Aligned for Impact with Matthew Naylor

Matthew Naylor: Welcome to Align for Impact. I’m your host, Matthew Naylor. I started this podcast because healthcare and leadership both come down to the same thing: alignment. When people, purpose, and performance connect, real impact happens. On this show, we’ll talk with entrepreneurs, brokers, and change makers who are challenging what is broken in healthcare and in business and find new ways to make a difference for companies, communities, and the people they serve.

Don, I’m the host of the Matthew Naylor podcast, and I love having these types of interviews with people like yourself because of your experience and your subject matter expertise. This podcast is about this very interesting intersection of employer health and self-insured medical plans where we talk about risk financing, healthcare services, cost containment, and healthcare technology. What’s so interesting about the conversation is there’s people that play roles in each one of these pieces like you. Just based on our relationship, you spent a lot of years at Berkley helping build an amazing A&H business. Prior to that, you’ve done a ton of stuff, but that’s kind of like in the risk financing section where you’re talking about stop loss and reinsurance.

You also built an unbelievable captive business, but on the other side of it, you have these healthcare services: TPAs and PBMs, cost containment, disease management, case management, narrow networks, high-performing networks, and virtual primary care. Then you have this healthcare technology. But you were in this one quadrant for a very long time. I’m really excited about this conversation today because I think your experience really speaks to where the market was, where the market is at the moment, and where you see the market going. Don, we’ve had this amazing relationship for a few decades now. I really would like for you, in your own words, to help us understand: how did you get in the business? How did your career start? Where have you been, where are you, and where are you going?

Don Gasparro: Okay, so that’s cool. I mean, we’ve had a great relationship and I’ve really appreciated everything we’ve done together in the past. What’s interesting when you talk about how I got started—early on, similar to you guys, I was an athlete in high school, going to college to play some sports. But my thought was, “Okay, I’m really good at math, but what am I going to do with that?” I was going to go be a high school baseball coach or soccer coach. To do that, I had to be a teacher, so I went to school as an education major.

Matthew Naylor: Where’d you go to college?

Don Gasparro: Undergraduate, I went to the College of New Jersey. And then graduate school, I went to Penn State.

Matthew Naylor: Awesome.

Don Gasparro: So, okay, I’m moving along, doing the thing, and I do my first semester of student teaching. I walk into the building, there’s kids running down the hall in between classes, and a teacher walks out of the room and hip-checks them into the lockers. And I’m like, “Oh, this isn’t what I’m set up for. I can’t be doing this stuff.” So, it happened that my parents had a guy who was a CFO at a very large corporation in New York. He said, “You know, math people get into being actuaries, and they do pretty good.” I’m like, “Okay, well, let me check it out.” So I started taking the exams while I was at the College of New Jersey.

Matthew Naylor: So up until this point, Don, you knew nothing about being an actuary?

Don Gasparro: I knew nothing. Someone gave me a pamphlet, and I did the problems. I’m like, “Okay, I could do that.”

Matthew Naylor: Yeah. So, Don, you’re a pretty smart guy. I picked up on that a long time ago.

Don Gasparro: Well, I don’t know how smart I am, but I had the discipline to do it. And that’s probably the hardest part about being an actuary: the discipline and the ability to really focus and spend the time you have to focus. So, I had passed three exams before I got out of the College of New Jersey.

Matthew Naylor: Wow.

Don Gasparro: So I was in pretty good shape. I went for my MBA at Penn State. I got out of school there and had a great job up at Aetna as an actuary.

Matthew Naylor: How’d you land at Aetna? How did you end up there?

Don Gasparro: Just the interview process. When you come out with three exams, you’re in pretty good shape.

Matthew Naylor: Yeah.

Don Gasparro: So, I did a lot of interviewing. Again, knowing nothing about insurance, because those three exams were mathematical as opposed to insurance. I interviewed a lot of places. There were just weird reasons why you would choose Aetna. You know, they seem to be heavy into sports. Everything around that campus is focused on social stuff.

Matthew Naylor: Yeah.

Don Gasparro: So it was a great experience there at Aetna. I learned a lot.

Matthew Naylor: They had a good training and education program at Aetna.

Don Gasparro: The actuarial program was probably one of the best. Really. They gave you a lot of time to study. That was your focus there.

Matthew Naylor: Awesome.

Don Gasparro: So it was a great experience.

Matthew Naylor: They don’t really have any of that stuff anymore.

Don Gasparro: They don’t do that. The actuarial programs are non-existent. They do give you hours, but your job was primarily to pass exams. And I was fortunate when I came in because I had the MBA; they put me in some pretty good rotations around the company where I learned a lot. I was in corporate actuarial, pension underwriting, and group health underwriting, which is where I kind of started with stop loss and things like that. I was heading up that underwriting department.

Matthew Naylor: I’m not trying to date you, Don, because we’ve been doing this for a long time.

Don Gasparro: That was like 10 years ago.

Matthew Naylor: 10 years ago.

Don Gasparro: No, that was back in the ’80s.

Matthew Naylor: Wow.

Don Gasparro: Yeah. So the program was excellent. I mean, there had to be 40 actuarial students going through that program at a time. It was a factory.

Matthew Naylor: And highly competitive, I’m sure.

Don Gasparro: Very competitive. And that’s where you get the discipline that you need to study for the exams because you really have to focus. The pass rate is pretty low.

Matthew Naylor: Yeah. I would have never passed.

Don Gasparro: It’s not that the materials are hard; it’s that you really have to focus. It’s just a large quantity of information that you’re trying to absorb.

Matthew Naylor: So how long were you at Aetna for?

Don Gasparro: I was there for five years. Then I moved on. I went to, at the time, TPF&C in their insurance consulting. Then we merged with Tillinghast. I was there for two or three years and then moved on to Continental Insurance, where I helped to oversee the three life and health companies they had there.

Matthew Naylor: Okay.

Don Gasparro: The funny thing there at Continental, again because of that finance background, within a week my first project was to evaluate the three life and health insurance companies and make a recommendation on whether to merge them, sell them, or do whatever. So I came back, met with the chairman of the board and the CFO and I said, “Look, it sounds like a good idea to merge these together, but honestly, you’re not in a good position. Although this is my job, you should sell.” I ended up being involved in the whole sale of those operations external, which was a pretty neat experience. You don’t get that kind of experience often. I had some M&A experience at Tillinghast, but this was pretty cool.

Then those guys liked me a lot and said, “Hey, look, we love you. You helped us sell these businesses, but we kind of want to keep you.” I said, “You’re a P&C shop. I’m not sure what I’d be able to help you with.” They suggested I go up to their benefits area and help figure out what to do with healthcare as medical costs were starting to take off. This was when cafeteria plans were coming out. We literally put together a true cafeteria plan where you had $2,000 and you could buy medical coverage for you, your family, life, disability—but it was truly a cafeteria plan. You could even get cash back.

That was a very interesting process. Cafeteria plans didn’t really take off; they called it flexible benefits back then. But it was an interesting project because you really got into the cost of everything. I was able to use my knowledge of pricing and negotiating different programs with different carriers to get a great “shopping list” for employees. From there, I ended up going to Foster Higgins.

Matthew Naylor: Okay.

Don Gasparro: And that’s where I met Dave Wilson. I worked there for probably three or four years. That was great; that was part of Johnson & Higgins. This was the time around when the Clintons were in office and they started talking about national healthcare. But we saw the opportunity as provider consulting. Dave and I were involved in a lot of consulting stuff, so we proposed to J&H that we start a company if they gave us equity. They said no, so we said, “Okay, well, we’ll start our own business.” We went off and we started Apex Management Group. That’s the point where you guys came in and we got connected through Donna Petrilli. We built that business. Like in any business, you start somewhere. We started with provider consulting, but we did have some pretty big stop loss clients. You kind of follow the money when you have your own business.

Matthew Naylor: Yeah.

Don Gasparro: Stop loss became the big-ticket item. That led us to being pursued by Gallagher because we had a strong data analytics tool that we used for employers to track what’s going on. Gallagher came in and we couldn’t refuse.

Matthew Naylor: When did you start Apex, ’93? And when did you sell it to Gallagher?

Don Gasparro: Sold it in 2002.

Matthew Naylor: I remember the actuarial tools you built for the employers around frequency and severity and the data analytics. It was really before its time.

Don Gasparro: You know, it was interesting when we were building that. Dave was a great mentor for me; Dave knew a lot about healthcare. As we were building that model, we thought we had probably the best model on the market, but we didn’t have the reputation of the Tillinghast model. So we had a pretty good PR guy who got us out there on the same level as those guys. Our tools were actually pretty good, to be honest. I remember at one point transplants were starting to take off and we were incorporating that in our models. It was obviously raising the prices and everybody was upset, but we had one at-large carrier come back and say, “Yeah, we used to moan about your rates, but as we look at our history, you guys are right on target.”

Matthew Naylor: That was a great business. It’s a really cool story, Don, because you started out not thinking you were going to be an actuary, wanting to be a teacher, then really figuring it out. You got your MBA at Penn State, got into Aetna, and started out in a corporate role. After Johnson & Higgins, you decided, “Okay, well, I’m not doing this corporate thing anymore. I want to be an owner and operator and entrepreneur,” which is a huge transition. You went out on your own with Dave Wilson and formed Apex and then successfully sold that to Gallagher.

Don Gasparro: Gallagher, yeah.

Matthew Naylor: What happened after that?

Don Gasparro: We had a great relationship with Gallagher. They’re a fantastic broker; their operation is top-notch. We incorporated the Apex stuff, the data warehouse and everything, as their backroom actuaries. We were very successful doing that. We getting involved with a lot of their clients. I remember one example where a pretty big commission client wanted to reduce their commissions, but they realized, “We don’t want to take away the Apex piece,” because they knew that was a big part of the value.

Matthew Naylor: You mentioned Gallagher. I’ve always been a student of other leaders and entrepreneurs. Pat Gallagher is a phenomenal entrepreneur. Pat Ryan, Hank Greenberg, Stephen Way—all very different people, but incredible, dynamic individuals who build great cultures. After the Gallagher piece, where did you go?

Don Gasparro: So I was in a great position at Gallagher, doing my thing. My wife goes to me, “You know, you just sold Apex. You’re here at Gallagher. I know you’re cruising along, but you’re not that kind of person. What do you think the next thing you want to do is?” This was literally a conversation we had.

Matthew Naylor: I love it.

Don Gasparro: And I said, “You know, when I was taking the exams, in my mind, what this is preparing you for is running an insurance company.” Every aspect of the insurance company is what the actuarial exams used to be. So I said, “How cool would it be to run an insurance company?” This was maybe a year into the Gallagher thing. A couple years down the road, I get a call from Jay Woods.

Matthew Naylor: I recall Jay. Where was Jay?

Don Gasparro: He was a reinsurance broker. He said, “Don, hey, I’m with these guys up in Connecticut, and they want to learn about the stop loss business.” I said, “Cool.” I’m thinking: project. We did a lot of projects at Apex where we helped organizations get into stop loss. I go up there and talk to Rob Berkley. Very smart guy. We had lunch. He goes, “Hey, what do you think about you helping us in stop loss?” I said, “I think I can help you guys out.” He said, “No, no, no. How about you come here and build a stop loss company?” I’m like, “Whoa, that’s interesting.”

Matthew Naylor: That’s such a cool conversation.

Don Gasparro: Yeah. So I said, “Gallagher just acquired us a couple years ago.” He goes, “How about if we buy Apex?” I said, “I don’t think Gallagher is going to like that idea.” Then he said, “Well, okay, so how about you just come? What’s it going to take?” So I go home to my wife and ask, “Who is this company, W.R. Berkley? I never heard of W.R. Berkley.” I look them up—Fortune 500 company. My wife, who was a P&C actuary, says, “Well, I used to work with Midwest Mutual, which is a Berkley company. They’re pretty big.” I go up there to talk to those guys and I meet Bill Berkley.

Matthew Naylor: Yeah. Amazing.

Don Gasparro: The smartest business person I’ve ever met.

Matthew Naylor: I’ve studied Bill quite a bit and his son. For a long time, people didn’t know who Berkley was. They were like the whale below the ocean that never came up to get harpooned. They built this amazing company founded on an incredible culture, but also really unique and niche programs with a lot of discipline. I can understand why, sitting across from Bill Berkley, you were intrigued. I don’t think they were in the A&H business at all then.

Don Gasparro: Not at all.

Matthew Naylor: Bill Berkley is a talent-first person.

Don Gasparro: He’s a people person. Absolutely.

Matthew Naylor: He cares about talent and people.

Don Gasparro: He does. And that’s what makes that company so amazing. They basically give you a whiteboard and say, “Draw the picture you want.” If you understand how the sausage is made, can quantify it, can protect the risk, and make money at it—let’s do it. Risk-adjusted return. That’s the whole focus.

Matthew Naylor: What year was this?

Don Gasparro: This was 2005. Those are the situations that just really get me going. I have no problem taking chances. Rob Berkley asked, “What’s the one thing holding you back?” I said, “I have to be honest, P&C companies often have a knee-jerk reaction to bad things.” He said, “No, that doesn’t happen here.” We ended up putting it together. Gallagher wasn’t too pleased, but I said, “Look, you don’t get this opportunity often.” So I took it.

Matthew Naylor: And they hired you to be the president.

Don Gasparro: President. Bill Berkley said, “What do you want the company to be called?” I said, “How about Berkley Accident & Health?”

Matthew Naylor: So you were employee number one.

Don Gasparro: Employee number one. We started putting things together. Again, you go back to all of the things that you learned in the book and now you have to build all of the many components—claims, finance, account management, systems, the underwriting system. We went through all of those things from ground zero. The difference between me and the other 70 companies within Berkley that were built from ground zero is they already had paper and products filed. I didn’t have any of that. We had to go through filing in 50 states, building the infrastructure, finding office space, and recruiting the team.

Recruiting the team is a very underappreciated function. It’s best to hire people that you can work with. You’re going to be with them 10 hours a day and even if a superstar is a superstar, if they don’t connect with the organization, it’s not good.

Matthew Naylor: That is such a true story.

Don Gasparro: Building a team around your ideas and thoughts is very important.

Matthew Naylor: So that was in 2005. I’m going to fast-forward to when you left, but I’m going to come back. When did you leave Berkley?

Don Gasparro: I left Berkley in 2021.

Matthew Naylor: In 2005, there was no people, no process, no premium. When you left Berkley in 2021, how big was the business?

Don Gasparro: It was about 450 to 500 million.

Matthew Naylor: 500 million of premium. And how big was the team?

Don Gasparro: We had to be over 100 FTEs.

Matthew Naylor: I think it’s so interesting that you left with 500 million of premium. You built an amazing business, but you also didn’t take a very traditional approach. Stop loss in 2005 looked very different than in 2021. What did you do along the way to reshape your vision and strategy?

Don Gasparro: The reality of stop loss back in 2005 was that it’s a commodity. One of the first things that I emphasized was building intellectual capital. I wanted people to know that we weren’t just a stop loss insurance company. We have a lot of smart people here that are experts in different areas. We will look at you, you tell us what the problem is, and we’ll come up with a solution.

I remember one product I came up with had to do with commercial real estate. They wanted the ability to offer a multi-year guarantee on stop loss to help with their budgets. I scratched some stuff up, talked to Bill Berkley, and I said, “I know you don’t like multi-year guarantees, but here’s my thought.” Bill is an extremely bright guy. Within a day, he was right on top of all of the issues. We set the parameters and offered it to this group. It didn’t go anywhere, but that was the kind of environment you had there: “Don’t sit in your little box; think outside the box.”

Same thing happened on the captive side. I had presented a concept which came up from a similar situation back at Apex where we were dealing with a large organization that had franchises. I said, “Why don’t we do this at Berkley?” We literally had a flip chart in my office: “This is how we break the pieces out, this is how we make the money, this is our ROI.” And we presented that and it was like, “All right, go to it.”

Matthew Naylor: What year was this?

Don Gasparro: That was 2007.

Matthew Naylor: In 2007, was there anyone else in the A&H business that was in the captive business?

Don Gasparro: There were some people doing stuff, but it really wasn’t popular. This is how you know you’re doing something: I go to a committee meeting right after we launched this thing. There were a couple of people there just lambasting me, saying, “That’s a fad. You can’t do that. That’ll never work.” I’m like, “Hey guys, we’ll see, right?” It just so happens that two of those people are now living off of very big blocks of captive business.

The concept was different; it shook up the market. We kept it relatively simple. We used to talk about a triangle: the employer, the stop loss carrier, and the captive. Keep the integrity of how the pieces work separately but keep it strong as a unit. That was very successful.

Matthew Naylor: Berkley is a major player in the captive space, and I’m sitting across the table from the guy that really helped build it. When I formed Crumdale as an entrepreneur, I always had a serious conflict with insurance being sold to people for the wrong reasons. I felt very strongly that fully insured small employers shouldn’t take their second biggest line item—healthcare—and with no data, just be told, “Oh, let’s go self-insured and go into a captive.”

At Crumdale, we made a decision to think hard about the supply chain and the things actually impacting a self-insured customer so we could leverage data and drive to the lowest net cost. You’ve learned a little bit about our business over the last several months. I’d love to get your perspective on where you think the captive business is going and how you think we fit into that?

Don Gasparro: Things with the captive world started to get pretty stale. I found that too much of it was about trying to sell stop loss. That’s not really the purpose. The purpose of the captive is for employers to engage in the management of risk and reap the rewards when it’s successful. In my mind, the organizations that will be successful in the future are the ones that have the intellectual capital to be consultative with information to help their clients manage risk and shift the curve.

I think a lot of people think, “Oh, I joined the captive and I save money.” No, the captive is just the financial vehicle. It’s the actual management of the risk. Now, relative to Crumdale, I look at you as actually starting from a different place than everybody else. Everybody else started with stop loss. You’re starting with the services, you’re starting with the intellectual capital, and then you’re wrapping around it the stop loss and the captive. To me, that’s the future. That’s where you really get the hook into those members to rely on you to be their strategic advisor.

Some organizations are basically just wholesalers of vendors. I think if you have the intellectual capital and the experts as part of your staff that manage those things, then you’re in pretty good shape. You want them to rely on you as an expert, not just a seller of someone else’s services.

Matthew Naylor: Yeah, I think of the risk financing piece and how the incentives are misaligned a lot of the time. We’ve really started at the opposite end: how do you optimize the supply chain from a contracting perspective so that everything is fully integrated and you have full access to all the data? Ultimately that has a very positive impact on the risk financing piece because you’re controlling the first dollar claims.

Don Gasparro: Exactly. And to the extent that you can get those members to bond with each other and start thinking like an insurance company as opposed to an employer, then you’ve kept that triangle intact. I think what’s happening now is I see a lot of different players trying to throw risk into the process without getting the appropriate risk premium to cover it. Too many promises are being made and it’s starting to have bad results within a captive solution. You always want to keep that triangle there and be the education piece. I see account management as being more consultative management; it’s the piece that keeps everybody together.

Matthew Naylor: It’s hard, Don. You probably saw this at Berkley, but brokers and employers have this “point solution fatigue.” It’s very easy for people to pull the “easy button.” They just take a major carrier, bundle it all, and it doesn’t matter. But it’s when that easy button is pulled and it’s not aligned, it produces bad outcomes.

Don Gasparro: And there is no easy button because it’s ever-changing. To be a member in a captive, you have to want to actively learn and manage the risk. We would get in a room with a group of employers and someone would say, “I want the lowest rate.” I’d ask, “What do you think is going to happen to the captive if everybody gets a rate below what the risk is? You’re not going to have a captive anymore.” Take the employer hat off, put your “running an insurance company” hat on. What should everybody get charged? That’s where we want to get to.

Matthew Naylor: Well, Don, I appreciate you sharing your lived experience. There are very few people that have your breadth of knowledge.

Don Gasparro: Well, I’ve been very impressed following you and seeing what you’ve built. Everything is outside the box. There is no such thing as “let me do what the other guy did.” How many other companies are doing podcasts like this to get information? It’s a breath of fresh air to work with an organization where the people are really into it.

Matthew Naylor: Well, the people here at Crumdale, we care about impact. Serving people properly is fun because when you work hard to do the right thing, you meet them at sometimes the most difficult times in their lives. What we do actually has a really huge impact on the people leveraging our platform.

Don Gasparro: People like working with people that are “into it.” If I feel you have passion about what I’m going through, I’m going to work with you. I don’t want to work with a “1-800-call-me” service. I’m working with a person who really cares and who is really thinking about the issues in my plan. I’ll pay a premium for that because I want to know someone’s there for me.

Matthew Naylor: Well, I appreciate it, Don. It’s been a great conversation.

Don Gasparro: Thanks for having me.

Matthew Naylor: This is Matthew Naylor. You’ve been listening to Align for Impact.