Doug Hetherington, VP of EmployeeBenefits, Echelon Group

DougHetherington is VP of Employee Benefits with theEchelon Group in Boise, Idaho. Echelon provides a variety ofservices, ranging from individual insurance and asset management to employeebenefits and retirement plans.

PaulWilson: How did you get started in the benefitsindustry?

I always loved skiing and graduatedwith a degree in hospitality management. I moved to Sun Valley andrealized I'd made a huge mistake, so I ended up being a headhunterfor a few years. The dot-bomb hit, so I started gravitating awayfrom software engineers and technical folks and working more withlocal businesses. My mom was a producer in the employee benefitsbusiness and a partner in a firm based in Twin Falls, Idaho, so Istarted doing some side work forthem, looking for producers and account managers, and was recruitedfor the job myself in 2002.

PW: Howhas the industry changed since you joined it?

I would love to say it's changed a lot,but in my opinion, it really hasn't. But what is changing is therate of change. We can thank the recession in combination with thepassage of health reform for exposing the problems, not just at theemployer and professional levels but also at the employee and evensocietal levels. As a result, there is more desire for solutionsand willingness to change. We've hit the tipping point.

PW: Whatare the biggest challenges you've faced when presenting innovativestrategies and ideas to clients and employees?

It's getting them to start, to becomemotivated about this paradigm shift. I've learned when yousit down with an employer, you've got to own it. You have to throwtraditional under the bus and then back up over it. If you're goingto walk in and discuss cost-containment, innovation and doingeverything differently, you've truly got to walk away from thestatus quo. You also have to be able to explain why your solutionsmake better sense. Getting an employer to begin that process isprobably the biggest challenge.

After 25 to 30 years of pain andsuffering, we all want a solution so bad, but we're also afraid.Could this actually make it worse? What does the solution look andfeel like? The reality is, very few have experienced it at thispoint.

PW: Somany strategies rely on building good data. Do you think theprocess will get easier over time?

It's one thing to look at data on anational level, or even on a regional basis, but when you can bringthat down to the employer level, or even a per employee per month,you're beginning to discuss real numbers.

I started out by getting into thecaptive space in 2013, and our first group with reference-basedpricing and a captive combined in 2014. Now, we're really startingto see the data. With our first few groups—and it's true with thenext few as well—we see cost savings and cost avoidance. It was onething to talk about it, but now that we can show the numbers,employers are very willing to have a conversation.

One of the things we've done over thelast year is to become extremely transparent. I walk around with myclient list of references and pass that off to an employer. Myclients know those calls may be coming; they are looking for morepartners who want to jump on board, and as that happens, it makesmy job a lot easier because, in essence, the problems we've solvedfor our clients are what's selling our future clients.

PW: Howare you taking advantage of the turmoil and change occurring in theindustry?

The day after health reform, my mother,who was very successful and the person I looked up to most in thisbusiness, called me and said, “You need to get out.” That was herlast year in the business, and at that moment, I didn't necessarilydisagree with her. But I received another call later from myfather, who I never took career advice from, and he said, “Youknow, I think your mom gave you some bad advice.” What he basicallytold me was, “Go solve the problem.” And that's what I set out todo.

The first thing I focused on was trend.I had learned a little about captives on the P&C side, and hadstarted poking around to see if there were any on the benefits sidein late 2010 or so. That's when captives were just starting to pickup a little bit. I partnered with a fantastic captive reinsurer andmanager and I was introduced to several vendors that dealt withdata. I was also introduced to reference-based pricing.

I ran a parallel track of trying tomarket both a captive and reference-based pricing, but the twoended up melting together. At the beginning of 2015, we launched acaptive where every employer was required to be reference-basedpriced. I partnered with a broker on the East Coast, and we put ourclients together and formed that captive, which continues to runvery successfully today. It has gone national through ourreinsurance vendor and has 24 employers. We're really excited aboutthe growth that we've seen; and the savings have beentremendous.

We're now at a point where we're ableto look at it from an actuarial standpoint and have a high level ofcredibility. Our initial group within the captive has reduced itstrend to a spot where we're less than $250 on a per employee permonth basis, and we have improved benefits and/or reduced costshare to the employees every single year since they've come intothe program.

PW: Allthis transformation and change brings opportunity, but what aboutthe challenges you're facing?

What I think is interesting is mycompetition isn't necessarily other brokers as much as just thestatus quo in general. So it's all about education and walking yourprospective client through why health plans operate the way they doin order to give them a good understanding of why the system isfailing and then identify their anxieties and deal with those oneon one. People often ask, who's your competition? I say, well, it'sprobably the largest insurance company and the largest hospital inmy state, and that adds up to four of the eight largest employersin my state. So I feel like I have plenty of headwinds coming atme, they just might not be from the directions where some otherbrokers feel it.

PW: Howdo you remain innovative without becoming distracted oroverwhelmed?

Things are changing faster and faster,and while it's incredibly exciting, a lot of what's coming into themarket is bright, shiny objects. I've noticed we're starting togravitate toward just a handful of vendors. There are going to bechallenges with solving the cost problem of health care, and whenthose challenges come up, what do you expect out of your vendor?We're looking for partners. What value will they bring? When thegoing gets tough, how will they execute? What's their track record?I would rather perfect our processes than continue to change on aregular basis, which has the potential to muddy the waters anddisintegrate our processes.

PW: Whatmakes you excited to get out of bed every morning?

Fixing health care. The television wasinvented in a little town called Rigby, Idaho. Wouldn't it beinteresting if in a couple of years, I could say, “Hey, rememberwhen we fixed health care right here in eastern Idaho?” If I cansomeday look back and say, I had my thumbprint on helping solvethis problem, and ultimately helping people access good, effectivehealth care at a reasonable price and that has a long-term rippleeffect on society, how could I be more proud of what I accomplishedin my career? I wake up excited because we're making progress andit feels like we're going faster and faster by the day.

PW: Whatare your sources of inspiration?

When I hear stories from clients oremployees, it brings it home that, at the end of the day, this isabout people. I've done the research on the financial shift that'staken place since the introduction of health reform. If you got adollar raise during that period, you're now spending 79 cents soyou can still afford to have health care. I know too many employeeswho can't afford to have their spouses and children on there, andthat makes me sick to my stomach. That's my motivation.

PW: Finish this sentence: The key tosuccess in this industry going forward is…

Don't be afraid to question the statusquo.