It would be no overstatement to describe EPIC Insurance Brokers and Consultants' rise to the top of the benefits market as … well, epic.

The San Francisco-based consultancy was co-founded in 2007 by John Hahn, EPIC's current CEO.

Hahn, a property & casualty and benefits broker, devised an aggressive growth strategy that he funded with seed money from Stone Point Capital, ultimately establishing 29 locations in 12 states through acquisitions and solid organic growth. In 2013, the private equity firm The Carlyle Group became a majority owner in EPIC. Today, the firm that posted $12 million in revenue at the end of its first year now boasts more than $200 million – and, according to its website, is listed among the top 20 brokers in the U.S.

And ever since the early days, Cindy Santangelo has helped direct EPIC's voluntary benefits program.

“We are still a small firm compared to the largest benefit brokers,” Santangelo said. “EPIC's vision all along has been to create a brokerage with the resources to compete with the biggest broker, while still maintaining the feel of a boutique insurance and benefits firm.”

EPIC's in-house private exchange

In June 2015, EPIC launched its private exchange platform, EXP.

The biggest brokerages with the most resources had already come to market with a private exchange capability, either by acquiring existing platforms and technologies or creating their own.

To compete with the biggest while keeping its personal touch, said Santangelo, it was important — if not imperative — for EPIC to build its own private exchange capability.

“It wasn't as if we were losing clients to other brokers' private exchanges,” she said. “But we knew it was a reasonable and achievable concept: to go out, and with strong partnerships, create a competitive product and potential solution for employers at a reasonable price.”

That partnership was with Atlanta-based Hodges-Mace, a provider of cloud-based benefit enrollment and administration platforms.

In some respects, EXP is similar to other private exchange platforms, which now number in the dozens, including the proprietary private platforms of major medical insurers. But it is also different in key ways, Santangelo said.

Private exchanges universally leverage technology to facilitate the administration of a functional, comprehensive health benefits program in a way that balances employers' cost concerns with the need for competitive and effective options.

With some exchanges, that means delivering pre-set benefits choices via a platform. That approach to private exchanges – or, for that matter, benefit administration platforms — conflicted with EPIC's vision for its clients.

“Different exchanges have their own way of 'stocking the shelves',” she said, referring to an exchange's carrier lineup, or the proportion of ancillary, supplemental, voluntary and non-medical benefit products that are offered.

“Our goal was to create a flexible platform,” Santangelo added. “That allows us to work closely with individual employers and help them first to identify their product needs and then customize a platform with options specific to the employer's vision and the employees' needs.”

In other words, the EXP Exchange does not “pre-ordain” which major medical, ancillary or voluntary carriers are available to employers and employees.

Private exchanges generating voluntary adoption

Long before passage of the Patient Protection and Affordable Care Act, health care consumerism advocates touted the virtues of a defined contribution (DC) approach to group health plan administration.

With the DC model, employers offer cash contributions that workers can apply to the insurance products of their choice. Theoretically, the DC model allows companies to cap health care costs, thereby improving current expenses and future liabilities.

The emergence of private exchanges in the wake of PPACA is widely viewed as a way to ease the transition to a DC benefits model.

In 2014, Pricewaterhouse Coopers surveyed more than 1,200 employers and found about one-third were considering moving workers to a private exchange model.

According to PwC analysts, “The healthcare affordability crisis is so intense for employers that private exchanges have a strong potential to grow in the medium to long term.”

In the ancillary and voluntary benefits market, private exchanges are already gaining substantial penetration.

Data from Liazon's Bright Choices exchange (which was purchased by Towers Watson in 2013) showed that nearly half of employees who bought a major medical plan in 2015 had also purchased a voluntary benefits product. Further examination of 10 large employers showed that employees purchased an average of five specialty insurance products along with their major medical plan.

Exchanges “very efficient” for the voluntary specialist

In her role as a voluntary specialist at EPIC, Santangelo oversees custom implementation of voluntary and ancillary benefits options on the EXP Exchange.

Key to that responsibility is understanding specific employer needs, she said, and then vetting the ever-expansive voluntary marketplace for the right products.

“The last thing we want to do is offer a product just for the sake of offering it,” she added. “The core of plans in most voluntary lines are similar, but more carriers are offering flexibility in designing features so that policies can be customized for specific groups if you know what you're doing. That's how you can affect the price point of policy.”

In EXP Exchange's first year, Santangelo said, several employers were enrolled in the platform, and many others are now preparing to transition. The platform has already proven “very efficient” for educating and enrolling employees on voluntary products, she said.

“The technology addresses a lot of the administrative concerns employers have traditionally had with voluntary programs,” said Santangelo.

As encouraging as early results have been, though, Santangelo doesn't think private exchanges are a panacea for every employer.

And while the latest exchange and benefits administration technology addresses the educational and communication-based challenges of marketing voluntary lines, the one-to-one employee consult is still her favorite marketing platform.

Don't lead with product

Without a question, Santangelo said: Successful voluntary marketing takes an investment from brokers.

“The voluntary market is so different from the traditional group plan market in how the polices are written and how they are administered, and change is happening so rapidly,” she said. “And employees are becoming much better consumer-driven advocates.”

Her advice for growing a voluntary business?

“Brokers coming from the traditional benefits world understand product, and they tend to lead their conversations with product,” explained Santangelo. “[But w]ith voluntary products, don't ever start a conversation with product.”

Asked for more precise insight as to her sales strategy, Santangelo offered a dismissive chuckle. “As I said: With voluntary products, don't ever start a conversation with product.”

Instant Insights /

Private exchanges fertile ground for voluntary growth

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