Shielding Businesses from Surprise Major Rx Claims | Paul Fortunato, MBA, RxPharmacy Assurance

Transcript Disclaimer: This transcript is generated using speech-to-text technology and may contain errors or inaccuracies.

Mike Koelzer, Host: [00:00:00] Paul, for those who haven't come across you online, introduce yourself and tell our listeners what we're talking about today.

Paul Fortunato: My name is Paul Fortunato. I am the product owner at RXPharmacy Assurance, which is a sister company of RX Benefits. RX Benefits is a pharmacy benefit optimizer, and RxPharmacy Assurance is offering self-insured employers the opportunity to purchase supplemental stop-loss coverage to help mitigate the risk associated with high cost specialty claims.

Mike Koelzer, Host: Paul, I think most of the pharmacists listening, most of us are not self-insured. We ensure, but we might be insured with grouping up with the Chamber of Commerce or something like that to kind of get into this group.

But I think the bigger companies there have insurance, but they're basically the pocket that the insurance is gonna go to unless maybe there's something really catastrophic. How close or far away am I on that?

Paul Fortunato: So Mike, you might actually be surprised to know that two-thirds of the American workforce are actually covered by benefit plans that are self-insured by their employer.

So that means the employer is underwriting the benefit, paying outta their pocket and not using an insurance company. And so, As you have a lot of smaller companies that are offering this benefit, they need to protect themselves from these kinds of large catastrophic claims that may come across their benefit at any given time.

And so they purchase insurance and that's what stop-loss does. It helps them backstop against that catastrophic event.

Mike Koelzer, Host: Paul. Now let me think about this for a second here. So a bigger company, we think of it as insurance, but they're ultimately paying for every single drug, and they're also paying. If somebody has an illness that lasts a lifetime and they're in bed, they're paying for all that, there's nobody helping out the big companies.

Paul Fortunato: Exactly right. But they may choose at times to purchase stop-loss coverage

To help them with those very large corner

Mike Koelzer, Host: the way up ones there just so they don't wipe out some business 

Paul Fortunato: Exactly. So you'll see a lot of smaller companies, self-insured, because there are a lot of advantages to self-insuring as opposed to just paying an insurance carrier. A lot more flexibility. But in the end, when you have a smaller budget, those larger claims, which are becoming more and more frequent, That again, can potentially financially devastate you and you need this insurance protection.

Mike Koelzer, Host: It seems to me, Paul, like our pharmacy, let's say we have a handful of people on the insurance. We're obviously smaller , so we're not self-insured. It also seems like we're not paying directly for the medicine that one of my employees gets, but I gotta believe that when the rates come around the next year, they're gonna get it somehow.

But it's not as direct as the bigger people that pay actually per medicine. Is that right?

Paul Fortunato: Yeah, I mean basically when an insurance company sets a premium rate that the company pays, they look at the population, they get a sense for, how healthy or how unhealthy the population may be, and they use their actuarial tables to figure out how much is it going to cost over the course of a year.

And that's how they set the rate. And then what will happen is as the actual experience comes through, if there are some surprises, then the insurance company is going to raise the rates to be able to collect on some of the losses they had for under collecting on the premium. So the insurance company in that scenario is actually paying for the drug, but the financial effect ultimately is felt within the premium

Mike Koelzer, Host: And the big boys, they're not doing that. They're paying basically per prescription 

Paul Fortunato: exactly right, and that's why they negotiate or have a broker or consultant who negotiates on their behalf with a PBM to access the medications and additional services to help manage the benefit.

Mike Koelzer, Host: Gotcha. All right. So bopping back to the smaller guys. I suppose those insurances too, they maybe work with the PBM too to get decent enough rates, but it's not actually contractual between the bigger business and the pbm.

Paul Fortunato: So some employers will work directly with their broker who will negotiate on their behalf. To determine a rate. There are many times when they may group together as a collective, and that's ultimately how we offer our benefit as well, is that we manage a premium rate based on our larger size. And so rather than individually underwrite it, it creates a lot more [00:05:00] flexibility and a much more aggressive premium lower cost for the employer who joins into a larger collective.

Mike Koelzer, Host: That's where we might be doing something with the Chamber of Commerce or something. At least there's some numbers there.

Paul Fortunato: exactly. Because in the end, the larger your sizes as you're negotiating, the better you're able to negotiate a better rate.

Mike Koelzer, Host: What are the decisions that companies make to be self-insured 

Paul Fortunato: Well, generally it really comes down to finances and also the flexibility that you feel you need within offering your benefits. So if you're insured, you have to follow a lot of state regulations with regard to benefit design that may or may not fit how you want to offer your benefits to your employees.

And if you're a multi-state, Employer and you want to have a consistent benefit across, say, 50 states. You can't do that as well as an insured product because each of those plans are filed in each state and they all have their different rules. So that's why you see the larger companies who are national and scope, who wanna offer a consistent benefit, they'll self-insure.

But that's not just for large companies. You can have some that are in a tri-state area

and each one of those states have different legislative requirements. So if you wanna sidestep that and treat everyone equally within your benefit plan, you could self-insure. So that's one big piece of it.

The other piece is that it's very financially motivated. So when you pay an insurance premium, 80% of the dollars you spend are supposed to cover claims. And then the other 20% is used for administrative

services. And some of that is designed by law. So if you think about it, you're paying a 20% premium over the cost of the claims for their administration.

So self-insurance removes that 20%. And now you don't pay more than just your claims.

 With Rx Pharmacy Assurance, we're very much behind the scenes and our relationship is directly with the employer. So it's really a financial arrangement of us offering them insurance against large claims. Probably the best example like our daily life is like your homeowners or your auto insurance, you don't know.

You're hoping you'll never have a claim or a catastrophic event, but you pay for the insurance to have coverage so that if it does happen, you don't become financially destitute. So that's exactly what stop-loss coverage is. There's a deductible set and it's set at the level that you feel comfortable as being your risk for any individual claim.

And then the insurance company, and in this case, RX pharmacy insurance, would pay the balance. 

 We only offer the supplemental stop-loss coverage.

So it's that risk mitigation product.

Mike Koelzer, Host: When I'm talking to my children who are just now starting to get out and we're in the corporate industrial world, I always warn them, and I think this comes from my dad, Hey, don't worry about the new tooth you need, or a broken leg or something like that. You want to make sure, and I say this to my insurance brokers, I say, look, I want to make sure that if Sally gets cancer and it's a lifelong thing, I wanna make sure she's protected.

Paul Fortunato: The way that you're gonna ensure that someone like that is protected is to make sure that the benefit remains affordable, not just to them but to you as the employer.

Because if you're continuing to pay out the large claims on a continual basis, or you have to pay large premiums all the time to keep that coverage, then potentially you're financially at risk.

So what our supplemental stop-loss program looks to do is to take on some of that risk so that when that large claim hits you as the employer, don't have to pay beyond the deductible amount, and if we pay for it, then your stop-loss carrier will not have to pay for it. Then the premiums with the stop-loss carrier can be lower.

So our major intent is to make the pharmacy benefit more affordable, not just for the employer, but also the stop-loss carriers as well, because they're dealing with all these multi-million dollar claims at this point, and they're challenged to figure out how to manage their exposure.

Mike Koelzer, Host: And I imagine Paul, your industry is what, sad stories are made of, you're reading the press, somebody they've got this lung disease and they found out that, there's drugs out there to save 'em, but their insurance is not doing this.

And there's big fights and things like that. And no one I think is wise enough to separate all that I think typically they don't usually blame like Steelcase or Amazon or something.

They seem to jump right to the insurance company, but in fact, Those are discussions that were [00:10:00] done by you and those companies to decide some of those things.

Paul Fortunato: So definitely as a self-insured employer, when they negotiate with someone like an Rx, benefits for coverage, I. The self-insured employer designs the benefit

and RX benefits may suggest programs to help manage the cost associated with it, make sure that there's certain clinical reviews happening so that the drugs are used appropriately.

But at the end of the day, the medications are very expensive. Pharma is almost wholly focused on bringing more through the pipeline with regard to specialty medications. And that's not necessarily a bad thing because we need that innovation because they're trying to service the most unhealthy populations that exist within the world. And the flip side, unfortunately, is that these medications are expensive. My team at RX Pharmacy Assurance, offering the insurance and covering when these claims get excessive, is a big piece of trying to keep it all affordable so that the employer doesn't have to turn around and say, you know what?

I can't continue pharmacy benefits any longer. You can only get, say, dental and vision through me and you'll have to go to the open marketplace on your own. And when that happens, the employer kind of loses their ability to take care of their population. 

Mike Koelzer, Host: So the average person going into a company, a self-insured company,

are they correct in thinking that everybody's gonna take care of their child who has cancer for the next 50 years, or do most of them have a. Cut off in there somewhere, just for financial reasons.

Paul Fortunato: that could take a few different forms. I think the intent of all employers is to offer a viable benefit for as long as they remain employed,

Mike Koelzer, Host: I was thinking differently. I'm thinking more like a car accident where they get, quadriplegic and then the car insurance has to take care of them forever. Employees are really just while they're employed.

Paul Fortunato: Yeah, pretty much. And, but there are multiple types of coverages that an employer offers, right? Beyond the medical, when they have their hospital stay, then they have long-term disability, so they could have ongoing payments, potentially for life, depending on how it's structured. With regard to how our coverage works, is that.

We bring peace of mind to the employer because if they were to hire somebody who has one of these conditions, and granted, they're not gonna have line of sight into that during the interview process, right? They're focused on, well, number one would be illegal to try to determine that. But number two, they're focused on trying to bring the best candidate into their corporation.

But they don't know if the employee or somebody in that employee's family is managing one of these very costly conditions, say like cancer or hemophilia. But the way our coverage works is that we will cover those conditions and the drug expenses associated with it so that we provide that level of protection to the employer.

That's the big focus for stop loss. And then ultimately where we're looking to help support is that there are these unknown risks out there that employers are going to get exposed to, whether it be through the new hire process or a new diagnosis, and they need financial protection.

And so traditional stop-loss was there to provide that protection. But the challenge became that there were gaps in traditional coverage because once the traditional stop-loss carrier pays on a large claim, they don't really want to pay for it ongoing. And so at renewal time, they'll go to the employer and

say, I will quote unquote, it's called laser.

I will laser out that member from coverage. And now you, the employer will have to foot a hundred percent of the liability. And that's where the gap started becoming, created. And that's what we're looking to help support. So if there is a new laser, well now they don't have to be exposed to that $700,000 annual claim anymore.

We'll help with that. And so our policy provides coverage up to a million dollars a year per patient. Per condition, and we thought it was important to offer it on a per condition basis because there are some people out there who are managing multiple specialty conditions like hemophilia and cancer. So the way our policy tracks is that each one has its own deductible and a million dollar annual max and a $3 million lifetime max.

So again, all in the focus of trying to keep it affordable for the employer so that they can ride these up and down waves of catastrophic claims.

Mike Koelzer, Host: Okay, so Paul, I'm following you there, but it sounds like, Oh, my dad used to do this. He would say to me I'd get out like a hundred bucks. Let's say I was going to Disney World or something, and he would say, Mike, let me carry your money because if I lose it, [00:15:00] it's my money. If you lose it, it's your money.

I never knew what he meant by that, but he was basically telling me, I'm gonna take care of you.

Paul Fortunato: Nice.

Mike Koelzer, Host: Your stuff sounds a little bit, I know it's true and we're gonna get to how you do it, but it sounds a little bit too good to be true. It's like everybody else, this is too expensive, but, RX Pharmacy Assurance is gonna come and make things.

Okay. So obviously that's where all the accounting risk tables and all that stuff come in. 

Paul Fortunato: It does come down to a lot of math. But at the end of the day, we're looking to. Offer coverage at a price that is consistent for everyone who joins our program. Our program is designed like a captive, so you have a group of unrelated employers who have come together to be able to purchase the coverage.

And by having this kind of group underwriting dynamic, it really helps buffer the impact of large claims for any individual employer because the group as a whole, their experience will be positive.

Mike Koelzer, Host: well that's how insurance works

you're able to take all of that potential together with bigger claims and get people committed to looking at that, which raises up the group and then is not as likely that each person's gonna get it.

Paul Fortunato: That's a totally fair way of describing it. Yes.

Mike Koelzer, Host: Making it affordable enough, easy enough, clear enough so that more people come on and thus you've flattened out your risk a little bit.

Paul Fortunato: And the reason why we tend to be very attractive to employers is because they have been experiencing the gap that their traditional stop-loss policy has created for them. So, they have that $700,000 specialty claim. It's covered in the first year, but in the next year, their carrier says, we're not paying it anymore, or we may give you a 60% rate hike to continue to cover it.

And so now the employers left with a lack of coverage, which is what they bought stop loss to begin with. So we're looking to fill that gap and pick up the pieces again, to help the employer sleep better at night.

Mike Koelzer, Host: Paul does that conglomerate of all of the stakeholders putting things into this new, stop-loss, do you guys have to get a stop loss on top of that?

Or is it funded so that there's enough. Risk money in there or does it keep stepping up to different companies and so on?

Paul Fortunato: Yeah, so ideally you want to collect as much premium as what your claims, your going out money would be even better. You want to collect more so that you can build up a reserve so that if you have a bad year in the future, you can buffer that and not worry so much about it. To your point, every insurance company also has reinsurance.

They have another, large insurance company who picks up some of that risk for

them all in the spirit of keeping everyone financially viable. So we actually reinsure a portion of our risk within the captive so that at the end of the day, we remain financially viable to continue to offer the coverage

Mike Koelzer, Host: So there's a company up there that is like your stop loss. 

Where does that stop? Then? Hopefully not with me. I don't want to be a part of this. Where does that stop up top? Is it the federal government or where's the ultimate end of people still saying, all right, well, it's getting a little bit expensive, so let's dig into this.

Where does that end?

Paul Fortunato: So, I mean this is the American business model, right? Is that if someone else can come to the table to help manage the risk and earn a fair profit on it, then they're going to be willing to be able to play within this space. And so, that's why we are willing to come in to help with the employer and the traditional stop-loss carrier.

We have folks who are willing to help us. To your point, I think it really goes on for an item, because it wouldn't need to stop until someone felt that they couldn't absorb the risk or didn't see it as a viable way to potentially make money for themselves.

Mike Koelzer, Host: It keeps going up until someone says, this isn't a business model we can do anymore. But so far 

Paul Fortunato: Right 

Mike Koelzer, Host: the numbers and that, it's working out obviously.

Paul Fortunato: right and insurance companies are all rated, There's a rated B rated, so as long as there are a rated companies, which are pretty much the Good housekeeping seal of approval, that they're financially solvent and can support this type of thing, if you have that type of backing, then you can feel very comfortable in buying the coverage that they will be there when you need them, and the claim needs to 

be submitted. 

Mike Koelzer, Host: What have been some miscues in the past with. Insurance [00:20:00] companies, whether it's home, auto, life, medical, I imagine sometimes when there's been a huge flood or something, they said, we didn't expect this in a hundred years or a thousand years.

This is like a million year flood. That kind of stuff. One has been some times where things got flipped and people weren't ready for it.

Paul Fortunato: Well, I wouldn't portray myself necessarily as an insurance expert, But there are definitely times when the totally unexpected and catastrophic happens to everyone, and that's where you see companies go outta business, whether they be the employer or even the insurance company, right? Because they just can't maintain their liabilities.

So that dynamic definitely plays out there, but luckily we have enough companies who are supporting each other in that whole reinsurance model, for the foreseeable future. I don't see much of a concern where the challenge comes in, it's the price.

So premiums continue to go up. You have a major catastrophic event, whether it's a hurricane, or if you have a lot of specialty claims as an employer, and there becomes a tipping point where even the insurance company needs to figure out how to manage this liability. I can't keep paying out a billion dollars every year.

And so again, that's where we're trying to offer some part of a solution by taking on some of that responsibility from the carriers. Because the biggest thing happening now around the corner is gene therapy, and cell therapy. So we're not talking about simple pills and capsules or even self-injections anymore.

These are the marquee situations that are gonna cost 4 million a

year. Now, looking at it from one perspective. The drug manufacturers may say that 4 million is a fair price cuz it's avoiding 40 million of expense over a lifetime. But at the same time, the bill is in the present

and everyone needs to figure out how that bill is going to be paid.

So as a society, we still have a lot of challenges in front of us and that's why we're trying to contribute some to some part of the solution. But there's a bigger issue at hand for us,

again, as a society to figure out where it's all going to go? Because you don't want a company or much less a patient to go bankrupt because of their health condition.

Mike Koelzer, Host: You mentioned that some companies, if they don't do this right, they could have gone, bankrupt or under, I'm thinking about now some of the companies that fully self-insure, do they have any stop loss in there

Paul Fortunato: It's gonna be a mix, but in general, the larger you are, the less of a need you have for stop-loss coverage because you have the financial resources to be able to kind of manage through those peaks and valleys. Also, the larger the group that you're looking at, the more consistent their claim experience will

1. So there are actuarial tables that say, one in 10,000 will happen this way. So, if you're a 50,000 life group, a hundred thousand life group and you use like a one in 10, you're like, okay, let me make sure I budgeted for

a one 

in.

And then you don't have to pay the extra expense for stop loss.

Mike Koelzer, Host: I guess the only thing I can think of, where it's way out there would be something like, and I'm sure the actuaries handled this, like, let's say C O V I D, let's say that was even worse, and everybody who was on it was then on a, well they were on a ventilator, but let's say that it was just worse than you can imagine, I guess the companies would cover it. But probably not forever.

Paul Fortunato: Well, I think, that's why you saw the government step in, and really help these companies by funding, whether it be the vaccines or other programs to help keep all these companies afloat due to this catastrophic situation that Covid brought along with it. So, To your earlier question, like when does it end?

It's like, well, luckily we have the United States government that potentially steps in, it helps out when they need to. I mean, you may question whether it's effective or not, but the fact remains that they're trying to create a solution and that just helps everyone, kind of keep moving forward.

Mike Koelzer, Host: I. Talk earlier about the heartstring stories you hear and the press and stuff, and sometimes they're complaining about, there's some, experimental this or that, but the insurance company won't do it and things.

 But you have to use business sense too, because a business wouldn't just experiment with some advertising program and throw it all into the Super Bowl because it might help, they've gotta make good decisions. And so the actuarial tables probably don't allow for a lot of experimental stuff at this million dollars.

At some point those graphs have to cross.

Paul Fortunato: Yeah, you're right. It is definitely a balance. When a drug is approved in the United States, it's approved for certain indications, certain uses,[00:25:00] And then to your point, sometimes the prescriber will say, well, let me try it for this, even though it's not really indicated for that. And that's really experimental.

That's the definition. And the challenge becomes that many medications, especially in the specialty arena, they're becoming very specific to what type of indication they treat. Like you think about, we have so many different cancers, we have so many different cancer medications, but just because it treats one type of cancer doesn't mean it's gonna be effective for another type of

cancer. But when you get into these kinds of emotionally charged situations where the indicated drugs aren't having the effect that everyone would hope, now they want to try a whole bunch of other things. And that becomes experimental and very costly. So, That's where the balance has to come in. And unfortunately, that's where I think a lot of the stories that we hear in the press reside where it's, people are looking for access to a medicine that doesn't necessarily have been proven to treat their condition very well.

Mike Koelzer, Host: But they don't want to tell that all in the press,

Paul Fortunato: It would be nice if it was a little more

balanced for sure. 

Mike Koelzer, Host: For sure. 

Paul Fortunato: The pharmacy benefit is really the most used benefit, within,

The whole cafeteria plan that an employer

offers. And Now we're seeing that 50% of the expense associated with pharmacy is related to specialty,

if not more. And what's really shocking is that it's only 2% of the population that have these conditions, thankfully, but they're driving.

Upwards of 55% of the cost.

That's where, then plans can afford to get a little more focused on how to manage those types of conditions, because then everything else kind of falls into place. Like, I'll just throw one statistic at you. The average specialty claim for a year can be $38,000.

Doesn't seem like a lot, but when you compare it to a non-specialty claim, 

that's like $500 a

year. It's a magnitude of like 75

more, and that's just an average. So, there are specialty conditions that cost an employer 500, 700, $900,000 a year.

Mike Koelzer, Host: My whole life I would say that I come down on the side of life more than death. And that would include probably my stance on, euthanasia, I'm afraid that if, People start doing that, then those that are sick are gonna start feeling like they're a burden and they might feel guilted into like, why should I be the one that wants to live when everybody else is using this assisted suicide? I've always been against that, but Paul, as I get older here now, I know those figures about old farts that are older than I am about the end of life stuff.

And it's really expensive and frankly, it's kind of a crappy life sometimes when it's that expensive. You're talking about the last three or four weeks of things. And I've always been, life is the best guy but just. Privately? Well, not privately, not anymore. Cause now I'm telling everybody just privately, I'm like, I don't know.

Would I want my family, if I've got, three months left, and let's say I was paying for it in my own pocket, which we are, we're 

all paying out of our own pocket as a community. It's like, how much do I want to go into my stuff?

Paul Fortunato: Yeah, it's definitely a challenge that everyone has to reconcile individually. But you know, what's nice about modern medicine? Again, the big price tag aside, these are life sustaining, life extending medications. They give people a quality of life in the early years of their life that they never would've been able to achieve without them.

So there is definitely a significant value to. Giving people the ability to live pain free as

I am 30 years old. And the flip side is it is a chronic condition that means they're on it for life. But you know, hopefully it's a very happy life not just for them but their families.

And we just have to figure out, again, as a society where the balance is with the price of these medications and then how to manage that. And some of it is if we could drive waste and experimentation

out of the system, that would free up a whole lot of revenue and economies that could then be translated into offering more to people who need it.

And I think that's what all employers look to do, especially when they self insure they wanna figure out how they can give more to their employee population because it's important.

Mike Koelzer, Host: We don't carry any brand names in our pharmacy cuz we get paid like 10% below cost. The problem is, it's not intuitive because as some of the insurances will cover the brand in our store, This drug is expensive and it will be [00:30:00] expensive, but this drug is so expensive, they know nobody can afford it.

So they throw in these, rebate coupons and things like that. So it's not intuitive and it kind of, I think, screws everybody up.

Paul Fortunato: It's definitely a challenge because there are formularies in place, with every PBM and every health plan, 

and they can be different, mainly because it's driven by how they negotiate with pharma

and ultimately what they're looking to represent. And so, if I'm a prescriber, My patients are probably covered by like 500 different health plans and PBMs.

I

can't keep that straight, which is why e-prescribing really needs to take a faster hold throughout society because that's when the electronic communication can then tell the prescriber, Hey, I know where your patient's covered, I know what their formulary is. Here are the four choices so that you don't have to worry about prescribing something that's gonna cost them too much.

So more of that needs to happen to try to get rid of all the noise you're describing. But to your point, it is a challenge cuz there are so many medications that effectively do the same thing.

And then it really comes down to the finances behind that formulary of which one's preferred.

And if you're, if you have a patient who changes employers, Potentially they're changing formularies and PBMs and health plans, and so everything you knew about that person potentially now is not a preferred medication.

And then you have to manage through that process.

Mike Koelzer, Host: One of my sons , he's a mechanical engineer, got a job and he was asking me about insurance and stuff like that. Like, dad, can you talk to me about this? I'm like, same thing you're saying, Paul. 

I'm like, look, it's a good company. All these companies are basically good in this industry. And Brian, by the time you find something that you think is more of a benefit at this place, they could change insurance in two months. And then what are you gonna do? Quit. You're not gonna quit.

Everybody sort of trusts everybody and there's some smoke and mirrors, some of it on purpose, some of it not on purpose, it's

confusing. 

Paul Fortunato: yeah, if you're in a good position, it sounds like your son may be where he doesn't have to worry about managing an existing condition

and he doesn't have certain healthcare needs that need to be addressed everywhere. He chooses a job, then I am totally on board with how you're describing it.

Because then you know it'll fit your needs. And the worst thing that could happen is someone saying, I don't want the insurance. You see, a lot of younger people say, I can't afford it, or I don't want to waste the money on it cuz it's dipping into like how I'd rather spend my money. But again, it's stop loss cover, it's insurance.

And when a catastrophe happens, you wanna be able to ride it through without being financially devastated.

Mike Koelzer, Host: was thinking about Paul, about, mentioning these doctors, how the e-prescribing is gonna help and stuff, and I suppose it takes time. Years ago, we were told in the pharmacy, let's say 10, 15 years ago, we were told all this is coming now, the computers in their doctor's offices and this and that.

We'd see some crazy stuff coming through though, like a crazy choice. The drug looks about right. But it was some offshoot of something and I can always just picture what's happening where the doctor, it's some newfangled computer, and this guy's 60 years old and he's got a few years left, doesn't want to bother.

So he gives it to some 16 year old up front, to plug in the different antibiotics and stuff. And the intention was there, but I think because you didn't get total buy-in, and this is a little bit longer ago, some of these people threw attrition out, but then you started bringing in oddities of this 16 year old in the front office.

And it sounds good, but it does take time.

Paul Fortunato: Yeah, I mean, to your point, when e-prescribing was first coming out, there was a lot of resistance, right? You had a lot of people who were set in their ways. It was embraced by some of the newer practitioners, because that's pretty much how they grew up. I mean, I look at my kids, they're so technologically advanced that they don't even wanna walk around with an ID card,

Or a wallet, let alone. So their acceptance and their prescriber's, acceptance of e-prescribing is gonna be that much higher, So I think As time goes on. it will get easier, 

but it's important because it also helps reduce errors.

 How many times do we make fun of people's handwriting, and potentially someone at the pharmacy misinterprets it, and then that could be a catastrophic event.

So e-prescribing is definitely a better way to try to reduce the number of

errors. 

Mike Koelzer, Host: Paul, look down the road about, 10 years or so, is there anything that you see coming that makes this more precise? And maybe it's people having wearables, or something in their heart.

Is there anything that you picture making, the stop loss that you guys are [00:35:00] doing more efficiently and, effectively?

Paul Fortunato: Yes, definitely. So, the product that we offer is supplemental stop-loss coverage. So we're not looking to displace an employer's relationship with their traditional stop-loss carrier at all. And so we know that the carriers are very talented with underwriting when it comes to medical expenses.

Pharmacy tends to be a little bit more of a challenge for them because they don't get access to all the actual pharmacy claims as much. They're very reliant on somebody feeding it to them as opposed to being able to monitor it on a day by day basis. So we've spent a lot of time over the last two years.

Working with the carriers to figure out how we can collaborate on getting them data so that their underwriting can become more precise for any individual employer, so they don't have to use very wide averages and ranges of averages. Now we can feed them information so they can build stronger actuarial tables that, hey, the incidence of a specialty claim is say, one in 10,000 

as opposed to one in 5,000.

So being able to share that data that should convert into lower premiums for the employer.

So these kind of like, intricacies can start becoming more the rule than the exception,

It helps everyone because the more precise the underwriting, the more affordable it is for the average employer.

Mike Koelzer, Host: Why do the stop losses have more information on the medical side, but not the pharmacy side.

Paul Fortunato: Their historical upbringing has been helping manage lightning strike situations under the medical plan. So stop-loss was really for those premature births, 

extended hospital stays, very expensive surgeries

These chronic conditions weren't really being serviced by pharmacies back in the day.

Really relatively a recent dynamic

Mike Koelzer, Host: Maybe diabetics or something you thought that was expensive cuz they were, a couple hundred bucks a month or something.

Paul Fortunato: right. So now that the pipeline continues to be very robust 

and the price tags become larger and larger, like the advent of million dollar claims is becoming more prevalent for stop-loss carriers. So getting better line of sight into this pharmacy data 

that becomes Intel that they never had access before

and really creates a stronger partnership that we have with them because we're really trying to be as collaborative as possible.

Mike Koelzer, Host: Paul, I'm gonna blame the PBMs, that they're obfuscating this, that they're not giving this information and so on. Is that true at all? Do I have a right to be picking on the PBMs in this area That they are going to share, the least information that they have to, and that's maybe some of the reason why, stop-loss people and the actuaries and stuff don't have a good handle on this, compared to where their handle on medical stuff is.

Paul Fortunato: I don't know if it's necessarily fair to paint them as the villain in this scenario, mainly because they're servicing as many self-insured employers as they may be with insured plans with the health plan. And when it's a self-insured plan, that data is the employers

so, and so ultimately if the employer directs the PBM to share the information with their stop-loss vendor or what have you, then they're obligated to do so.

I don't think there's much resistance with that. Where the challenge comes in is building the kind of communication platforms so that the medical plan can receive it in a timely way. A lot of times there's an intermediary there, a broker or a consultant who has to take the data, massage it in a way so that it's readable for the medical plan.

And, their timeline may not be as efficient as what the medical stop loss carrier needs. So there are a few similar steps along the way, but I don't think it's about protecting the data in a way that they don't wanna share it. It's really just trying to build a better sharing system, for lack of a better term.

Mike Koelzer, Host: we, in the pharmacy, we like to pick on the PBMs because we say, yeah, but they're not showing the net, they're showing pre, pre rebate stuff and all that. Do you think these bigger companies have a pretty good handle on that? 

Paul Fortunato: I really feel that there is, because you also have to remember that especially the larger organizations, they're hiring consultants to represent their interests, who are very savvy with,

How deals are structured, and there are certain decisions that are made as part of the deal in concert with the employer and the consultant and the pbm, and it gets designed in a way that everyone is satisfied.

To the extent they aren't [00:40:00] satisfying that then the client and the consultant move on to another pbm,

who will 

work with them. we are always seeing it as a David and Goliath, and we have like zero power against them. But I understand what you're saying, we might be an unfortunate case, but when you get to the big decisions, it's not like the PBM is this powerhouse versus a weakling.

Mike Koelzer, Host: It's basically, co-equals having a negotiation. And the PBMs don't always win. Like in our situation.

Paul Fortunato: Right. I mean, when it comes to the PBM market in general, every touchstone is really driven by volume. So the more volume you have, the better your negotiation

power. That plays on both sides of the fence, whether it be the pharmaceutical manufacturer of the PBM or the retail chain in the PBM 

or the retail chain who buys directly from the manufacturer.

So it's all about size. And so that's why you see, the larger PBMs potentially bring significantly more value because their size helps them negotiate better. Then the individual deals are subject to how people negotiate on their own or, through their agents like consultants and brokers.

But it's generally, the larger you are, the more commands you have at the 

negotiation table. 

Mike Koelzer, Host: Now, Paul, I wanna ask this next question. I don't want you to take offense to it, and sometimes people take offense to it. It's usually just my kids when I say to them, what do you do all day? So I'm gonna ask you that. What do you do all day, Paul? What is your day like? Are you in meetings or are you online?

What are you actually doing in your position?

Paul Fortunato: A lot of my time is spent educating,

 It's educating the broker community. It's educating the employers and helping them understand. That they have options when trying to manage specialty medications. And so talking to the brokers or the clients about the continuum of opportunities they have in managing specialty risk is where I spend the lion's share of my time. 

Mike Koelzer, Host: Paul, if you woke up tomorrow and you could not be in the industry, you could not be in healthcare or insurance, where would your next path be? And it might be somewhere you pick that's relatively close and skill sets to what you're doing now, or it might be something completely different because as you said, this has been a lifelong commitment, in a good way.

Paul Fortunato: Interesting question. So my entire professional career has been in healthcare. you asked me what I studied in college, it was engineering.

To me, when I was doing engineering, I was very big into computer science and really enjoyed the programming aspect of it.

But then once, I got to the college level, it wasn't as much fun. Anymore. So I was already in the engineering school and operations research and industrial engineering was, to me, the business person's engineering because in addition to calculus and statistics, you also had marketing courses, and accounting courses.

So then kind of going after my mba, it dovetailed really nicely. So I kind of stepped into the insurance industry. MetLife was the first company I worked for, Snoopy was the mascot at the time. So like, how can you go wrong? And I just really fell in love with account management and helping people.

Of work through difficult situations and trying to find solutions. And so, my path eventually brought me to RX benefits and then we just launched this product a couple of years ago and to me it was like super exciting to get in at the ground

zero, insert a little bit of my own Dna and how it was being created.

Mike Koelzer, Host: The cool thing about healthcare, my wife sometimes will throw out that one of my children, she thinks she'd be an attorney and stuff. And I'm like, yeah, I had a friend who went through attorney school and then like, didn't like it, didn't like the contentiousness of it, and so he went back and became a third grade school teacher.

Something like that. But the cool thing about healthcare is in general, even though we have competitors in general, the people you're working with, you're all going in the same direction. You can have a hundred percent wins from that, where in some other businesses it's, 50% win, 50% lose kind of thing.

Paul Fortunato: People are always gonna need their healthcare. And we saw a shining moment of it through Covid,

Some aspect is always gonna be present in our lives. The impact of Covid is going to have a downstream effect in future years because there was so much time that people were delaying their care because they were so fearful of going to doctor's offices or interacting, picking up their script.

And that's gonna have a downstream effect in future years to come

because their situation's exacerbated. And now we're gonna have to figure out how to manage through that. that bubble is coming too.

Mike Koelzer, Host: And some people might say, wow, eight months have gone or whatever since things opened up, whatever the official date was. But that goes [00:45:00] slowly on people. We have some elderly delivery customers. They're still a little timid, I agree.

That might take more time than you think for that to open up again.

Paul Fortunato: Yeah. And I think that'll just create more

opportunity to figure out

how to deliver

healthcare better, right? That whole, you know,

doing it via Zoom, I think a lot of people would've scoffed at it for many more years to come. And if it weren't for Covid, now, it's really how we expect everything to be delivered across the spectrum.

Like, even, mental health and behavioral health things, doing that on a Zoom, like you would never probably think to do that before Covid. But now there's a bigger acceptance and hopefully that creates more opportunity people to access care that 

Mike Koelzer, Host: Yeah. I think it's giving people permission. What I like about Covid too is, I think there's more permission for companies to do things maybe they didn't do before. 

In our case, it's maybe a half day after Thanksgiving off instead of the full day kind of thing. People are just more used to thinking people might be closed. And so, it certainly had its good points.

Paul Fortunato: Yeah, I think it's created a lot more work balance for people, and honestly, I feel like it did a lot for the family unit,

For as much as it might be difficult to be stuck in the house with teenagers in the end, you can still find a silver lining in that. 

Mike Koelzer, Host: I've got an office kind of in the middle of the house. It's closed off. And this is before Covid, I wasn't going into this store as much, and my wife would say, \ you I gotta go somewhere this morning. I'm like, well, why? She's like, well, you're here.

And I'm like, I'm in my own office. I'm even breathing my own recycled air in so much of my own office. She's like, I can just tell, so it's a different dynamic for sure.

Paul Fortunato: It's true. It's kinda like, when everyone retires 

and now you have to figure out your new way of life together, as a couple. So maybe it gave us a little education leading

into that. Well, they won't be so traumatic 

Mike Koelzer, Host: Oh boy. You see more of that now? Maybe it was always there, but you know, these couples that call it a day with their marriage, you after all the kids are out of school. That's number one. And then the second one is when they're retired, they're just not used to being around each other.

Paul Fortunato: Well, don't forget to date, you always have to date

Mike Koelzer, Host: Oh. 

Date, date your 

Paul Fortunato: That is, yes. Yes. 

Mike Koelzer, Host: All right. I got it.

 Paul, what a pleasure talking to you. I didn't know all that stuff about the stop loss 

so this puts that puzzle together. So, 

continued success to you. RX Pharmacy Assurance under the umbrella of RX benefits. And, thanks for spending time and keep doing what you're doing.

Paul Fortunato: Really appreciate it. Thanks for the opportunity and hey, anytime I can share a little clarity, I'm happy to.

Mike Koelzer, Host: All right, Paul. Sounds good. Nice talking to you and we'll touch base again soon.

Paul Fortunato: Very good, sir.