Compounding pharmacies, Retail pharmacies, Insurance, Pharmacy Growth, Startup Pharmacies

Keeping Your Pharmacy Insured Featuring Steve Boone

Many pharmacy owners have never explored their insurance options and as a result, are likely overpaying.  

Only recently have other options become available for pharmacy owners, and these options could result in saving $15,000.  

In this episode of The Bottom Line Pharmacy Podcast, we sit down with Steve Boone, Agent with Heartland Insurance Group to discuss how to keep your premiums low, what insurance options are available for delivery, case studies on how much you could save, and more! 

The Bottom Line Pharmacy Podcast is your regular dose of pharmacy CPA advice to fuel your bottom line, featuring pharmacists, key vendors, and other innovators.

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If you prefer to read this content, the video transcript is below:

Scotty: Welcome everybody to an episode of the Sykes Bottom Line Pharmacy Podcast. Today we have Steve Boone with Heartland Insurance. Been in the insurance  world here for a long time, as long as I can remember. 30 years, or works in, operates in 30 states. Let me get that right…I just, Killed it. 

Steve: Licensed 

Scotty: Licensed in 30 states. A lot of pharmacy experience been around the pharmacy industry again for quite some time. As long as I can remember Steve, welcome to the podcast here and the old exciting risk management that unfortunately, all of us have to deal with. So welcome.   

Steve: Well, thank you. Thank you for having me. Glad to be here. 

Scotty: So, before we got started here, we were just kind of going over the nature of the insurance industry right now, kind of jump into that, I guess with what, where pharmacy is today in terms of risk management and the macro environment if you don’t mind. 

Steve: Yeah, sure.  Well, when it comes to pharmacy insurance, You know, really, over the last two decades, there’s been a really, uh, underserved market. A lot of the insurance companies that used to write pharmacy ended up getting out because there was a big compounding claim up in the Northeast that cost, you know, hundreds of millions of dollars. So that kind of hurt the market. As far as competition and really right now with the state of the insurance industry, you’ve got maybe 4 or 5 insurance companies that are still offering business owners policies that include the professional liability and you know, our main competition is the company that’s been around, you know, 100 years that everybody has heard of, which has been a great company and they’ve done good things for the industry. And so, what I do as an independent agent is I’m able to take those other carriers and give you an option, you know, to really do 3 things: you want to try to lower your cost, you want to broaden your coverages and you want to find an agent with experience that understands your business. So, you know, you’re not dealing with an insurance agent that, uh, doesn’t specialize in pharmacies. So, you know, with that as the backdrop. What we’ve seen over the last 2 years in the industry as a whole, and I’m sure everybody’s, you know, experiencing this is your rates have gone up dramatically double digits and there’s a lot of problems with even shopping this around because, you know, a series of things have happened. That includes storms, and litigation, and inflation, and construction costs, and parts supplies, and all of that, that has caused a real heartburn for the industry as a whole. So, you’ve got now little competition in the pharmacy world as far as insurance and a market that is probably the worst in a generation. So, you really gotta pay attention to this.  And so, we do have options. And so, that’s kind of the way that we, we look at it. We’re here to give you options. It’s hard to find these options and specializing in this particular niche really gives us a good advantage. So, having that expertise in the pharmacy industry allows you to know what the risks are in particular to know. Where those pain points can be for a pharmacy. 

Scotty: So, what would you say, you know, what are those common risks that pharmacies need to be aware of or be mindful of in particular? Is there any risk in particular? Is there any risk?  That’s more susceptible to shopping around insurance carriers? just curious, like, what… 

Steve: Yeah, there’s 2 areas that you know, that that are pretty common and obviously, you know, if a professional liability is the 1st, where you have errors and admissions, this is a, you know, this is like malpractice for a medical doctor in a pharmacy world, you know, either dispensing or compounding. You know, you have special coverages that allow you to offer this professional liability. And so that covers you for the consulting, any mis fills, any problems that occur that are not really over the counter type drugs.  When it comes to pharmacy professional that is the part that really most insurance companies have a problem with. They don’t want to offer that. And, and so the other problem is you have, it’s not really a problem, but you have general liabilities. So, if somebody were to slip and fall in your store, or somebody gets hurt, you know, on your parking lot, you know, You could be liable and responsible for that but that’s covered under general liability, which is really you know, a common type of coverage that insurance companies are willing to offer. So really, it’s getting the combination of the professional and the general together.  On 1 business owner policy really is the goal. So, you know, in addition to that, you’ve got your normal property coverages. So, obviously, there’s been a lot of theft and robberies over the last few years, and you have storm damages, frozen pipes, all that stuff is covered under property coverage. And, you know, you just need to make sure that your limits are adequate for your inventory and that your deductibles are good and, you know, and that you have adequate coverage in case something were to happen, and the business would have to close. You need to have. business income, you know, available so that you can continue to pay your employees. So, we go over all of that when we do a comparison. The fact that we’ve done nothing really, but pharmacy insurance for the last 10 years allows us to really know the competition. So, you know, when you get a quote from us, we’ll do a line by line comparison and answer any of your questions and you know, make sure things like spoilage, employment practice coverage, cyber coverage, all of these types of caveats that are included in these policies need to be addressed. And that’s really what we’re good at, is helping you understand the policy. And giving you a good, fair comparison.   

Bonnie: Yeah, Steve, we are definitely no stranger to the importance of a pharmacy niche  business. Right. Um, we do the same thing. You know, we do accounting, we do tax, we do, um, consulting for those areas, only for pharmacies. So, we see how important it is to understand one particular industry because there’s so many nuances to that particular industry in itself. We say all the time, if we had to cover, you know, multiple industries, it would be hard to know the details, you know, get down into the nitty gritty with, with that particular industry spread out. So, we definitely see the same thing with pharmacy lending. We see those banks that are out there in the industry. It’s just so important that, you know, attorneys that do this with pharmacies, it’s no different with insurance. So, we definitely see the importance there. We hope that others can notice that as well, especially with insurance. I mean, I can see, you know, if you are under insured or have insurance with someone who doesn’t understand these things about it, you know, about the pharmacy industry, it can be devastating. I would think. 

Steve: Yeah, well, it’s insurance taxes, legal issues, you know, they’re all specialized fields and a pharmacy has enough worries on their own just, you know, keeping their business afloat. It’s smart to get somebody that specializes in their type of industry. I mean, I can think about all the compliance issues with Medicare changes, their DIR fees, I mean, all of these things that, you know, keep cropping up for the pharmacist and the pharmacy owner, um, is daunting. And, you know, with margins, you know, going, getting smaller and having trouble finding staffing. I mean, really a pharmacist has to look and see, you know. Where they can find savings and keep profitable, you know, in light of all these changes, so that’s really what we’re good at, you know, for a pharmacy that has had a pretty good claim history, you know, maybe a couple of claims here and there over the last few years, we can get them a savings averaging about 25 percent a year. And this isn’t going backwards in their coverage. This would mean higher limits, broader coverage, specialized agents, service, you know, we understand the need for all the certificates and all of the timely issuance of those things. You know, if a pharmacy is looking to cut some costs,  I mean, insurance is an annual premium, so it comes around every year, you know, and if you can save, I mean, it depends on how many locations you have, but let’s say your three location pharmacy,  you could easily save $15,000 a year. This is after tax money. So, I mean, it would go right into your pocket. And, you know, it is one of those things where you would accumulate that savings every year. So, that’s kind of really the goal is to Help you lower your cost, but still get broader coverage than maybe what you had before, right? 

Bonnie: What do you see is the number 1 area of claim that you guys see in a pharmacy? 

Steve: Yeah, you would think probably it would be professional, but actually, it’s more on the property side where you have, you know, hail damage, pipes bursting , theft and robbery, you know, normal claims that a retail store would have is probably the most common and you know, with the pharmacy you do delivery. So, you have car accidents, and you have car accidents. Your employee gets hurt. You have workers comp. So, it’s really the normal type of claims that a retail store would have that maybe wasn’t a pharmacy and so it’s a profitable industry to these insurance carriers. If you find a company that is making money and they want to grow on this retail side of the business. That’s ideal because they want your business. They want to make sure that they can get your business. They understand that people switch insurance because they can find a better deal. So, you, it’s really important to get with a company that has a strong financial backing, that they’re making money, and that they’re interested in this type of business, because if they want the business, they will price their product to get it.   

Bonnie: Well, that brings up a great subject matter that we, I get a lot of questions on when it comes to delivery and employees and vehicles. So, this is a great opportunity for you to give us like the best-case scenario there, because, you know, we have a lot of clients who say, “well, I bought a delivery car, and my employees use that car. Should I buy the car in the pharmacy name? Should I buy the car in my personal name?” Do they have to, we always just, at least I do. I’m always like, talk to your insurance, make sure you’re covered, make sure the employees are covered, but tell us best case scenario when it comes to that. Because we do have a lot of, you know, these pharmacies with employees driving around. Some may be using their own vehicles, going place to place. Where can they get in trouble with that? 

Steve: It’s a good subject because it comes up a lot with us too. So, really what you want to understand is, regardless of who owns the car, if that car is being driven during work for the pharmacy, the pharmacy is going to be responsible. Okay. So the ideal way if you’re doing delivery is for the pharmacy to own the car. Okay. Because then the pharmacy can ensure the car. And if there’s a claim, the pharmacy is protected under that insurance. It also means that in most cases, you know, the pharmacy is going to have an umbrella policy. That umbrella policy would then go over the top of the auto liability. So, this, you know, car accidents happen, deaths happen because of car accidents. I’d say this is one of the biggest exposures a pharmacy has is an accident. Uh, doing delivery or an errand.  So, not every pharmacy owns their own delivery cars. And sometimes they’ll say, “well, we’re paying an employee to do delivery and they’re using their own car.” Okay, in these policies that we write, under the liability, we can add what they call “hired and non-owned auto.” Okay, so that protects the pharmacy if they get drug into a lawsuit because their employee had their own car in the accident. So, what happens there is, this hired, and non-owned auto does not protect that employee’s car from damage, that would be under the employee, and the employee would still be liable, you know, because they own the car. So, the insurance follows the owner of the car. So, what happens in a case like that? Let’s say an attorney gets involved, some third party is hurt, they’re gonna go after the driver of the car who owns it and they’re gonna go after the pharmacy, okay?  Usually, the pharmacy has more money. So, you know, they’re gonna definitely drag the pharmacy in because they’re gonna say “you’re responsible. This was on the clock.” So, the pharmacy would be protected. The employee, they’re gonna be covered under their own insurance. So, depending on what kind of coverage they had. What limits they have, they could be liable for that too. So, you really want to stay out of that situation. And the way you do that is you get your own car for the pharmacy, title it in the company’s name. You can do it. Like you said, you can write that off as a business expense and then you can insure it properly. So. Yeah, it’s…especially nowadays because you saw a lot of these personal auto policies start adding exclusions to their policies for delivery, because everybody was trying to make money doing delivery and Ubers and all of this, what they call cartage and transportation. So, you could have let’s say you have an insurance company and you’re using your car to do a delivery and then all of a sudden there’s an accident and your insurance company says, well, you have an exclusion that doesn’t cover you if you’re doing delivery. Okay. So now, as the employee, you’re kind of out of luck, so it all falls back again on the pharmacy, which that is where the hired and non-owned auto comes into play. So, now if an employee is hurt on a car in a delivery, that is covered under the worker’s comp of the pharmacy. So, you know, and there’s a charge on the workers comp for doing delivery. It’s quite a bit higher than just a retail clerk. So, we make sure the pharmacy owner understands this, and there’s been cases lately that, you know, pharmacies are hiring couriers. You know, they’ll hire a service to do this. Well, that means that all that liability really goes to the courier service. They own the car, they’re contracted with it, the pharmacy needs to make sure that courier service is insured, okay? And they would know that if anything ever did come back to the pharmacy, they would still be covered, but that’s one way, if they don’t want to buy a car and they don’t want their employees using their old car, you can hire a courier. Now this is going to be mostly in the, more of the metropolitan areas, but those are really the three options you have for delivery. 

Scotty: Yeah, that’s some good information right there, folks. 

Steve: Yeah, we do that a lot. I’m telling you, this one, this one will burn you hard, right? You gotta watch it, because these insurance companies, they didn’t like all this delivery stuff that was happening with personal vehicles. And you could see why, you know, I mean, that exposure was never baked into their rates. It was to and from work, not to and from 10 places, dropping stuff off in the middle of traffic and a situation where maybe somebody’s headed home. So, they’re off the clock technically, but they’re just dropping something off on the way. And I just think it makes. It’s like you said, perfect sense to have that vehicle in the name of the pharmacy. We like to see those vehicles park there, stay there, and you know, employees are just using those for delivery. Not their personal vehicles. Yeah. Well, the thing that we’re finding out is. Delivery is a big part of pharmacy business. I mean, we have pharmacies that make a lot of money on delivery. If they didn’t do delivery, they would lose a lot of revenue. So, once you start doing delivery, your patient’s kind of expect that, you know, and it wasn’t just because of COVID it’s now  it’s like a courtesy, you know, it’s added benefit. You know, you’re not going to get delivery at CBS. So, you know, that sets them apart.  And, but it’s a pain point for these insurance companies. And again, it means less competition, more expense. It really is part of the whole insurance nightmare that’s going on right now. So, we have to really coach our pharmacy owners “look, these small claims, these little fender benders, these little things that you can take care of out of your pocket, you want to keep them off your record.” And so, we help them in the beginning, or somebody hits you and it’s your, not your fault, Instead of filing a claim and going through all of that, we try to help them get the other party to pay for it, the other insurance company to pay for it, because the cleaner your claim history is, even if it’s not your fault, the less attention it draws to your accounts in underwriting during the renewals. So, the last thing you want to have is money goes all up in all that. 

Bonnie: Yeah, I have an absolute, this is way off topic, but since we’re talking about insurance in a week,  I hit, I have a perfect driving record. Perfect. Knock on wood. Not been in any accidents. I hit a deer that did $12,000 dollars damage to my car. Took it, got it fixed. Within 24 hours of getting it back. I hit another deer… 

Steve: Part of the same family? 

Bonnie: It’s a whole different place. An hour and a half away. 

Steve: Great deer hunter.   

Bonnie: Yes, but anyway, I digress. But then my insurance agent was like, heads up when renewal comes around, I don’t know if they’re going to keep you. And I’m like, I have been with you for 20 years. I have had nothing. This is the only thing I’ve ever had. And they’re talking about dropping me over.   

Steve: Yeah, that sucks.   

Scotty: You’re a risk on the risk management team. 

Bonnie: I mean, it’s not like I ran over somebody. I mean, you know, the payout, I mean, I know it’s not cheap, but it wasn’t that bad. Anyway, we’ll see in April what happens. 

Steve: Well, a comprehensive claim is definitely not looked at the same way as a collision claim. Right. You know, so you can have an at fault or non-fault. So, deer, hit a deer, fire, flood, people call them act of gods, whatever, you know. Those things typically don’t get surcharged, Okay. Like you would an at fault accident or a ticket or something like that. So, but what’s happening is. There is so much heartburn with personal auto insurance with the industry as a whole, that would have never been an issue in the past. Right. So, depending on what your insurance policy is… 

Scotty: What’s causing that heartburn? Why is there… 

Bonnie: There’s just so many claims for everything?   

Steve: Yeah. The number one issue is drunk driving. But we’ve always had that, right? The second issue is distracted driving. The third issue is fraud.  And then down here, it comes into, you know, you’re a bad driver. But really, they had all that stuff baked in there. But now what’s happening is, the cost to repair your car four years ago instead of $12,000 would have been $6,000, right? And let’s say that it wasn’t a deer, let’s say it was some kid walking across the street. It wasn’t your fault. Wrongful death. That would have cost the insurance company a million. In today’s world, it’s 5 million. These jury verdicts… 

Bonnie: That I could understand. 

Steve: You know, that is on top of all the stuff. So, you got this supply chain, inflation, nuclear verdicts. Well, you see every day, you know, you’ll see 30 or 40 lawyer ads. Call us if you’re hurt. So, the lawyers figured out how to get everybody to call them. And the jury is not sympathetic to the insurance company, right? I mean, they’re evil. So, you know, you have these verdicts that are just unbelievably high. So, you know, if you’re an insurance company executive, this is what they’re telling us. And you see it, I see it. I mean, it’s just I mean, there’s just no way around it. We have to deal with it. So, like on a $12,000 loss, you have no choice but to turn that claim in. It wasn’t like, you know, it was $500. 

Bonnie: Right, right, right… 

Steve: You gotta get your car fixed, you know. It’s the old money on it. So, you just… 

Bonnie: Oh yeah, side note, I’ve had it eight months… 

Steve: Oh, the car? Yeah, you can’t have anything nice. I mean, it, it’s just… 

Scotty: Side note, get a beater truck like I got, and you bump into whatever it is. 

Bonnie: Yeah, it’d be fine. Oh my gosh. 

Steve: I’ve not bought a new car in 10 years. 

Bonnie: This is the first car I have ever, ever bought, and now I probably would never do it again. On a side note, as well, I just would like to say that my husband does not agree with the act of God scenario that you just mentioned. He thinks that it was totally avoidable… 

Steve: Well, I mean, I hit a deer before. I’m not sure what I was supposed to do… 

Bonnie: But anyway, totally avoidable.   

Scotty: That’s between you and your husband. 

Steve: Yeah. I mean, it’s you know, it happens in the fall. These deer go crazy and everybody, if you’re in the rural area, because I can pick them out where they come from these pharmacies that are out in the rural area. I mean, they’re hitting deer, coyotes’, wolves. I mean, it’s, you know, it’s, they’re just. You know, it’s just a fact of driving there, but even in the city, like in our city in St. Louis, they have an open bow season for the parks in our area. You know, I mean, we’re around, you know, two million people and they have hunters going into these parks with bows, you know, killing some of these deer because it becomes a huge problem traffic wise. So, you know, it’s just, it’s out there, but you really, on a comprehensive claim, especially being there, you know, for so long, they should, you know, they should go find somebody else. That’s the other thing. If you have the home with the insurance company and the home and auto together, maybe a number… 

Bonnie: I have everything… 

Steve: There you go. So, that gives you a lot of leverage, you know. 

Bonnie: I’m gonna have to call you Steve. We’ll see. I’m super curious about the professional sector with pharmacies. 

Steve: Okay. 

Bonnie: Do you see a lot of issues with that as far as malpractice?   

Scotty: Let me jump in there, because I saw on CNBC the other day where the fraudulent drugs that are out there. 

Bonnie: Yeah. 

Scotty: It’s like I didn’t realize it was to the extent it is but it seems like it’s pretty widespread I know that’s an added risk and you don’t even know; you get a bottle of whatever and it looks like it’s from the manufacturer. It’s everything. 

Steve: Black market, right? Yeah. So, the whole backstory here is when they cracked down on the opioid dispensing of the controlled substances, that really took everybody from, you know, going to the pharmacy and getting their pills they basically went onto the street, right? Because they normally had a prescription where they could get it filled and, and then when that stopped, that took a lot of people into the street drugs that turned off a lot of the, uh, problems that you’re seeing now with. You know, counterfeit drugs. It also caused a big problem with theft and robbery in the pharmacy, because they couldn’t go in there any longer and get the insurance to pay for it, they had to. So, people, criminals started breaking into them.  But when you see, professional liability basically, there are so many checks and balances and, and you have a lot of robots and a lot of oversight that, you know, you don’t see a lot of misfills. You might see somebody picks up a prescription that was meant for somebody else. Right? They, you know, because they always verify your address and all of that. So, you see maybe that happening or really probably more involved with compounding, the wrong dose, you know, it’s 10 milligrams, It got 50, you know, accidentally. But you really don’t see a lot of that. I mean, when you think of some of these pharmacies, they’re doing a hundred thousand prescriptions a year, you know, or more, you know, there isn’t a lot of problems with that, you know. So, everybody thinks that that’s…  

Bonnie: How about brands versus generics for replacements, Does that ever seem to be an issue?  

Steve: So, the insurance allows the pharmacist to make that call. 

Bonnie: Okay. So, they cover, if you do a generic substitution, that’s included in the dispensing. So, there’s a lot of, everything in pharmacy insurance evolves around the pharmacist because they’re the healthcare provider. They’re the licensed practitioner. You know, and you have a pharmacist in charge that’s overseeing the techs and everybody else. So, you know, there is a lot of focus in the insurance on the pharmacist itself. Not so much the owner or the employee, but the pharmacist. And really, most of the pharmacies, if you look at them, I mean, they’re highly educated. You know, this is a generational type of business, you know, to get a doctorate degree in pharmacy, you know, it’s over 10 years of schooling. So, you know, but you do see a lot of fatigue in pharmacists and a lot of working late hours and, you know, and it’s a repetitive thing. So, you know, but for the most part, counterfeit drugs is not involved in any pharmacy insurance, and all of the drugs that these pharmacies are getting are coming from the wholesalers or the labs. So, you know that what you’re buying, or what the pharmacist is putting on their shelves is top quality. 

Bonnie: Good, good. 

Steve: Yeah. 

Scotty: What about is there anything in particular that can limit your risks and lower your premiums? Is there anything that stands out or I’m sure you get that question a lot “well, how can I lower this premium?” Is there anything, does anything jump out or help with that or…? 

Steve: Alarms. Okay, so you’ve got alarm security systems. Those give you discounts. You have discounts for like things like newer roofs, you know, so you have, you know more hail protection there. You have higher deductibles, you can take a higher deductible, that saves you money on the discounts, you know, like the State Farm, the bundling of the insurance, you know, where you get the business owners, the auto, the work comp, and the umbrella, all of those together, you get a multi policy discount and then you get discounts for good claim history with some of the companies we use, if you pay your premium in full, they give you a 10 percent discount. So, yeah, I mean, we’re all about discounts on our end of the thing, because, you know, that helps us find the savings. And, you know, and the savings is what people want, you know, but they don’t want to you know, jeopardize their coverages. So, we look for the discounts. The things that you know, that we talk about on coverages is, you know, you have a lot of flu vaccines and a lot of expensive refrigerated products, so you need to make sure that you have the adequate coverage for spoilage or if the electricity gets cut off or something happens, you know, the refrigerator breaks down. That’s a big topic. We talked a little bit about… 

Scotty: How do you determine those coverage amounts, if you got three pharmacists, does it vary, I mean, how do you know that, for example, the professional…? 

Steve: They’ll know the inventory what they have on hand, you know, like insulin is hugely expensive, right? The weight loss drugs are expensive. All of these need to be refrigerated. So, you know, what we say is, look, the refrigerator should have an alarm. So, if it starts to fluctuate, it sends us a message to your cell phone that, you know, this is going down, so that’s kind of a preventive because you really don’t want to claim on that either, you know, because, you know, that’s just another claim and high deductibles on those sometimes. So, you gotta ask them to, you know, do an inventory and I, you know, it happens more than you think. That’s probably really right now 1 of the bigger claims that we see is somebody didn’t have an alarm, power went out on a Saturday night, they didn’t catch it till Monday, you know, so the other topic… 

Scotty: What about professional liability? 

Bonnie: Yeah. 

Steve: So the professional, you know that covers all the dispensing and the consulting. And the communication between the doctor and the patient, so anything that is, has anything that’s not over the counter is professional. Okay, which would include compounding and the storage of the drugs and the devices that you use. So, anybody that has a problem or concern or liability issue with that is professional liability. That’s all part of the business owner’s policy. So, you know, that’s where, like I was saying, that’s where there’s very few carrier choices out there because, you know, they see it as malpractice, like a medical doctor. And they just, they’re not geared to understand how to price for that. And you see all of this stuff with the opioid litigation and all of the headline news, you know, that people will kill for sterile compounding. Well, that just scares the insurance companies, and they go, “well, why are we doing this if this is happening?” So, that has really caused a lack of competition in this industry which hurts the price. 

Scotty: What if I don’t do compounding, I mean, can you do, can you separate that out? I don’t do compounding, or? Because you have to think if you’re a compounder, you’re doing, you’re obviously more risk there, right? 

Steve: So, there’s no charge for compounding. What they do is they underwrite for it. So, if you’re doing 100 percent sterile compounding, they’re probably going to say it doesn’t fit my appetite as a carrier. Go somewhere else, right? But if you’re doing, you know, like hormone creams and flavorings and you know, they look at compounding as a percentage of annual sales. So, if it’s like, less than 5 percent of your sales, they’ll give you an accommodation. They won’t charge for it. The way they figure professional liability premium is based on staffing counts, the head counts, the number of pharmacists and techs. So, they have a charge, you know, based on that. So, yeah, it’s you know, and it’s like most things, you know it depends on how profitable your insurance company is. If your insurance company is profitable, they look at it like a loss ratio. If their loss ratio for every dollar they bring in, they pay out less than 50 cents.  They want more than, you know, they’re greedy. They go “give me, give me that.” You know, so if your insurance company for every dollar they bring in, they pay out $1.20.  They say “whoa, whoa, we don’t want any more of this. We want off some of the stuff that’s costing us money” So, you have to be with an insurance company that is making money. And really one of the struggles of our main competition, they lost 50 million last year, or roughly. They only brought in 120 million. So, you know what I’m saying? I mean, there’s something, there’s going to be a problem here, they’re going to have to make up for that because, you know, that eats into their capital surplus, and they have to have these surpluses there. So, you know, on top of these small regional companies and these small mutuals, they’re kind of, they’re going under because of this crisis that we’re in was never really, you know, thought it was going to happen. And now on top of everything else, they’re losing money. So, you know, we use a carrier that is making money hand over fist out there. 

Scotty: How do I know…where do I go to see if they’re making money out there? How do you…? 

Steve: Their annual reports. Yeah, they’re all, you know, they all have an annual report. Basically, look for, you know, the net income or loss, and then you can see Google them and say annual report net income. Yeah, just name any insurance company annual report in a pop up. There’s usually like, 12-month lag on all of that. Yeah, but, you know it’s a time right now where insurance companies are, what they’d rather do instead of having a thousand customers paying $500, they’d rather have 500 customers paying $2,000, you know, because that cuts their expenses, their administrative costs. They make more money. They’re not the, you know, insurance company for the world. So, you know, you really, you know it boils down to the agent because the agent is gonna have a real, you know, good understanding of what the appetite is for the insurance carrier.  And, you know, in our case, you know, we’re probably the top producing pharmacy insurance writer for our carrier in the country. So, it gives me some help because I get some nice underwriting perks. I also get, you know, the trust built up between my underwriter and myself that, you know, what we’re sending them is profitable. We have a history, a track record, you know, like our loss ratios are probably in the low thirties. So, they know for every dollar they bring in, they’re going to make 70 cents, you know, on average. So, you know, it’s again, it goes down to specializing in what you do, because, you know, if I was a generalist and I had to figure out everything to do with insurance, you know, I wouldn’t be any good. You know, I just really need to concentrate on what I know the best and it’s an underserved market. I’m probably one of the few that does this on a national level and on the independent side. 

Scotty: Now, I’d be remiss if I didn’t ask about the captive insurance play there, Steve. We got. 

Steve: Right. 

Scotty: We got a client or two that’s involved in that. 

Steve: Yeah. 


Scotty: And of course, the IRS hates it because there’s been a lot of use there but if done properly and done the right way, it can be beneficial for some pharmacy owners. 

Steve: Absolutely. 

Scotty: You still got those around?   

Steve: I’m involved in that. That is one of the things that I refer to a specialist and it makes sense because there’s a lot of compliance issues with that and, you know, the way I look at it is there’s a lot of areas within pharmacy. That are not covered by your normal commercial policy. Like here’s an example. Let’s say there’s a big flood and nobody can get to your pharmacy because the roads are flooded out. Right? Well, there’s no coverage for that in a pharmacy policy. You know, the floods flooded out, your building wasn’t hurt, your customers just can’t get to your store. So, that’s on the pharmacy, but in a captive program, those things that are not covered under the commercial policy can be picked up coverage, self-insured coverage through the captive. The downside with the captive is you’ve got to have upwards of 500, 000 a year to make it work. I mean, there are tax advantages, but you’re basically paying for stuff that’s coverage for things that are not covered under your commercial policy. And so there’s a lot of companies out there that have that type of cash flow, you know, and you know it is a write off, so I mean, you can’t really discard that, but it needs to be used  through a specialist that makes sure that you are compliant, so you don’t go through any audits, but the government is okay with it, because they keep increasing the limits that you can put into it, so, and it’s been tested, it’s been around a while and there’s a lot of companies that are domiciled in the United States. It used to be mostly offshore stuff. So, it’s not for everybody. It’s for the high end. You know, the people that are 50 million and above in revenues. 

Bonnie: Scotty, are we ready for the bottom line for today?   

Scotty: Sounds like it. Sounds like you are.   

Bonnie: Steve, we always end with the bottom line from each of us. Kind of a key takeaway. I’m just going to start with, what we kind of started the podcast with, but I think it’s so important again, within the pharmacy industry, finding you know, these key professionals out in the industry to help you that have an industry niche, understanding of independent pharmacy whether it be accountants you know, attorneys, healthcare specialists, financing, and now insurance, same way. I mean, just make sure you’re fully covered and that’s a great way to do it is working with an insurance company that understands the pharmacy industry and what the coverage is you need to make sure that you’re in good shape. 

Steve: Yeah, that’s good advice.   

Scotty: That was a long one, Bonnie.   

Steve: One long sentence. 

Bonnie: Sorry. 

Scotty: I’m always short and to the point. 

Bonnie: You can cut it down in editing. 

Scotty: I think my bottom lines are pretty short and concise, and I guess this one’s going to be, risk management’s important, and you need to definitely pay attention to it, not let all the distractions and all the extra that pharmacies have to deal with, pharmacy owners have to deal with, don’t get too far away from risk management, and stay focused on that, pretty much everything you do, because Last thing you want is a bunch of claims or accidents or issues to arise. So, risk management should always be in the back of your mind. 

Steve: Right 

Scotty: Great, great points from you, Steve, today. 

Bonnie: I’m pretty sure that that was longer than mine. 

Scotty: It might have been.   

Bonnie: Steve, you can wrap us up and you can take as much time as you need. 

Steve: Well, again, thank you for having me on. The one thing that kind of sticks into my mind, uh, I’ve been in the insurance business since the early 80s, is the number of pharmacy owners that have never shopped for their insurance.  They got insurance when they were in school through the name brand, you know, the big company. They, were told by their associations and you know, their peers that this is the only company that you can really deal with. And so decades fast forward, they never really did a comparison, and it’s not because, you know, they didn’t think about it. They just didn’t know where to go, right? Because it is a specialized field, and their business is much different than any retail store. So, what I would say is the bottom line is like anything else that you buy for your pharmacy, you should shop it around and to see at least for your own benefit, you know, if you’re overpaying for lesser coverage, because that really in today’s environment with increased cost and limiting of coverages is even more important now than maybe a few years ago. So, if you’re looking for a second option or just you know, a review from a non-biased third-party person, you know, we’d love to be able to help you. I mean, basically the way our process works is you send us a copy of your renewals. We do an apples to apples comparison and we send you back the quote. If you like it, you like it. If not, we’ll leave you alone. We’re not really trying to force you into anything. And, you know, typically, if there’s 20-30% savings the conversation goes forward. You know. 

Scotty: I did have a client that switched to you, Steve, and is very pleased. So I wanted to point that out. 

Steve: Yeah, no, we’ve helped hundreds of people. I mean, it’s, you know, it’s out there. It’s just, you know, it’s like anything you’re trying to do everything else at once. You know, the nice thing about pharmacy insurance, you don’t have to wait for the renewal. You can quote your policies at any time and if you decided to switch, there’s no penalty to switch in the middle of your term. You know, you can immediately start seeing the savings. And, um, You know, and so, you know, I tell people it’s a lot easier to save money than to bring in new revenue, you know, the margins are so small to save $15,000 means, you know, that’s the difference between adding $400,00 or $500,000 in new revenue, you know, so it’s an easy thing. And 98% of the people that switch to us, renew with us. The 2% that don’t means they sold their business. To somebody else. So, the service is the big thing on the back end. We get them in with a good deal and then we keep them happy with some good service. And so, you know that’s our story. That’s my bottom line. 

Scotty: All right. 

Bonnie: I got a double bottom line. Now I’m going to start preaching. We got clients that are looking to cut costs. They’re worried to death about the DIR fee situation coming up in ‘24. So, I think that’s huge like you said, if you have not taken a look at least shopping it around and comparing what you have in the prices, it’s a great time to do that. You can do it now.  And that could be a huge savings for you. Apples to apples, but… 

Steve: They will thank you for it, but honestly, it’s good advice and, you know, and we say the same thing about your all’s service, you know, this is a specialized service. We know this family; they do good things. And so, it’s a reciprocating thing, you know, we take care of this cottage industry and I think it’s making, I mean, they’re the people that are helping save community lives. I mean, these pharmacies they, look what they did through all the whole pandemic, you know they were frontline people. So, you know, they deserve a good service and good advice. 

Scotty: They do. They certainly do. And there’s a lot of folks out here that support and do everything they can for these pharmacists and these pharmacy owners. So, good stuff, but it is that unique industry. 

Steve: Yep. 

Scotty: Thank you, Steve. And I’ll have to get you on another time, but I appreciate you. 

Steve: I’ll see you at the next conference.  

Scotty: Yep. We’ll be there. 

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