A Radical Approach to Cutting Costs and Empowering Employees
Ditch the Broker, Mobilize the Workforce:
In this week’s special edition of “News You Can Use” on HealthcareNOWRadio I sat down with Adam Russo, CEO and Founder of Phia, to explore the company and its benefits program and rethinking the way you offer benefits to your employees. This is part 1 of a 6 part series “Straight Talk, Better Benefits”
Adam’s journey into this space is personal. As a first-generation American who watched his mother struggle with the legal system, he became an attorney to be a voice for the voiceless. That drive took an unexpected turn when, as a teenager, he began working for a self-funded health plan legal expert. There, he witnessed firsthand the staggering waste, fraud, and lack of transparency in a system that consumes over 50% of our economy. As he pointed to me while you can find every quality metric and price comparison for a toothpick on Amazon, getting that same information for a knee surgery is nearly impossible. Based on this, he launched his own missions to use data analytics to help self-funded employers cut through the bloat and take control of their healthcare spend. A mission that grew from an $8,000 investment in his mother’s basement into a company serving over 20 million lives.
We reviewed the foundations of the system and why healthcare costs continue to spiral while everything else, like his recent purchase of a new television or LASIK surgery, gets cheaper and better. The answer is universally depressing and one we have heard before, since there is little to no consumerism in healthcare purchases. When a procedure isn’t covered by insurance, like LASIK, prices plummet due to market forces. But when insurance is involved, the system rewards the status quo. Employers, for whom healthcare is typically the second largest expense behind payroll, often spend less than five hours a year innovating their plans. Yes, you heard that right – 5 hours per year on the second-highest cost of running a business.
Instead, they rely on brokers who are incentivized by a percentage of the rising premiums, a system where “reasonable” simply means doing what everyone else is doing, even if it means costs continue to climb. Adam challenged standardized plan designs, asking why a yoga studio and a union of truck drivers should have the exact same benefit structure. Spoiler alert – they should not. Employers must stop accepting the same old trope and start looking at their raw claims data to see where the real money is being spent.
Free Health Insurance Isn’t a Dream – It’s a Blueprint
But if you listen to nothing else and are looking for a real-world step out of the ever-rising costs cycle, we see in employee healthcare benefits.
Mobilize your entire workforce to solve this problem.
Pay them to seek waste in their healthcare benefits. A simple incentive with cash rewards of 20% of any billing error or overbilling they find in the services they and their family members consume. You should listen to the first instance that was caught in this program in his company, with the head of human resources catching a private room overcharge on her son’s bill. The payout, a $50,000 check. That kind of incentive spreads like wildfire, turning every employee into a vigilant consumer. This approach is a cornerstone of his own company’s success, where they’ve turned the model on its head. By eliminating premiums, deductibles, and copays for employees and their families, they’ve created a culture of retention and loyalty. The savings from reduced turnover and lower healthcare costs have made this “free” model financially sustainable.
This is a long-term approach with real steps to start you off and get your employees motivated to steer towards the readily available, high-quality, low-cost hospitals, and best of all, embracing direct primary care for better physician relationships
Listen in to hear how Adam proved that with a clear plan and a commitment to innovation, the goal of providing better healthcare for less isn’t just a dream, it can be your winning blueprint.
Until next week, keep solving healthcare’s mysteries before they become your emergencies
Listen live at 4:00 AM, 12:00 Noon or 8:00 PM ET, Monday through Friday for the next week at HealthcareNOW Radio. After that, you can listen on demand (See podcast information below.) Join the conversation on Twitter at #TheIncrementalist.
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Raw Transcript
Nick van Terheyden
in this week’s special edition of news you can use on healthcare now radio, I sat down with Adam Russo, and he is the CEO and founder of fear, so that we could explore their company and the whole benefits morass. Adam, thanks for joining me today.
Adam Russo
Thanks so much for having me. Nick It’s a pleasure and an honor. Thank you.
Nick van Terheyden
So as I do with all my guests, I’d like to just get a little bit of context. You’ve been in this space for a while, but tell us a little bit about your history, how you got here, and you know, why you got here, why this space, and why you do this.
Adam Russo
So, you know, I appreciate the question, and I’ll try to keep it as short as I possibly can. But you know, it isn’t like I woke up when I was 12 and I said, I’m going to be a health care attorney, fighting the good fight to reduce overall health care. That wasn’t it at all. I’m first generation born in this country. My mom and moved here from Poland. My dad came from Sicily, so, you know, English was a second language for my mom, and it was very hard for her to, you know, they went to a divorce, so it was very hard for her to deal with the court system, you know, the probate court, you know, getting, you know, all the Jews that surround force and custody battles. And I saw that my mom was having a very hard time. And in our neighborhood that I lived in, everyone was Polish. It’s a Polish neighborhood in Boston, so and there were no Polish attorneys, so I thought, you know, it’d be good to become an attorney so I could be a voice and advocate for people like my mom, who are very similar situations, right? So while I was in while I was in college, I applied for a job, and happened to be working for an attorney who was a self fund health plan expert, like, how random is that? Right? But I worked there from the time I was 18 until I graduated law school, and I did everything from answering phones, handling cases and selling, actually being a salesperson for his organization. And that’s where I realized how much abuse, fraud over charges, how the healthcare system, which is over 50% of our entire economy, connected in some way. It’s so different than every other aspect of our economy, speaking of a from a consumer stamp, yup, like you know, you can go on Amazon and get everything, every quality metric, every pricing component, every review on a toothpick. But if I want to get a knee surgery, to get that same type of information easily accessible on Amazon or a bunch of other places is almost impossible right to do in a healthcare space. So that’s what I realized. You know what? I think I could build a better mouse trap, data analytics, scrubbing data and identify situations where health plans, self funded health plans, most importantly, could actually find ways to reduce their overall health care spend, because every year, as you know, it isn’t like anyone I’ve never heard of anyone. Tell me a CFO or a head of HR that they had their annual meeting for their renewal with their insurance broker and that their rates were gonna go down.
Nick van Terheyden
Spoiler alert, never happened.
Adam Russo
Yep, and I believe that you can do that, and by just everyone knows, I am not a broker. I’m an attorney. I founded the fear group back in 2000 in my mother’s basement with my best friend from college, Mike Bronco, who has since retired, and we started the company with the total investment of $8,000 never got a loan, never acquired anyone. Purely organic growth, and we have over 300 people today serving over 20 million lives in their self funded space, everything from school districts to small, you know, small employers to large, well known brands across country, across the world, and everything in between. And what I can tell you, is by looking at the data and looking at how plans are designed. It is there’s no question that, unlike almost every other industry, there’s still there’s still so much fat, so much bloat, there’s so much just waste in the entire healthcare system that, quite frankly. I would say 99% of the listening public has no idea about and that’s what we’re trying to bring to light. And right?
Nick van Terheyden
So, so you know, certainly one of my areas of passion, and let’s just share a little bit of common heritage. So I too, you know, first generation immigrant to this country, and in fact, struggled a little bit like your parents and, you know, so I immigrated, and I came from a completely different system, and, you know, I think I had the wait what reaction that I think you did with regards to health care, the more I sort of got exposed to it. That was despite being in the system. So I have complete and utter sympathy. I mean, I’m still doing that to this day. It’s shocking to me how terrible this is for the benefit of the listeners. I think most people don’t understand how, and I’m not talking going back to the, sort of the original reasons we’re here, because this is the system we have. We have insurance, not looking to sort of explain that, but we have this, as you described, insurance brokers and folks that are delivering and you know, as you pointed out, it’s, it’s shocking, but not once Do we ever hear them come to you and say, Hey, I’m reducing your costs and I’m going to deliver more benefits. That just never happens
Adam Russo
when you briefly explain,
Nick van Terheyden
can you briefly explain how this system works for the benefits of people that are sitting on the other side of this, which is consuming it as employees, typically, I’m
Adam Russo
going to try to keep it as simple as I can think of it this way, right? So I recently, actually, yesterday, purchased a 50 inch Samsung flat screen television for, I think, $350 right? Okay, 50 years, 10 years ago, that TV is 15,000
Speaker 1
so why is a lot thicker and heavier,
Adam Russo
lot thicker, lot it’s saying, right? You just plug them in now and, you know, connect it to Wi Fi smart TVs the whole thing, right? They have all your information, but that’s a separate topic for a separate show, right? Bottom line is, the prices have gone down. Why? The advances? Things get better. Things are made cheaper. Things are more efficient. Then you have consumers who go out there and are smart, know what they’re looking for. They can shop. They go on one website and see compare 30 different TVs, different sizes, everything right there on the screen. So the prices of televisions have dropped dramatically. In addition in health care and health insurance the world, LASIK surgery, eye surgery. So I had a LASIK, I didn’t realize that it time, a period of time that it works, and then it stops working. Okay, like, what’s the well, 10 years span. Well, when I got LASIK, I remember it was like 5000 per eye, right? Expensive, yep, but it was never covered by health insurance, not covered. So what have you seen on the price of lace? On dramatically down why it goes back to the TV. Consumerism, buy one. I get one free. I mean, whatever you can think of like this. Consumerism. There are different quality metrics because why it’s not covered by your health insurance, any medical procedure not covered by health insurance, what we have seen are prices for those goods and services go down, yep, but when it’s covered by health insurance, we’ve seen prices either stay the same or go up, even though everything else is dropping your price with technology, right? So what’s the difference? The difference is consumerism. There is no consumerism when it comes to our health plan design. Just think of this Nick health your your health insurance expense is the second, typically the second largest expense for any company behind you know, salary, okay, payroll, yet most employers spend less than five hours in a whole year looking at their health care Spend right? And trying to find ways to innovate, they don’t, what do they do? Every single CFO says we want to reduce, you know, price, the the cost. Okay, they go to HR. But HR is very well aware that any change to incentivize people to turn pay. Shifted to consumers, to educate the general staff, to educate the staff and their family members. I hate the word dependent. I use the word family members. It’s a lot of work. It’s it’s more work for HR. So you’ve HR wanted to keep the status quo, because they just want things quiet. They don’t want a lot of noise. But then you have the CFO putting pressure to reduce the cost. And all this money is being spent by every single one of these deployed. They’re all doing the same thing. They’re hiring a broker who they feel has the expertise, and that broker is going to lead them in the right direction when it comes to better benefits, reducing benefits, reducing cost, etcetera. But I’ve been doing this for 26 years. I’ve so more than half my life I’ve yet to see a plan. Take a five, three to five year action plan when it comes to the health spend, and say, right, here’s what we’re going to do. We’re going to redesign the plan to incentivize people to care about the quality and cost of care. We’re going to educate them, we’re going to incentivize them to care. And we’re going to make our population as healthy as we possibly can.
Nick van Terheyden
Right? Nobody’s doing that, no. And to be clear, the brokers in here are incentivized in a way that doesn’t, you know, engender, you know, good let’s call it good behavior, because they’re paid as a percentage of the fees that are essentially charged as a result. So their incentive is to see this go up. There is, it’s, it’s, it’s Cafe,
Adam Russo
and also Nick you add to that, to add to that, they have no incentive to do it. But even more importantly, I like to use the word reasonable. Everything is everything from a litigation standpoint, right? I’m just gonna say every
Nick van Terheyden
lawyer on this planet uses that word,
Adam Russo
right, reasonable behavior. So if you’re a broker, right, if you’re a broker, any other broker is saying to their clients, we’re going to increase premium by 5% 10% we’re going to increase co pay, we’re going to increase deductible. If everyone else is doing it, then you’re being reasonable. You can still you don’t have to take that extra step, because all the stuff that we do, a lot of it initially, is not easy, it’s hard. It’s work, right? But what I can tell you is, what I can tell is, in my organization, we set up a plan 15 years ago so that one day we would be able to offer all of our employees and everyone in their family, not only free health insurance, but the highest quality care, the best type of care, which would make it, if you would think, even more expensive. If anything, we turned it around. And it’s all starts from a plan design aspect, what you cover, what you don’t cover. The funny thing I always thought is, you know, let’s just say you are one of the largest insurance carriers, right? Let’s just, you know, whatever United they represent 10s of 1000s of employers all over the country. So they represent everything from a yoga studio with 10 yoga instructors who are all vegans and don’t drink to a union plan of truckers, truck drivers, 80% obese, yeah, most of them are some kind of medication and not very healthy. Can you tell me, Nick, why do those types why both employers that I just described have the same benefit plan design?
Nick van Terheyden
Yeah, that’s how it is. Absolutely not. But to your point, I mean, the benchmark is the standard of what’s happening elsewhere. And because nobody has sort of moved this needle, except for a few exceptions. And obviously, fear is one of those exceptions, you’ve sort of teased a little bit of the plan, and you know some of the things that you’re doing. So help the listeners understand how I mean as a as a consumer, so as a an employee, and therefore patient, and whatever my control is through my employer. But obviously for the CEOs, CFOs, especially, who, to be clear, are not asking the right well, maybe they are asking the questions, but they’re not getting the answers. But how correct? How do they approach this so that they can turn this around? Because if you go based on the benchmark, you’re just going to get the same dog food, and it’s not going to fulfill any of the things that you’re describing, which to be clear, anybody that tells me, Hey, we’ve got better health care, it’s. Euro cost. You know, I, you know, there’s nobody on this planet that so nobody on the US planet, to be clear, in other countries, different story. But nobody is going to say, oh, no, I don’t want that. I want to pay more. So you’re clearly, you’re teasing this beautiful thing. How do we get there? How do they achieve this
Adam Russo
simple the first thing you have to do is actually look at your claims data, raw data, your data on your health care spend is going to tell you everything. So for example, if I looked at my past five years of data, a lot, even last year’s claims data. Again, you’re not looking at individual people, you don’t know, oh, Joanne over there has this disease. You’re looking at claims, and what you’re going to find is a very small percentage of volume in your claims makes up 90% of the expense, big percentage, right? So for example, I’ll give you a simple one. Okay, let’s say I have 100 employees, and one of the Philia, a hemophilia, you’re going to be over a million dollars a year in claims, guaranteed, 2 million, yep. Now, if I was the CFO, or if I’m the HR, and I’m looking at all the data, I’m like, Huh? But for this one claim, this one person’s claims, yep, we’re actually trending in the right direction, right? Yeah. What programs out there are there that we could put it to help this hemophiliac going forward? And there are plenty of programs you can literally go to the cave. As an example, go to the Cayman Islands. I think it’s called cave in health city or something. I forget what it’s called, right? Yep, and three times a year, bring the whole family stay in a five star hotel resort, all expenses paid, right? You get your blood work done there, first class everything, and it’s going to cost you under a quarter million dollars, 2 million right? Now, that’s a simple little thing, right, that you can do. But one of the key things I tell people, excuse me, one of the key things I tell people is, till you get the members of your plan, the people on your plan, to be incentivized to care about the quality and cost, everything we’re talking about is a waste of time right now. What do you mean by incentivized? I mean pay them, yep, literally, give them cash for every guy. So the was saying, okay, for every mistake, everything on your medical bill. If you find an error, an overcharge, anything, we will give you 20% in cash of the amount of money that you were able to I love it.
Nick van Terheyden
You’ve just mobilized the whole workforce to go seeking errors.
Adam Russo
Yep, that’s it, you. So what happened was the first person, I can’t make this stuff, it’s crazy, was the head of HR noticed that her son’s hospital bill. And again, this is not something we would have noticed, because only she knew, yeah, that he was not in a private room. He was not in a private room, yet he was doing Billy as a private room. She identified it. She got a check for over $50,000 Wow, oh, that’s the 20%
Nick van Terheyden
Yeah, that’s what
Adam Russo
people do those days. It spreads. It spreads like wildfire. Yeah, no, absolutely. People caring about, hey, wait a second, this drug the doctors telling me to take, it’s $1,000 a month. Is there a generic I can take? Is there another brand I could take it might be cheaper, and it it just keep it just keeps on growing. And got to a point where, now, you know the crazy I would ask you a question, Nick, just a simple question in eastern Massachusetts, alright, I’m going to say there are, let’s just, I’m making this up. Let’s say there are 40 hospitals that you could deliver normal birth. What do you think the range is of what it costs to deliver that baby on the bill? What’s the
Nick van Terheyden
I’m gonna give you? I’m gonna give you anything from about 500 to $1,000 all the way up to easily 70,000
Adam Russo
Okay, so you’re pretty close. You’re better than most. The average that we see, the range we see is 11, 11,000 to 67,000, I. It’s the same baby, yeah, same babies coming up any better looking at this one hospital, and then you say, Okay, well, about quality? Well, we have all the quality metrics. Yeah. It’s not like buying a car $100,000 hospital bill. A hospital stay does not necessarily mean that that same stay at a $20,000 that that one is five times better it’s not. Yeah, a lot of times we find that the higher the bill, the lower the quality, right? So here’s what we did. Nick we looked at all the hospitals, and how do people, how do women, moms, decide what hospital they go to deliver the baby at? How do people decide where to go? My mom went there. I was born there. My sister works there. What? Because all people are thinking about is their co pay and deductible. That’s it. If they actually looked at the whole care about the whole bill, here’s what we did. We said, okay, and this was 10 years ago. It’s called the diapers and wipes program. We said this, every year we identify three hospitals. You don’t have to go, because it’s a network, right? You go to any hospital you want, but if you choose one of these three, we’re going to pay for the diapers and the baby wipes, right for a year on us, 76 babies born, 76 babies born at a high quality, low cost hospital. Yeah, that alone has saved us three and a half million dollars.
Nick van Terheyden
I don’t doubt it for a second I and just in fairness, I need to defend my low end Bill estimate, because when I was first, when I first arrived here, I was fortunate to have fantastic insurance, because I worked for a hospital, and we had our first baby, and it cost us nothing, which was quite the shock when you see what’s going on now. But I, I just think outstanding, you know, I think the incentive of the mobilizing your team is just an extraordinary, clever move to sort of wrap up, tell us what you’ve got going on at your company, and you know what the story is? Because, as I mentioned before, you eat your own dog food, right?
Adam Russo
Here’s what I can tell you. What the first thing we did is we looked at what the cost is to us to recruit, hire, onboard and train new employees. And we also know that typically, it’s six months before that new employee is at this part with a former employee left. It cost us. It’s my company, $24,000 to bring in a new person, right? Yep, the average health care spend at my company last year per employee was 16,001 six. So I’m better off finding ways to keep good employees right. So what do we do? We said it’s free, no premium, no deductible, no copay, nothing for you and your family, but you got to stay here. You got to be here so you have people that want to stay and as as our company is growing, so is our workforce. Our workforce. You know, 20 years ago it was a bunch of 20 year olds. Those 20 year olds like me are now in their 40s and 50s. Well, guess what? I have four kids now and a wife. My what I what’s important to me is different than it was 40 years ago. Yeah. So as we see our employees grow into better better positions, higher positions, more money, they want stability, and by offering the best health care possible, we ensure that no one ever wants to leave this place, and if anything, people want to come right? So it’s the opposite approach of all the plans that we design, where every year, co pays go up, deductibles go up, etc. And I know we don’t have time for it today, but you know, direct primary care was probably the best thing that we Yeah, six years ago and again, paid in full by us.
Nick van Terheyden
And to be clear, the physicians on the other side of that table are going, Yeah, this is great. I get relationship. I get paid appropriately.
Adam Russo
I time to get to know your patients. It’s awesome.
Nick van Terheyden
Unfortunately, as we do each and every show, we’re running out of time. I just want to highlight a couple of things. You know, first off, the outstanding piece of advice for an. Anybody listening to say, here’s what you can do today, because to get to the point of free, to be clear, nothing is free. But, you know, free to your employer employees is difficult, but incentivizing folks to go after those errors is is just a gem. I mean, I have to say that is like we should have that rolled out across the universe. It’s so brilliant,
Adam Russo
I know, and that’s what we and that’s the biggest game changer. And I can tell you, it’s a five year process for us to be able to offer the free benefits.
Nick van Terheyden
And to be clear, one step one, but you’ve set out a plan and a clear capacity to deliver something that I think anybody listening to this show, if they’re not going wait, what’s the name of the company, where’s their application process? I don’t think that’s outstanding. I mean, just outstanding. I think you’ve given us a lot to think about, but unfortunately, as we do, we have run out of time, and it just remains for me to say thank you for joining me on the show. It’s been a true pleasure. Adam, thanks for joining me on the show.
Adam Russo
Nick, thank you so much for having me. I hope I brought something to your listeners today that they can learn. But like I said, it’s a long process, but just doing the same thing we’ve been doing is not going to change. It’s not going to get better, it’s going to get worse. And I believe that there is a definite winning, successful blueprint that more and more employers should start to get a look at. So thank you again.
