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Thursday, February 4, 2016

Customer Service Case Study: BCBS Are Criminals!!

Posted By: George Deeb - 2/04/2016

It is no surprise that most of us have been getting fleeced by our health insurance companies ov...

It is no surprise that most of us have been getting fleeced by our health insurance companies over the last decade, where rates keep rising at an annual clip of 15-20% a year (5-6x the rate of inflation) and the underlying benefits keep falling (e.g., higher deductibles, higher out of pocket maximums, and lower coverages).  And, the Affordable Care Act ("ACA"), which was supposed to be a good thing, bringing healthcare to millions of uninsured, at a government-promised no impact to currently insured policyholders, ended up creating the opportunity for the insurance companies to turn the screws even further.

They ended up passing along most of the additional costs of the ACA roll-out to their old customers, in the forms of even higher rate increases (40% in the first year alone), and creating a process where you can only make healthcare decisions during a 2-3 month open enrollment period each year (effectively holding customers hostage for up to a year at a time, in anything but an open and free economic way, if the carrier ends up abusing their powers).

We all sat back, watched it happen and said there was nothing we could do about it.  But, what Blue Cross and Blue Shield of Illinois ("BCBS") did this year bordered on criminal.  And, I needed to share this story of extreme customer abuse, so you don't make the same mistakes with your customers.


Back in the November 2015, BCBS sent out a note to its individual policy holders (which I have been one for almost a decade), that basically said my current PPO Gold plan was being discontinued, and they were rolling out a replacement PPO Gold plan under a very similar name.  It included a list of key changes to the plan, like pricing, deductibles, out of pocket maximums, etc.  At first read, it was not a better plan, as the policy terms were worse than my old plan.  But, based on the marketing materials, the policy was close enough for my needs.  I assumed it was going to be business as usual in terms of my doctors and hospitals, and I followed the automatic transfer process into the new plan.

But, nowhere in their list of significant changes letter, was a clear disclosure that my underlying in-network doctors and hospitals in the network were MATERIALLY being downgraded.  BCBS did not renew its relationship with the Northshore or Northwestern medical systems for its individual policy owners, the biggest, most-used, most-respected hospitals and doctors in the Chicagoland area.  They only kept them in-network for the corporate/group policy owners.

I learned all of this when my wife went to go for a procedure this month, and our normal doctors and hospital said we were no longer in-network, and our coverage levels were going to be cut in half to the out-of-network levels.  Which was a shocker to say the least, especially since we were three days outside of the open-enrollment period to find a new policy, which means we were stuck paying for a crap policy that we would never use (except in an emergency) for the next year, whether we liked it or not. Not a great feeling when you are forking out almost $20,000 per year for what you thought was a "Gold" level product.

When I called BCBS to inquire about it, they told me about the changes above, and said my only options were to: (i) find a new doctor and hospital that is in-network (where the quality and locations of such were far less respected); (ii) switch to their HMO solution (where none of the most respected doctors were in-network, and you lose control of picking your own doctors, as you do in a PPO); or (iii) go find a corporate or group plan where my doctors and hospitals continued to be in-network (which doesn't work well for small business entrepreneurs that are using contractors vs. employees to save on benefits costs).  And, even if I wanted to go work for a big company for their insurance benefits, most big companies are hiring fewer on-payroll employees, also relying more on outside freelance contractors for up to 40% of their workforces.  None of which were acceptable or viable solutions for me.  What a mess!

MY APPEAL TO BCBS AND THE INDUSTRY (and key lessons for how to treat your customers)

1.  Market Honestly.  If you are going to make material changes to the policy ,especially to its underlying network, that needs to be more clearly disclosed during the open enrollment period, not buried in the fine print, forcing customers to stumble on the problem on their own, when they have their biggest need.  That is like advertising a Cadillac plan (under the same "Preferred Gold PPO" name you have used for years) and given them a Yugo where the engine doesn't work when you go to turn the key.

2.  Be Loyal to Your Long Term Customers.  If you have materially pissed off your customers (18,000 of which in this case), figure out how to be flexible and make it right.  Don't dig in with lower quality solutions or deadlines, when you are putting their quality of doctors and hospitals at material risk.  It is not reasonable to ask them to drive 30 miles to an in-network hospital they have never heard of, when the best doctors and hospitals are right in their backyard a few miles away.  Especially, after many have forked out hundreds of thousands of dollars to you over the years, making very few claims as largely healthy users.

3.  Get Rid of the Corporate/Group vs. Individual Policy Distinction.  This has basically become a way for corporate lobbyists to figure out a way to help preserve their recruiting advantages (for the 60% of their workers they prefer to hire as employees).  All in a world where 40% of the workers for those same companies, and elsewhere, are sole proprietors or freelance contractors that don't qualify for group coverage.  To make matters worse, there are no longer trade associations for those individuals to join to get group healthcare rates, as the insurance companies have dropped those channels altogether, trying to save on referral fees.  At the end of the day, in the words of the band Depeche Mode, "People are People", and they should all be given the same opportunities for coverage at the same prices, regardless if they are working as employees of big companies or contractors in small businesses.   Especially when workers are more mobile than past generations, not working at the same company for more than a couple years, and need a portable health plan that moves with them.

4.  Consumers Need Normal Protections.  The laws written by our government should never impede fair trade practices.  What other product or service does not provide for refunds, credits or returns if the client is not happy with what they bought.  Worse, they are legally required to continuing paying for the poor policy in the future, to be compliant with the ACA.  Consumers should never be locked into long term agreements for huge sums of money when they feel they are getting screwed based on misleading marketing materials.  Get rid of that 2-3 month re-enrollment period limitation.  That is anything but a fair and free market.  All it does is make it less onerous on the insurance companies, thanks to their lobbyists.

I have been a loyal BCBS customer for most of life, from my parents plans, to my old employer plans to my current individual plans.  All in the face of terrible abuse in the form of gouging price increases and reduced coverage levels.  Shame on me!!  But, BCBS was the "Gold Standard" in my mind. Now, I find myself with my family at risk with sub-par doctors and hospitals located far away from my home, looking for new solutions after the open-enrollment period has ended.  And, researching solutions from new in-network carriers, like Aetna or Coventry (but, not Cigna or Humana, who are also in-network, but do not support individual policy owners!!).  That is not how you treat your best (highest revenue, lowest claims) customers.

Any successful Chicago-area growth consultants in a similar situation want to join Red Rocket, so we build a group healthcare plan together or join a PEO to leverage their group rates.  Being an entrepreneur or small business person, which accounts for over 50% of all the jobs in our country, should not be so onerous when it comes to healthcare decisions.  Our, jobs are hard enough as it is.  As for BCBS, shame on you!!

For future posts, please follow me on Twitter:  @georgedeeb.

Monday, February 1, 2016

Lesson #225: Potential Pitfalls With Mergers & Acquisitions

Posted By: George Deeb - 2/01/2016

I have always been a fan of considering mergers & acquisitions as a viable way to more qui...

I have always been a fan of considering mergers & acquisitions as a viable way to more quickly scale your business.  But, this road is not foolproof by any means.  Below are some of things that can go wrong, so do your research and plan accordingly.


The skillsets it takes to grow a small stand-alone business are very different from the skillsets required to grow a larger business through M&A activity.  You want to make sure someone inside "Newco" has past experience in dealing with M&A related issues like merging businesses, teams, financials, etc. and someone that knows how to operate a much bigger company, typically with more procedures and controls for scalability.  Remember, the CEO's role must change as the company scales.


Let's face it, mergers are very much like marriages.  You are merging people, personalities and cultures.  And, marriages don't always go as planned, often ending in divorce.  But, "divorce" in the M&A sense is typically much harder to accomplish, meaning you are stuck with these issues, whether you like it or not. So, it is critical you do your homework and make sure the senior management has clear roles and can gel as a new team together.  And, that the employees in the trenches will aspire towards a shared collaborative culture of "we", instead of "us" vs. "them".


Oftentimes, entrepreneurs think selling to and working for a big company will solve all their problems, as big companies have bigger budgets, etc.  But, having lived through two sales to billion dollar companies, big companies bring as many headaches, as they do solutions.  Big companies move like a turtle, compared to the lightspeed of startups, with many layers of bureaucracy and decision makers.  And, the powers that be at the top, are typically focused on much bigger "fish to fry".  Which means your startup will most likely get "lost" inside a big company, unless you have a well-documented agreement detailing their guaranteed support ahead of time..


Yes, I am sure you tried to ask all the right questions during the due diligence process (as I have previously taught you how to do back in Lesson #66).  But, I guarantee you, even the best advisors and lawyers may miss something that can come back to bite you.  Not to mention, let's face facts, a seller is trying to sell, and is always going to present things from a rose-colored glasses perspective.  Which is why you need proper seller representations and warranties documented in your M&A agreement to protect you.


Let's say you have two $5MM businesses coming together.  It is reasonable to estimate that the combined business could do $10MM in revenues together, if not more from the cross-selling of the respective products.  But, the reality is, you have a higher chance that revenues are only $7-$8MM when the dust settles.  Why?  Because key employees may become disgruntled by the merger and leave the company.  Or, the target was overly optimistic on the health of their sales pipeline, etc.  So, build in a cushion for situations like these, and make sure the pro forma economics still work for you.


Earnouts are payments made to selling shareholders at some point down the road, well after closing the deal, after the selling company hits some agreed upon financial or performance target.  Earnouts can work great if you are a buyer, as most buyers know, earnouts very rarely pay out to sellers as much as the sellers hope for.  Sellers agree to terms thinking the earnout will be achieved, and then a grim reality sets in when it does not.  So, if you are a seller, regardless how well written you think your earnout is, things will most likely not pay out as you hope.  So, take more upfront cash in hand, where you can.  And, be happy with deal even if a zero earnout is achieved.


Getting M&A transactions properly documented for maximum protections in the event something goes wrong down the road is not easy.  It requires the skills of very experience lawyers.  And, it is most likely not your general counsel; it is a lawyer with deep M&A experience who has lived through the "negotiation wars" over time, and has battle scars to show for it.  Do not be cheap here, pay up for the best M&A lawyer you can afford, as it could end up saving you millions in capital and hours of heartache down the road.

This is not intended to be a catch-all list of potential pitfalls, but is simply some high level things to keep in mind to protect yourself when going down the M&A road.  Get a good advisor to help you with your negotiations and a good lawyer to make sure it is properly documented.

For future posts, please follow me on Twitter at: @georgedeeb.

Friday, January 29, 2016

Sales & Operations Must Be Tied at the Hip

Posted By: George Deeb - 1/29/2016

A common mistake I see with clients is with their organizational structure, often running the...

A common mistake I see with clients is with their organizational structure, often running their businesses with separated departmental silos.  As an example, which I will focus on this post, they think it is the sales department's job to sell accounts, and the operations department's job to service accounts, with a clear hand-off once the sale is closed, and very little collaboration between the two. That is a big mistake which I will address below. 

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Wednesday, January 20, 2016

It's Impossible to Maximize Growth and Profitability At the Same Time

Posted By: George Deeb - 1/20/2016

It is mathematically impossible to try to maximize growth and profitability at exactly the same ...

It is mathematically impossible to try to maximize growth and profitability at exactly the same time. The math just doesn’t work. The many companies trying to do both could benefit from a reality check. Consider the following.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Thursday, January 7, 2016

For Startup Success, You Need Strategy and Execution

Posted By: George Deeb - 1/07/2016

The right recipe for startup success requires an equal mix of: a good strategy or idea, powered ...

The right recipe for startup success requires an equal mix of: a good strategy or idea, powered by a experienced management team that knows how to execute the plan. If you typically have only one of the key ingredients, your startup won’t succeed. And, in terms of ranking these two critical elements, as I have said before, I would rather bet on an A+ team executing a B+ idea, than a B+ team executing an A+ idea. Building startups is really hard, and the team makes the entire difference. Let’s bring this story to life, and look at two different startup clients that I have worked with at Red Rocket. In these two examples, they were both being powered by first-time CEO’s with limited prior startup experience and they both had equally good ideas in comparable enterprise facing markets.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Wednesday, December 30, 2015

Customer Service Case Study: A Knightmare at Disneyland!!

Posted By: George Deeb - 12/30/2015

The plaque at the entrance of Disneyland in California reads: "Here you leave today, and ent...

The plaque at the entrance of Disneyland in California reads: "Here you leave today, and enter the world of yesterday, tomorrow and fantasy".  The very core of the Disneyland brand has been to take you to that fun and magical place.  Our recent family trip to Disneyland was anything but fun and magical.  It was more a page out of a Freddie Krueger horror story.  And, if Walt Disney could see all the corporate greed for maximizing money making, at the expense of a fun user experience, he would surely be turning in his grave.  Below is a summary of our experience, and lessons for us all to learn for delivering a world-class customer experience (or not!!).


You know you are not off to a good start, when despite arriving an hour before opening, you still have to wait an hour just to park your car.  The flow from the highway exit to the lot was bumper to bumper for about a mile, and when you finally arrived at the pay booth, six lanes merged down to one lane in a chaotic mess.  It was like Disneyland had never had to deal with parking flow issues in their sixty year history before.


The average person can walk at around three miles an hour; we were lucky if we were walking one mile an hour.  It was so overcrowded in the park, you felt like you were part of a herd of cattle being lead to the slaughter.  You should never feel like waiting in lines for the rides, was actually a reprieve from the chaos of walking through the park itself.


Disneyland prides itself on how well-designed its park is, with "invisible" operations behind the scenes.  But, to me, the "visible" part of the park, was very poorly designed to handle large volumes of crowds.  There were so many "pinch points", where a wide walkways narrowed down to a thin walkway, creating crazy bottlenecks.  And, there were many "dead ends", where you needed to reverse direction back through crazy crowds, to get where you thought you were originally heading (based on very poor signage).


There are around eight main sections of Disneyland, each with a main ride therein.  In a good user experience, in a 9-5 day, you should be able to ride each of the eight main rides in an eight hour day, with no more than an hour wait for any one ride.  Wait times were approaching two hours on many of the rides, which means the visitors were only able to experience around half of the rides offered.  Fun is enjoying the rides, not waiting in lines for the rides.


I like the concept of a Fast Pass, to get a set reservation time to avoid a busy line.  But, the fails were many here: (1) you can't set reservations anywhere but the ride area, which means you need to battle crowds and wait in lines just to get your Fast Pass; (2) you are limited to one Fast Pass reservation every two hours, which reasonably means you only get a couple chances to use it per day; and (3) if you don't return in your slotted time, you lose your reservation (and many people were missing their one hour reservation time window because the crowds were so bad to get back to that part of the park in time).


I love marching bands as much as anyone, but there is a time and place.  You should not close down the main foot traffic walkways of the park, to accommodate marching bands on the busiest days of the park.  That takes a slow user experience, down to a crawl.  If you want bands, put them on the main stage at the entrance of the park, where they won't impede foot traffic flow during your peak times.


When it is lunch time, around noon, and you can't get food for your kids until after an hour or two of waiting in long lines, there is a major problem.  And, when you finally get your food, and there are no empty tables for you to sit down and enjoy your meal, that just compounds the problem.  And, when you find the one open restaurant in the park with 20-30 open tables, and you are are turned away because you didn't have a pre-booked reservation (which many people missed due to crowds impeding foot traffic) is just plain stupid.

I understand the Disneyland amusement park experience has been in our country's core DNA since 1955, or over 60 years now.  That is around three generations worth of families that have taken their families to the Magic Kingdom for that break away from reality and to fantasy.  But, when that experience has become more of a nightmare, at the rapidly growing entry cost of $100 per person (and easily double that with parking, food and souvenirs), maybe it is time for the country to have a new family tradition.

Perhaps that is visiting any one of our 59 national parks, where the experience is equally spectacular, the land is plentiful and you won't be cattle-herded up against 65,000 other travelers.  Or, if amusement parks is a must, there are scores of them across the country--take your hard earned money to other parks that better respect your user experience.  For example, we visited Universal Studios in Hollywood, Legoland and the San Diego Zoo that same week we visited Disneyland, and they were delightful in comparison.

Anyway, take these business lessons to heart: (1) don't mis-serve your customers in delivering a poor user experience (regardless of how much money you can make); and (2) don't take your history and customer loyalty for granted (you never know when they will hit their breaking point and take their family and money elsewhere).  Disneyland should have capped their user maximum at a much lower level to preserve a better user experience (even if they needed to raise prices to enable that).

I know I will never go back to Disneyland after this recent experience, and I recommend you don't make the same mistake I made: trusting our once-in-a-lifetime family experience to Disney (did I really just say that??!!).  I am sure Walt and the brand team at Disney are cringing as those very words are leaving my mouth, as it is 100% counter to the brand positioning they are aspiring towards. But, it has become the stark reality, based on the current generation of Disney executives who have forgotten how to put their customers first (not their bottom line).  They may not feel the financial impact in this generation, but they surely will in the next.


ADDENDUM ADDED 1/13/16:  I have to give credit where credit is due.  I got an unexpected call from Disneyland this week after they read this blog post.  They said I raised a lot of fair points, apologized for the poor experience, acknowledged it was one of their busiest days of the year and told me their team is brainstorming the overcrowding issues to remedy it in the future.  Then, they offered my family five free Park Hopper tickets (a $750 value) to use on our next visit, anytime in the next two years.  That was an unexpected and appreciated offer, and a professional and honest way to treat an upset customer.  Problem is: with my family in Chicago, the odds of flying my family out to Los Angeles a second time in two years is pretty low.  So, I won't be able to take advantage of it.

For future posts, please follow me on Twitter at: @georgedeeb


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