it relates to health insurance and all the things related to that benefits piece.

Would you say that again, the employers are feeling reactive or do you think there is a shift to being more strategic in how people approach benefits?

10:20 Jill Palmer

Yeah, I would say it’s a little bit of both. So I think the encouraging part is that with that shift, employees are becoming more strategic because there’s plenty of reactive pressure because the numbers are real.  We’re seeing it across the board in all these different areas.

But what’s different now, and kind of leaning into what Ryan said, is that employers are realizing they can’t just wait for renewal and hope the market fixes it. And the momentum report, like you said, speaks to this, that employers are making real plan changes, adjusting plan designs, pharmacy, renegotiating pharmacy arrangements, deploying point solutions, and that moderation in the trend is an early return on that activity.

And that lines up with what we’re seeing with our partners too. Employers are taking a more proactive approach to self-funding and stop loss, using predictive modeling or earlier intervention to manage those serious illness risks.

So I’d say the market is forcing everyone to react but the better employers are moving beyond reaction and really building a deliberate strategy to help for those future claims and future outlooks.

11:17 Matt Cranney

Yeah, and maybe if I could add too, the best strategy is not a 12-month strategy, right? It’s, I think for so long, people have sort of navigated from renewal to renewal to the next renewal.

If I’m somebody listening today with a business, how do I align the values that I have and then make decisions in this area aligned with those values

And you said it beautifully, Jill, in regard to, yes, you have to, react to those increases or those changes, but at the same time, you also get to stay proactive with your planning at that high level. So I really, I really like it.

Ryan, you mentioned it, you took us down this path. So I’m going to come back to you first on this, but let’s talk about the elephant in the room. And that’s cost. We can continue to see from Momentum that it rises year after year.

What is Momentum telling us about how employers should respond to, not just absorb those increases and maybe going back to that big strategic plan that we just talked about?

12:19 Matt Cranney

You know, I guess the first thing I’d say, Matt, is there’s no silver bullet that’s going to solve the problem for every employer group. There’s just a lot of variables that, you know, that come in.

I’d break this down into maybe, you know, 3 steps.  And this is called out in the Momentum report as well. So the first trend is just continuing year over year is data. Data continues to help consultants and employers point to opportunities that need to be addressed. And we live in one of the most data-rich environments right now, just as a business community, as a society, and so forth. And the employee benefit space is no different.

As we mine this data, we can identify the opportunities and measure the impact when we deploy solutions. And I think that’s really important.

So, to draw an analogy, just like going to the doctor, to help with a personal ailment, first year doctor needs to diagnose and pull together various data points, right? And diagnose what the issue is. Well, it’s no different. Broker consultants need to do the same thing for employers. We use data to do that. And then finally prescribe the right solution.

Data capabilities are rapidly expanding in the age of digital and AI. The same thing goes for M3. We use a powerful combination of third-party data analytics platforms as well as data tools that are built by our robust digital team.

In addition to understanding these cost drivers, employers, along with their benefit consultants, need to build a strategy. And both you and Jill referenced this, right? I think those strategies aren’t just a six-month or 12-month strategy. I think they’re becoming complex multi-year strategies that are aligned with the population of the employer group, the goals that the employer has, and also the culture.

And finally, risk tolerance, because not all of these cost containment solutions right now, Matt, are maybe within the risk tolerance of what they may be for another employer. Lastly, making sure that the multi-year strategy can accomplish, all the business objectives.

So let me give you an example of how maybe all of this comes together. You know, one continued trend in the employer-sponsored health plan space is, you know, changing funding arrangements from maybe a traditional fully insured arrangement to a self-funded arrangement in, let’s say, a benefit captive, okay? And in many cases, captives provide the opportunity for these employers to tap into things like pharmacy management strategies or point solutions that are specific to population health management and condition management.

Not to mention, you know, the opportunity to get into things like direct contracting with certain types of providers and direct primary care providers and things like that. So, I mean, there’s a lot there, right?

And so when you’re working on building a plan, first you can identify with the data and what’s the right approach, but maybe the deployment of those solutions happens over the course of that three-year plan.

You know, maybe you work towards, you know, the direct contracting aspect in year three, because we don’t want to change the culture or the philosophy of our benefits, program overnight, baking that into a well thought out three-year plan might be, might be a good way to go. Does that make sense?

16:01 Matt Cranney

And it’s funny as you’re thinking about it and laying that out for us, you know, it is that callback to, for our listeners who are listening to this conversation, the first step is really to understand your organization.

I’ve used the phrase around here that what we’re experiencing right now in our industry, similar to, I would offer most industries with AI, is a level of change that we haven’t, at least I haven’t experienced in my career. And, you know, people are looking at it as saying, oh, no, it’s a, you know, a movement towards, you know, more AI solutions and more.

First of all, it’s a change management exercise in being able to, the organizations that will win in that space are the ones that are doing a good job in bringing everybody along together.

It feels like there’s a parallel here as it relates to how employers of all sizes, whether you’re sitting here with, you know, 10 employees on your plan or 1000 employees on your plan, knowing your organization and figuring out that change management piece, I think is really significant.

And Jill, I want to, Ryan used the phrase around M3, double click. And so I’m going to double click on that piece a little bit with you. Maybe, you know, if I’m listening today and I’m thinking about this and I haven’t maybe made that switch to proactive and strategic yet, maybe what’s one mistake you think employers are still making when it comes to managing that benefit cost?

17:34 Jill Palmer

Yeah, and I would just lean into what Ryan said is that really they’re treating that rising cost as a pricing problem versus a risk management problem. And there’s data that’s supported by that.

One of our carrier partners showed nearly nine in 10 self-funded employers experience high cost claims. So it really can’t just be, it’s all about price. It has to be that strategic plan, three, five-year plan.

And I think that is coupled in terms of, if I can say a mistake, is partnering with a broker who doesn’t understand your employee culture, doesn’t understand that change management process you have in place, to really make that strategic decision with you and walk you through that roadmap about how we can help curve the cost and bend the trend of some of these increasing claims year over year.

So again, kind of pulling into that, pulling in that data that we have so much access to and really making a cohesive strategic plan for employers and working that plan. I think it’s having it in place and making sure they’re able to work the plan. And you really can only do that by partnering with a broker that can help walk alongside you for that.

18:34 Matt Cranney

Yeah, I love that. One of the, a phrase another one of our executives here at M3 uses is, the plan is nothing, but planning is everything.

And so the ability to bring your leadership team together and have that conversation and hopefully having your advisor be somebody that you would want to have at the table for that conversation, being able to leverage resources like Momentum and other data streams that Ryan talked about before to help inform and guide that strategy. Because, and maybe this is then a follow-up question I have for you, Jill, in that piece. At the same time, we’re seeing costs continue to go up, workforce expectations are going up too.

What are employees expecting today in the benefits space? So let’s take it just for a second, take cost and just put it to one side. What are you seeing that employees are expecting that they weren’t expecting maybe just a few years ago or a couple years ago?

19:36 Jill Palmer

Yeah, I think the biggest shift that we’re seeing is employees increasingly wanting help navigating the convenience of the plan and then access to the system. So not just access to a benefits plan.

I think historically you get a full-time job and you kind of have expectations that you’ll have a robust health insurance benefit plan.

So now it’s more about how can I navigate it and how can I make it accessible and easy to access it. One thing that C2 recently did is we partnered with a solution called Text Care, which is a personalized text-based healthcare navigation, which has dedicated health advocates for each employee.

So those health advocates can help answer benefit questions, and guide individuals to the right health care resources conveniently. It’s all through text message. This is not something that we had two, three years ago where I can literally talk to a nurse practitioner, send pictures just via phone. I don’t have to go into an office. So I think it’s that accessibility feature that is new, is becoming newer and more prevalent for employees today.

Certainly affordability. I know we said we’re going to put costs aside, but affordability is continuing to be a discussion. So really, I think what employees are asking is, not just what’s covered. They’re really asking, how can I access it? How can I afford it? And who can help me navigate it when things get a little bit more complex?

20:47 Matt Cranney

I love that.

20:50 Ryan Barbieri

You know, going back to some of the comments that I made earlier about, you know, all these different like point solutions and things like that. So if you think back, you know, 10, 15 years ago, as an employee, as a covered employee on a health plan, it was pretty easy for me to figure out, what doctors are in my network and just how to navigate the whole process. But again, out of necessity, employers are putting a lot of other layers. I just saw a study on average, there’s employers have four different point solutions baked into their health insurance program. That wasn’t the case 10 years ago. So this whole idea of care navigation, decision support, all those sorts of things is just elevating in necessity because employees that are covered under the plan just don’t have the knowledge on how to navigate.

21:46 Matt Cranney

Yeah, I love that. Ryan, I’m going to stay with you. How should employers balance, maybe the key word here is offering more, you know, maybe more isn’t the exact right descriptive, but offering that more without sort of blowing up the budget. Because again, to your point, Jill, we cannot put cost aside. Employers cannot do that because this is real dollar.

So Ryan, I’m curious what you would, your response would be to that.

22:09 Ryan Barbieri

Yeah, I think what I would suggest and offer up is, you know, when you’re talking about solving the healthcare equation, you need to think in terms of investment and not just expense, if that makes sense, right? Because when you’re taking a look at these types of solutions and so forth, there’s oftentimes an upfront cost, right?

So there’s higher dollars to pay for these point solutions, as an example, it might be a per employee per month charge, and then soft dollars, the time necessary for HR to appropriately roll out and gain adoption and things like that, all necessary to put yourself in a position to hopefully bend trend down and begin fighting this thing. So perhaps the data shows that we have some significant opportunity to leverage some direct contracting or maybe even an on-site clinic if we have enough critical mass in our workforce, okay? Well, we need to find the partner. We need to build out the clinic. We need to do the hard work of driving adoption or utilization. And eventually we’re going to hit that break even and get to a point of ROI. So bending the cost curve just doesn’t happen overnight.

23:25 Matt Cranney Ryan

Yeah, you know, thinking of this as an investment, not an expense, right? An investment in our people, an investment in their peace of mind, an investment in their families, an investment in, if you’re listening to this, and we’ll switch to, I’m coming to both of you to ask sort of your, you know, maybe a big practical takeaway or two that you’d offer to our audience, because I don’t want to lose the fact that the biggest focus here is allowing our business owner clients to be really great for their employees so that they can have a benefit plan that helps them attract the best and retain the best talent. And so even in the face of increased costs and more complex claims and all of the things that you guys have brought light to in our conversation today, that main focus is on our people, right?

And so if I’m an employer listening to this and I haven’t opened the momentum report yet, Jill, I’m gonna come to you. What are the first one or two things that if I’m a business owner listing today, what would you recommend to our audience?

24:29 Jill Palmer

Yeah, I think one of the very first things I would do is you should be having some data from your benefits broker. So just get your hands on your own data, see what’s going on within your own employee population. And then determine if you have a plan or not. Do you have a three to five year plan? And if not, maybe you’re not working at the right consultant because your consultant should be able to help you build that plan. So I think that would probably be one of the first things that I would recommend.

24:50 Matt Cranney

Awesome. Ryan, what about you?

24:52 Ryan Barbieri

Yeah, I guess I’d leave the audience with two words that would be the takeaways. No and go. No, I think it’s really important for employers these days to get educated on the trends that are happening in the marketplace and to make sure that your expectations are aligned with reality and understand what the possible solutions are.

And obviously, your employee benefits consultant, to Jill’s point, will help with this. Just know the marketplace and make sure that expectations are aligned. And then go build a plan, work a plan. You know, the caveat to that is, you know, we’re in a super fluid marketplace and dynamic marketplace right now. So constant reevaluation of what’s going on makes a ton of sense. But build a plan or work a plan.

25:46 Matt Cranney

I love it. Wow, this conversation has gone really fast. And I think this topic, we’re just scratching the surface. But I really appreciate both of you making time to join us today. Ryan, as we talked about before, for anyone listening who wants to get their hands on the momentum report to dive deeper into the trends, to get those actionable insights, as Jill sort of called us to, for their organizations, what’s the best way for people to do that?

26:14 Ryan Barbieri

Yeah, I mean, you can go on to the M3 website, m3ins.com, and under the insights section, you’re going to see a lot of our thought leadership, including the Momentum report.

26:25 Matt Cranney

So that is our last call to action is go do that. We would love and appreciate your feedback too. Jill, Ryan, thank you so much for making the time to be on Fast Break with us today. You both are really awesome and smart and insightful, and this has been a great conversation. So thank you.

26:45 Ryan Barbieri Jill Palmer

Thank you, Matt.

26:46 Matt Cranney

If you found this conversation helpful, be sure to share it with a colleague and subscribe for more insights and conversations like we’ve had today. So until next time, this has been Fast Break.