Investment Community

We identify investment and merger and acquisition opportunities and help potential investors understand the market.


We provide highly customized consulting where the client's needs and interests drive the process—on a project-by-project and relationship-by-relationship basis—to ensure the desired results are achieved.

INVESTMENT COMMUNITY

Given the relative newness of the web enabled Human Resource and Benefits Administration technology and outsourcing industry, the opportunities for investors are significant. This ripe investment market encourages the entry of new service providers, but many come into the marketplace with a severe lack of understanding about the industry’s complexities and needs of their client base.

Prospective investors—whether private equity, venture capitalists or established industry firms seeking to merge with or acquire other firms—are well-served by Gruppo Marcucci’s deep understanding of the market and its vast number of players. We provide critical market knowledge and expertise to help you successfully achieve your investment goals.

 

INSIGHTS FOR INVESTORS

The Human Resource and Benefits Administration technology and outsourcing industry remains a ripe opportunity for investors–particularly with the recent growth and development of the private healthcare exchange marketplace. At the request of global investment banking and asset management firm William Blair & Company, Rhonda Marcucci addressed groups of investors in New York City and Boston in December 2013.

Following are a few highlights of the discussion with investors.

  • Ancillary Products. The sale of non-health insurance products, such as disability, life, AD&D, and other supplemental insurance products will be crucial to exchanges. Ancillary products have relatively high commission rates that can average 2 times to 4 times the level of major medical insurance commissions or per-member per-month fees. Given that 80% of employees are estimated to be over insured, the likelihood of shifting dollars from major medical insurance to ancillary products is significant.
  • Commissions and Fees. Per-employee per-year revenue of $300 to $350 per year is likely, assuming a bump from ancillary product commissions. Without ancillary product sales, a number of $200 to $250 per employee may be a more reasonable. Revenue figures could vary dramatically by exchange provider, funding mechanism, carrier participation, and group size.
  • Exchanges to Function as Product Managers. Ultimately, one of the exchange’s key roles will be the product manager for the employers using their platform. In addition to a wide variety of health insurance plans, there are more than 12 different types of insurance products that could ultimately sit on exchanges. And even within health insurance plans, there is emerging optionality, including the options for narrow networks or even to include different parts of the coverage package (i.e., a cafeteria-oriented structure).
  • Near-Term Capacity Constraints. Capacity for larger group market will likely be constrained during the next two enrollment periods. The implementation process takes significant resources and time and it will be tough for current exchange operators to enroll more than 1.0 million to 1.5 million new employees per year over the next two years with their current capacity.

Read the full William Blair report>

Included as part of the discussion with investors was the recent purchase of Liazon by Towers Watson, which plans to scale up Liazon’s technology to serve the jumbo market. Rhonda shared her thoughts regarding the challenge facing the active employee market, specifically that the capacity for exchanges to add active employees could be less than the demand for exchange solutions during 2014.

Also discussed was areas of differentiation among exchanges and projected mid-market revenue per employeeassuming the integration of ancillary products into an exchange.

Download the summary report from William Blair>

 

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About Gruppo Marcucci

Gruppo Marcucci (GPM), a division of Gallagher Benefit Services, Inc., provides outsourcing intelligence and associated consulting to stakeholders in the Benefits and HR Technology & Outsourcing industry. Our in-depth understanding of the service provider market and our vast experience sourcing and implementing solutions is key to our clients achieving full operational success.

@GruppoMarcucci

April 17, 2019
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