Jim O'Connor Interview
[00:00:00] Welcome to The PEO Podcast, where we interview industry leaders to discuss all things PEO’s from compliance to technology, to client relations, and everything in between. I'm your host, Andreas Deptolla.
But we bring a lot of fresh ideas and an alternative solution to problems that here to for PEO is really haven't been introduced to. So our innovative thinking, our creativity has really been, been a key advantage for us.
Hi everyone. And welcome back to The PEO Podcast. Today I’m spending time with Jim O'Connor.
[00:00:39] Jim is a National Practice Leader for the PEO consulting practice at CBIZ. We chat about master health plans, sales and attracting new talent as we begin to emerge from the pandemic.
[00:00:55] Tell us something unique about you, that your team at CBIZ, maybe doesn't know about you. Probably what they don't know about me most don't know about me is that I have $5 dogs and two cats. And so animals now officially outnumber, uh, the members of my family. Uh, but, um, yeah, we just added our fifth dog, so we've got a lot of rescues.
[00:01:16] And so that's probably a, an item that most people would see Booz don't know about me. We're a big dog and pet people in our family. Um, are the cats and dogs getting along? They do, interestingly enough, they, they, they absolutely do. I can't say the same about my daughters, but, but definitely the cats and dogs do well.
[00:01:36] I haven't took kids on here. I can, I can certainly relate to that. Um, so, so, um, Jim, tell us about , your journey in the industry. How did you get to the point where you are right now? Yeah, sure. So I came into the health insurance industry in 1987 as an underwriter at when the Prudential insurance company was in health insurance.
[00:01:58] And then I went [00:02:00] from the insurance carrier side, came out to the brokerage consulting side, started working with PEOs as a benefits consultant to them in the mid nineties. And then. My partners and I sold our firm to see biz in 2009. And I've had various leadership roles, in CBIZ, uh, throughout those years, uh, presently, um, uh, enjoy the role of national practice leader for the PEO and association consulting practice at CBIZ.
[00:02:30] And what specifically fascinates you about the PEO market, right. But what are some of the things that you're really passionate about too? Two things come to mind. One is they're serving small employers for the most part, right? What they typically serve employers that have less than a hundred employees, very often, less than 50.
[00:02:50] And so they think the average is probably about 20, 25. If you look at the PEO industry, so small employers that would drive America's economy, Right. So if we can do [00:03:00] more and more to help small employers be efficient and profitable, that's good for the, our countries. It's, it's really important. So that is, is a real important to me from a mission perspective.
[00:03:11] And then from a pure business dynamic perspective, I just love the whole outsourcing model. Like I just do. I think that if we can free up businesses to do what they do best, whether it's selling widgets or servicing this or selling that. And then pull all of the routine mundane and regulatory compliance, administrative functions out of their shop and into a PEO I think that's really a great economic, uh, equation.
[00:03:39] Yeah. You and I, we, we discussed in our preparation session, uh, um, you know, the, the concept of the medical master plans within the PEO concept, right? And maybe start off like, you know, for somebody who might not be as familiar with specific topic, like how would you explain the concept and what kind of [00:04:00] advantages do PEO’s typically see?
[00:04:03] Sure. So has any swollen where things shut down? Kind of what are the benefits, you know, comp and benefits they're providing to their employees? Health insurance is always an important part of that. And so our country has played with, you know, escalating costs and health insurance. We haven't solved this problem.
[00:04:22] And so in small employers are very, very challenged by being able to get affordable health programs for their employees. So a PEO is an outlet for them to ideally get access to broader. Better more affordable coverage. And why is that? Because the PEO right. It's thinking about what, it's, what it's doing.
[00:04:42] It's aggregating thousands of small employers into a larger employer. And then as a larger employer, instead of me of being, say a single employer with 20 employees, I joined a PEO and they've got 20,000 employees. So them buying a health [00:05:00] insurance plan. At 20,000 employees is going to afford them options and designs and pricing access that would not be available to me at 20 employees.
[00:05:12] Right. So, so that whole aggregation is what the master plan is about. When you join a PEO and their master health plan. So, so you outlined the advantages from the employer side, right? As a small group. How about from the PR side? Right. If, if I decide to go that ride route and then offer Massa Medica plan, what are some of the advantages that I get from the PEO system?
[00:05:38] Sure. As a PEO, um, The primary advantage to providing a well-run affordable master health plan, or it'd be master dental or life and all the ancillary coverages. So you, as the PDO, providing your master plan, your benefits, I think the advantage is, is to be market competitive, right? [00:06:00] You want to be bringing to these smaller and mid-sized employers.
[00:06:04] As many opportunities for better purchasing power pricing, design access that they can't get on their own. Right? So if I'm a PDO and by the very fact that I have of this mass covered population, and I'm coming to you as a small business owner, I'm showing you my payroll services, my administrative services, my technology.
[00:06:28] But they're going to ask, Hey, can you do anything for me on my benefits? Can you get me my benefits more affordably? So, so as a PEO, if I am able to have a successful well-run well-designed master health plan, that can be a real advantage for me. But it's not without its challenges as well. So, so now let, let's say, uh, the leadership team of PEO gets together and you're doing some, some work with them, you know, as the PEO might think about adding a Medica master plan [00:07:00] to their portfolio, what are typical decision-making criteria that a PEO should be thinking about?
[00:07:09] Well, the first thing is you have to have scale, right? So, so if you've just got a few hundred or even just a few thousand work site employees, you have to be able to scale. You have to be able to grow it and, and. The the, the big challenge is that there are only a handful of health insurance carriers that are, are open to doing PEO master plans and some regional carriers as well.
[00:07:36] But they're very selective. So if I'm the PEO and I don't have a master plan today, and I, and I'm interested in getting one, I need to be really cognizant of how to best position myself with those insurance carriers. So they want me. Uh, as, as a client. And you mentioned that that that's a scaling effect, right?
[00:07:56] Um, generally speaking, there are obviously [00:08:00] always, uh, from what sizing perspective would it make sense for a PEO? How many lives do I need to cover in order for this to be even like interesting? Sure. So as you kind of framed it up, there was no hard and fast answer to that question. And when you ask the insurance carriers that it's always the question they hate, they want it, they want to shy away from it because they don't want to feel like they're not, they don't want to give the perception.
[00:08:24] They're not open for business, but here's the reality. You better have, you know, at least 1500 to 2000 employees, maybe 2,500 work site employees before we even go to the table and start talking about that now again, the number of employees is one piece of it discussion, but you might have a very interesting niche.
[00:08:46] That you're in as a PEO and it might be an industry vertical. It might be a geographic and industry vertical. It might be, you're only going after employers of over a certain size. So there are other mitigating factors that will [00:09:00] change that, that number that I just gave you. But if someone said, Hey, don't give me any of those other criteria.
[00:09:06] Just generally speaking. What's the number I should be at before I tried to go to the table with one of the major carriers, you should be around that 2,500 employee Mark at a minimum. So Jim, you essentially, you know, your role, you're kind of in between, right? The, PEO, and then you, you work with the carriers, um, and you, you mentioned that not all carriers are open to, to this, uh, concept, give us a secret sauce here.
[00:09:31] What, what is like, from, from the carrier perspective, what are they looking at? Right. If they evaluate, uh, and you alluded to some of these things, but like what, what is the process like and what does the carrier interested in seeing. You know, it's interesting Andres, I think that you'll appreciate that. A lot of it starts with real non-health insurance criteria.
[00:09:50] It's looking at the business itself. It's looking at the PEO itself, the leadership. You know, are they either highly professional? How do they [00:10:00] manage their business? Right. Are they financially very strong? You know, their worker's comp plan? Do they run it well? Is risk management important to them? What is their business strategy?
[00:10:11] What is sort of growth strategy? Um, are they take all comers really don't care who their clients are or just, just take anybody or are they selective? Do they have their own underwriting approach to, to bring it on their clients. You know? So, so from a business perspective, the insurance carriers want to make sure that because these become partnerships, right, when you're a PEO and you now have a master health plan with one of these carriers, they want to make sure that you are a good partner for them.
[00:10:43] Being, you know, being cognizant of bringing in good business. Right. And so, so the secret sauce is to be able to demonstrate to that insurance carrier decision-making team, that I will be a good partner, that I has the PDO. I [00:11:00] have the right people, the right processes in place to, to manage a master health plan.
[00:11:06] I've got the right gross strategy. So that. You can see the future that I'm going to be adding thousands of employee ease over the course of time. And it's adding profitable employees. That'll be good risk, not, you know, anybody. Right. And, and, and that. It's not just about the people and processes internally, but you know, you know, self plug here right.
[00:11:32] Are using the right consultants, the right underwriting tools and teams outside that are knowledgeable about master plans, know how to construct and manage them. And so those are the things that you, you better have those boxes checked before you get to the table to have the discussion. And it's like, as if you were looking at making an acquisition of a company.
[00:11:55] You're gonna look at the character and the, and the management team. You're gonna look at the [00:12:00] business management style and structure and the growth plan. We'll think of the insurance company. They're looking at a partner email to better bring all those things to them as an instant comparison, right?
[00:12:11] Like, uh, the, the M and a acquisitions, right. You know, oftentimes we see that, uh, companies that are active on the M and a side, they kind of have their playbooks, right. Or their frameworks. Right. You're you look into the finance balance sheet and whatnot. You look into culture, you look at different KPIs and whatnot.
[00:12:33] Just something like that exists, like, like a, like a clear framework that you work through with specific clients, um, asset preparing, um, for, for the underwriting process, is that a long process where you say like, Hey, typically it's six to 12 months. Tell us more about that. How do you, how do PEO’s prepare for that underwriting process to be?
[00:12:54] I think you hit on it, right? You, your map out. Kind of the playbook, the [00:13:00] checklist, you know, what I just verbalized and, and other criteria as well. And, and you do that, that SWAT analysis, right? In terms of strengths, weaknesses, opportunities, threats, as it relates to the PEO itself. And where are they strong right now?
[00:13:13] Where do they have deficiencies? And if those deficiencies are addressable, how long would it take to address them? But examples might be, you know, that they're not large enough. Right. And so they've got it. They've got to get larger. Um, or they might have weakness in their, um, CFO controller, finance department.
[00:13:33] So they've got to upgrade the personnel. So there's things like that. And so underneath it, It's going to be that timeframe is going to be variable based upon what the starting point is for that PBL. But I think your six to 12 to 18 months is probably not unreasonable bye-bye and, you know, you mentioned earlier you're managing risk as one, uh, important element.
[00:13:53] How should PEO think about prospects and new clients that come onto their [00:14:00] platform in that context as the PEO is doing field underwriting, right? They're looking again, similarly. The, the client's ability to pay their bills. They should be looking at again, the, the, the management team, the structure of that perspective employer coming onto the plan.
[00:14:17] What is their philosophy towards providing benefits? Does that employer provide benefits today? Are they contributing a meaningful amount towards the cost of the health insurance, which demonstrates it's important to them as part of their comp and benefits strategy to attract and retain talent. Right?
[00:14:36] So, so that's the type of field underwriting that, that first and foremost they should be doing. And then there will be the more formal group health questionnaires, where, where they're vetting. The risk profile, the health risk profile of an employer. Um, and so those are the types of things that PBMs will do to, to look to straight out or, [00:15:00] or attract the best risks into their master plan.
[00:15:03] So we talked a lot about the, you know, the, the process and the, the, the advantages. For, for the PEO for the employer groups, if you look at the other side of the coin, so to speak, like, are there certain instances where you say like, you know, a medical massive plan is not the right fit for the PEO outside of you talked obviously about the sizing or the other criteria, but you said like, Hey, this is probably not the best strategy to pursue for sure.
[00:15:30] So what do you think about it? There's proximally 900 or some odd PEO’s in the country and less than 10% of them have a master health plan. So you think about that, right? You've got about 900, some odd PDO and about 80 or so a master health plan. So what are the rest of them doing? Right. So you have to solve for it if you're really want to be in the game.
[00:15:52] So not every employer and not a repeat audio is going to have master plan as a solution. Right? If I'm an employee, if I'm a PEO with a master [00:16:00] plan and I'm vetting my. Employer groups coming in, employers that are not going to be a fit for the master plan might be somebody again, like we said earlier where the employer's not contributing much.
[00:16:10] So therefore they've got low participation or maybe we, we done the medical screening and they've got a few significant claims. So we don't want to bring them into the master plan. So then we're going to do what we call open market. That's where you bring them to the traditional small group marketplace that's available in all 50 States from all the insurance carriers.
[00:16:29] So you go open market, right? If I'm a, if I'm a PTO that does not have a master plan really, then, then one of the only things available to me is master is open market. Or other specialty programs, uh, such as the health benefit Alliance, which is a program we have, or other type of alternative health programs that are available to two PEOs.
[00:16:50] The key is if a PEO has a master plan being thoughtful about which groups are the right fit for the master [00:17:00] and if not having alternatives to pivot too. So you're still solving. The health benefit need for that employer, client, like a hybrid model there. Right. And flexibility, uh, can be really key. Uh, so thank you for, for these insight into the massive medical plans.
[00:17:19] I want to, to, um, shift our conversation a little bit and ask you specifically about CBIZ in the PEO world, right? What is, what is your unique value proposition to PEO’s and how do you do differentiate, um, to smaller players in the market? So, what I'm most proud of is in the last three years, we've gone from having one PEO client to now we serve over two dozen PEO clients.
[00:17:42] And so that demonstrates a pretty rapid growth in a fairly short period of time. And, and the key to it has been, I would say a few things. One is our innovative thinking. No disrespect to any of my competitors or some tremendous ones out there, but we bring a lot of fresh [00:18:00] ideas and alternative solutions to problems that here to for PBO is really haven't been introduced to.
[00:18:07] So our innovative thinking or creativity has really been, been a key advantage for us. The other is our flexibility. We're not an all or nothing shop. We can be the consultant on a master plan and somebody else is doing the actuarial and risk underwriting work. We can do the risk and underwriting work and not be the consultant.
[00:18:28] We can do all your open market quoting, but not be involved in your master plan point being we're a very much an open architecture firm. And so you pick and choose from our menu, what it is that that you need. So if you've got. Current partners that are serving you well, but there are gaps. We can fill the gaps, or if you want us to displace a partner that maybe isn't serving you as well, we can do that as well.
[00:18:54] So we're very flexible in that respect too. The other key area is. We're very [00:19:00] hands-on and then executing on the strategies that we are putting in place. Particularly from a sales perspective, we will partner with the PEOs sales team and go to market with them and support them actually on sales calls, when it comes time to discuss the benefit offerings.
[00:19:19] And what the value proposition is for their clients out in the field. First of all, just very tactical. You said like you, you can support your, your PEO clients per sales calls, right? Yeah. All medical offerings. Um, is there any limitation to that? Does it has to be a certain size of the client or how do you, how do you typically structure that?
[00:19:40] No, to be honest, we tell our PEO clients, whether it's two employees or 2000. Uh, we'll support you on every sales call. Make us a part of your team. I talked about first chair, second chair all the time. My, my team that will hear this podcast will, will roll their eyes right now. Cause I'm always talking first chair, second chair.
[00:19:57] And that PEO sales rep is first-year leading [00:20:00] the call. It's his or her relationship. But we're second chair, we're the subject matter expert about the benefits. And so when it's time for that to be the topic discussed, that that's our role in that meeting. So, and you mentioned that, you know, over the years, you you're, you're obviously working with special off like different PEO’s here, and you mentioned that fresh ideas is important, right?
[00:20:22] Whether that's coming from, from the PEO or like, you know, from, CBIZ, I would be interested in hearing, like, what have you seen over the years? What are certain concepts that our audience should think about. Right. So things that you said like, Hey, these three or four PEO’s that are very successful in the market have implemented successfully.
[00:20:41] Is there any, any concept that, um, you know, we, we should be thinking about here. Yeah, for sure. I would say that the first answer, the question is comprehensive in their, in their approach. So, so make sure that their offering is as well-rounded, as it, as it can be. [00:21:00] Don't leave any of the gaps that, that could otherwise be filled by either product or services.
[00:21:05] So that that's kind of price of entry. That's basic, but here's the real answer your question. So with that, having been said, it's their positioning. It's their go to market positioning. Too many PEOs are still stuck in that product sell mindset, right? They feel like they're selling a product that, that that's a transactional nature of a sale.
[00:21:27] And I think, and I don't say this disrespectfully, but I think that comes out of the payroll selling mentality PEO is more holistic, as we said at the top of the discussion. And so that the most successful PEOs over the years have cracked the code on teaching their salespeople. To sell value service and to be, and this is often an overused term in sales, but it's true being consultated listening to the buyer and what it is they're saying they need and then solving for those needs.
[00:21:59] As opposed [00:22:00] to come into the door and just selling product, product product. So the most successful PEOs, it's more about the messaging and their communication and how they go to market. Are there any resources that you can recommend our audience here, whether it's like, you know, certain say it's, I mean, uh, a book about sales, about positioning, uh, anything that, that comes to your mind?
[00:22:22] You know, I, I, I don't think it's out of the market yet. And, and, uh, but I know that. Jason Randell, the CEO of quest go is coming out with a great book that I think is going to be a transformative to the industry. I would also say that Naviaux has some great conferences pace. One of the other associations in the, in the industry has, has, uh, some informative, uh, No conferences, and there are some tremendous advisers out there.
[00:22:47] I think of Johnson, suey, I think of others. And again, Dan McHenry, I just think of other there's there's a lot of tremendous resources out there that have been in the industry and know the industry well that PEOs can take advantage of. [00:23:00] Gavin. W what would you, would you say S certainly resonates, right? If you think about, uh, the best players, not even in the PEO markets, right?
[00:23:08] Uh, but holistically, often companies that have found their niche, right. They're very much known for, we are the PR company for this region. For this specific vertical, right. And then your clients know, Hey, you know, the partner really understands me here and can be, yeah, we can enter into it in a really fruitful and successful relationship.
[00:23:31] No, it's like anything else you need to kind of vet through who the pretenders are versus who the folks are that really know what they're talking about. And that that's like any industry, right? That's like any business. Just like there's, there's good. PEO’s there's average PEO’s and there'll be bad opinions or there's good consultants, average consultants and bad consultants.
[00:23:50] There's good interviewers, bad interviewers. And, and, and then there's you, you know, above, uh, above the rest, Andrea, so, yeah, so as, as we, uh, you know, [00:24:00] look looking now in the second quarter, what are, what are some of the, the priorities that you are currently discussing with some, all of your clients, right?
[00:24:08] Uh, for the remainder of the year, uh, and to get ready. Fall, you know, what, what we hopefully can call the post pandemic, what you have, uh, what are some strategic initiative there that you're currently working on it's daily now, and multiple times a day, the conversations are about the, the. Significant ramping up of hiring and being ready for this, this onslaught of hire.
[00:24:31] And I, I, again, I'm with PEO’s every day on meetings and calls and, uh, gun restaurant owners talking about hiring 90 people as soon as possible trucking companies, you know, hiring retailers, hiring. So. So this reopening of our economy is very, very real. And so that's what the PEO's are ready, getting ready for.
[00:24:56] And what's key to that is employees are gonna have choices, [00:25:00] people that are now getting reemployed, they're gonna have choices of where to work. And so having a robust benefit plan. Is going to be a very important part of it, right. If I can get $15 an hour at three or four different places, but that one place is going to give me $15 an hour, plus a really good health plan.
[00:25:17] That's where I'm going. Right. And so if I'm a PEO that can source that for its clients, right. That's going to be a competitive advantage. So, so all the conversations right now, It was, how can we make our clients, the employer or clients of the PEO competitive in their attracting talent, back to their workplace, back to their offices, back to the restaurants, back to their stores to be employed, which is going to be a real, it's going to be a war for talent right now.
[00:25:49] Yeah, it's interesting that you say it's it's it seems to be a remarkable recovery here from a economic perspective, right? It's a little over a year ago, we, we talked about [00:26:00] recession, right? And now for employment in the United States, this is inside again. And to your point. Wolf's talent. How, how can you retain and attract the best talent?
[00:26:11] Right. Um, this is certainly a hot topic, right? Um, for fall out of us, but, but it's, it's really a great news story, but it can also be, it also presents opportunities. To take advantage of, and if folks ignore it or don't prepare properly for it, if they're not, they're going to lose out, they're gonna be winners and losers.
[00:26:32] So the PEOs that are positioned for that are gonna be the ones that again, have the resources, the processes, and the benefit programming in place to capitalize that. Yeah. And if, if you, if we're talking about trends, right? I mean, one of these. What would it be here in quite perfectly here it's like attracting and retain the best talent right now, regardless of the location.
[00:26:52] Right? That is certainly something that the pandemic has shown us depending on the position and the job profile remote [00:27:00] work can work. Right. And how can PEO’s uh, support their employers to do that effectively? Yeah. So certainly what we, we've all experienced that as one of the more positive aspects of coming out of a pandemic is the ability to be remote and still be productive.
[00:27:17] And so technology, right? It has to be the order of the day, PEOs that have not yet gotten as advanced technologically in, in all of their systems are finding they need to step that up. And, and whether it be onboarding technology, whether it be ongoing, uh, employee management, technology, communication technology, Meeting technologies, which we were accustomed to now.
[00:27:39] So the PTO needs to be hat can't be an impediment at a minimum, has to be neutral in terms of not being an adverse environment for that workforce, but ideally being a positive contributor to their efficiency, their effectiveness, and the other thing that the PEO could also, uh, be cognizant of. And this comes back to the [00:28:00] employee benefits dynamic is we've also studies have now shown that.
[00:28:04] People are not only more efficient, but they're working more hours by there not being a physical separation from their home in their workplace. So employee assistance program, mental health, stress management resources as part of a proper benefit strategy is more and more important. And so that's very real because you're not going to have necessarily everybody at the physical location where they're taking work breaks or taking lunch breaks or physically away from work.
[00:28:32] You're not having that supervisory oversight to manage that. And people will, there'll be harsh on themselves. So we need, we need those types of mental health strategies to help people cope with this remote workforce environment. I couldn't agree more. Right. I think your work from home on the one hand, like, you know, it provides flexibility, right.
[00:28:51] And the employees don't have to commute potentially. Right. But, uh, that's the flip side to that as well. Right? So your point studies show that like, [00:29:00] People didn't re speaking work long hours. Mental health is a, it's a, it's a very, very important component there, right? Because otherwise, like your business and private life kind of like yeah.
[00:29:11] Uh, mushed together as one. Right. And I think it's, it's important for the employers as well, too, to have a separation and have a full rich life. And it's shown that it's also not just a doing the right thing concept, you know, if you want to look at it from a practical dollars and cents perspective, The quality of work deteriorates, right?
[00:29:32] If people are just pushing volume and not taking breaks, any athlete, any actor, any professional will tell you that if you don't slow it down and step away, then the quality of what you're doing deteriorates will the same is happening with people that are just constantly working because it's to walk into their home office.
[00:29:51] Where their computer is five steps away is easy, but again, they're not always at their best. So we've gotta be cognizant of how to manage that remote [00:30:00] worker. We at thrive pass, I've come to the conclusion to, we will we'll follow like a hybrid approach, right? We'll still keep our main hub offices in the United States and twin cities, Denver, but then also.
[00:30:12] Totally open for remote work. Right. I think we have, we have seen a phenomenal talent coming on board because of that. Right. But now the question, all of us is how, how do you, how do you manage that, that hybrid successfully? Right. And, uh, I think it will be important to fly people in for certain events, right.
[00:30:31] Or, or travel more and spend time together in the office specifically to. Builds relationships. I think innovation sometimes might be hard on zoom, right. Might be a little bit easier to do in person. So I think the next 12 to 24 months will be quite interesting, right. To see how, how the work shifts and what are the best models for this.
[00:30:52] It's true. And then again, the PDO, his role in that will be to help facilitate support, whatever [00:31:00] direction that employer chooses to take. Right. If you're a restaurant, right? You're not remote, you know, physically in place. Right. So you're going to have different industries with different needs. And as a CEO, how are you going to adapt to that diversity?
[00:31:12] Tim? Thank you so much fall for your time today. It was a pleasure to have you on the show and where can people find you if they want to learn more? Well, thank you, Andrea. So it was great to be here. I enjoyed the conversation again, I can be reached at my email, which is J O'Connor, J O C O N N O R@cbiz.com jO'Connor@CBIZ.com.
[00:31:37] Uh, where you can find us on our email@example.com. This podcast is sponsored by strive. Pass a trusted PEO partner for employee benefits from pre-tax accounts to call by administration drive past empowers employees to strive through exceptional service in innovative technology, firstname.lastname@example.org.
[00:32:00] [00:32:00] Thanks for listening to today's episode, don't forget to subscribe and visit us at peo-podcast.com. To learn more. I'm Andreas Deptolla and this is The PEO Podcast. We'll see you next time.