Date: Friday, December 24, 2010, 3:00am PST
by Bridget Riley
In an uncertain time for the health care industry, Extend Health provides an uplifting tale.
Extend Health offers clients – mostly big firms – control over costs by ditching the high premiums of group plans for lump sums placed into employee health care accounts. So far, the company has saved its clients over $1 billion; the average family saves $500 annually.
As a nascent company in 2004, Extend Health met with Wal-Mart executives to pitch their health-care exchange. CEO Bryce Williams and Chief Operating Officer Joe Murad snapped photos of themselves at Wal-Mart headquarters to mark the unique occasion.
They landed Wal-Mart subsidiary Sam’s Club as their first client, and in the next few years secured many more photo-worthy clients, notably the Big Three U.S. automotive manufacturers. In the public sector, Extend Health signed on Nevada’s public employees Dec. 15.
“The one-size-fits-all model is dead and going to continue to die off,” Williams said. “There is a massive amount of overspending for health coverage today that doesn’t need to be happening.”
Specializing in retirees – a ballooning population due to aging Boomers – Extend Health functions like Expedia for the plus-65 set. It provides a marketplace of 67 health insurance carriers and the customer support to help retirees pick plans to supplement Medicare, with no fees to clients. The company earns its revenue, which was $36.6 million in 2009, from the insurance carriers. Each purchased plan brings a commission back to Extend. (Revenue for 2010 is not yet available because these transactions happen almost exclusively in the sixweek enrollment period happening through Dec. 31.)
The company became profitable in 2008 and now operates with 628 employees, including 500 call agents located in Utah. The company recently shifted its headquarters from Burlingame to a larger, 9,862-square-foot San Mateo office.
Extend Health works to simplify the transition from group plans to Medicare and supplemental plans by investing in technology and automation. Its first round of funding – $10 million from former AOL CEO Steve Case in 2005 – allowed it to develop applications inhouse at a tech site adjacent to the Utah call center. CEO Williams says the proximity between the call center and tech center enables immediate feedback on upgrades.
The call center, too, is atypical by being in the United States. The advisers answering the 800-number are paid on salary rather than commissions. Some agents are devoted to only one client, such as Eastman Chemical Co. Eastman Health and Welfare Manager Phil Belcher said his company’s retirees wanted counselors familiar with the company culture.
“When you talk to an Eastman employee, they come prepared and they want to talk for an hour and a half,” Belcher said.
Extend Health CEO Williams says the company’s focus on customer care wasn’t as thorough before 2007, when the company underwent a Six Sigma quality-control review, a multimillion dollar investment he viewed as essential for the scale he hopes to achieve.
“We have not allowed the fact that this happens over the phone to (keep us) in a paperbased environment,” William said. For example, the company worked with insurance carriers to accept voice signature over the phone and automated recordings of disclaimers.
Originally a lawyer from Texas, Williams takes great pride in having American-run call centers serving American retirees.
Williams sees the next growth opportunity in the public sector, with more clients like Nevada that are looking to shave costs now more than ever. Exchanges like Extend Health’s or competitor Transition Assist’s may serve as models for state-based exchanges set to open in 2014 as part of health care reform. With health care reform has come a new openness to using exchanges, a trend it hopes to capitalize on.
“We’ve already completed all of our internal stuff that we want to do to get ready as a company to go public, and we’re now just watching the markets,” said Williams. “We’ll decide in the next three quarters whether or not it’s something that we want to do.”
Snapshot: Extend Health Inc.
HQ: San Mateo.
What it does: Health-care exchange for retirees.
CEO: Bryce Williams.
2009 revenue: $36.6 million.
2006 revenue: $1.4 million.
Four-year growth: 2,514 percent.
Funding:$10 million from Steve Case in 2005, $15 million from Psilos Group Managers in 2007.
Profitable since: 2008.
Contact Bridget Riley at firstname.lastname@example.org or (415) 288-4966.