Q&A: Benefitfocus' Shawn Jenkins

The NASDAQ stock exchange crashed in March 2000, Shawn Jenkins recalled. "That June, my partner Mason Holland and I started Benefitfocus. It was an awkward time to start a software company," he said, with just a touch of irony.

Holland had founded Charleston, South Carolina–based American Pensions in 1989. Jenkins joined the company in 1994 and bought into it in 1997. They built a software platform that allowed employers to manage their 401(k) plans over the internet, and this gave Jenkins the idea that a similar platform could help employers and employees manage their health insurance. In 2003, South Financial Group, also in Charleston, bought American Pensions, providing the men with startup funds for Benefitfocus.

Grocery store chain Piggly Wiggly became their first customer, which required Blue Cross Blue Shield of South Carolina to send Piggly Wiggly's health insurance data to Benefitfocus. As soon as the insurance provider saw what the software could do, it wanted it for all its clients, which dramatically changed the Benefitfocus business model. Instead of selling to individual employers, the software company began selling directly to insurance providers.

Today, the company supplies its enterprise applications to 25 health insurance providers around the country (most of them "Blue" plans) and to about 115,000 employers, which have more than 40 million employees receiving benefits. Jenkins believes that Benefitfocus will reach $1 billion in revenue within another 10 years. "We've been in business only eight years," he said. "We're just getting started."

Business aviation is helping the company achieve more than Jenkins had ever dreamed possible.

In building Benefitfocus, what did you learn?

One of the fundamental things is to get the right people in the right position. I can't tell you how many times a good person with good skills was just not right for the position. I've also learned to make changes quicker than I used to—and to trust my instinct more.

When people are in the wrong position, do you fire them or put them into another job?

Both. If somebody believes in what the company believes in, we'll keep him. Sometimes we move associates to another area of the business to capitalize on their skill sets. But if the person has something in conflict with our culture or values, that person has to be removed.

What surprises or problems did you encounter as Benefitfocus grew?

Even though our company grew pretty darn fast, things always take longer than you expect. Getting the signature from a customer takes twice or three times as long as you want it to. Getting software to market is a very complex and difficult thing. We're going to grow 50 to 60 percent this year and I still feel that we should be growing faster.

Based on what you've learned, is there anything that you would have done differently in 2000?

Oh, sure. Some things that we do today for our associates-including their families in more events, more vacation time, increased benefits—I probably would have accelerated that some. When we were losing money, when we were investing in the company the first two years, we had to really control the nickels and dimes.

Today we have a very broad and deep benefit package; we encourage a lot of time off. We give people coupons to take off for volunteer charities and that kind of thing. I wish I would have done more of this in the early years.

That's a very progressive management style.

Right. If you work at Benefitfocus, you're going to work some [long] hours, because we're a high-growth, high-tech company. We're constantly looking for ways to relieve the stress and take the pressure off people a little bit.

How else would you describe your management style?

Dysfunctional. I walk around a lot and talk to people. I admire Sam Walton, founder of Wal-Mart, who advocated "management by walking around." Our senior management team-nine people plus me-meets every week.

Do you plan to take Benefitfocus public at some point?

The simple answer is we plan on growing the company for a long time. We are focusing on increasing recurring revenue, and increasing free cash flow profitability. And we believe that all the financing outcomes will then be available to us, including a public offering.

We don't have a date or a corporate objective. But we have all the controls in place that we would need as a public company.

How did you get into aviation?

Aviation is deep in my blood. My dad, who was a dentist, got his private pilot's license a month or two after I was born in 1967. At two months old, I was in a car seat in a Piper Tri-Pacer. I've been flying literally as long as I can remember.

You studied aviation in college and taught flying for a while, but decided not to pursue a career as a pilot. Why was that?

The pay was too low and wouldn't accelerate fast enough—to be totally candid. I thought I could satisfy my aviation desire by owning planes and being part of a company that would be able to fly aircraft. I tell people we had to start Benefitfocus so I could afford a plane.

I understand you own and fly a Cirrus SR-22 piston airplane and are now moving into turbines.

One of our past board members owned a King Air but wasn't flying it much. So my business partner and I bought part of it; we have 150 hours [a year] between us. There are some other King Airs that our pilots fly, so if our plane's busy, we'll fly somebody else's, and that works out. We've also bought time in a Citation CJ2 that we're going to start flying. It's owned by a couple of guys who have a [Part] 135 [charter] operation.

My partner and I also have an order for an Eclipse, which we're buying as individuals. We're considering getting three of them, creating a 135 operation ourselves, and having a couple of corporate pilots. Not as a big money-making business, but as a way to spread the cost and then have access, so we always have a plane available.

If you get one airplane and you get other people using it to defray the cost of owning it, you lose the benefit of owning it. The last thing you want to do is call out to the airport and not have the plane sitting there. So it's kind of weird; you can't have just one, you have to have three.

What is wrong with health care in the U.S. today?

A country as wealthy as ours that has 50 million people who don't have health insurance—that's just not right. One fundamental problem with our healthcare system is the administrative costs. When President Clinton and First Lady Hillary Clinton attempted to fix health care in the early '90s, one number they found, which is still true today, is that about 30 percent of our healthcare spending is on administration. That's about $650 to $700 billion of the $2.5 trillion we'll spend on health care in America this year.

How would you fix it?

It's so big, multifaceted, and cumbersome that you really can't fix it, you know, next year. It's a 20-year thing. To put it in context, only Germany, Japan, the United Kingdom, and maybe France have economies that are bigger than $2 trillion. So our healthcare system is like the fifth biggest country in the world. When people ask, "How can we fix it?" that's like asking, "How do you fix Germany?"

So is there nothing that can be done?=

It's the states that bear the brunt of the cost of the uninsured. Uninsured people walk into an emergency room because someone will treat them. If that bill goes unpaid or is not covered by a federal program, the state covers it. It's a huge burden.

Massachusetts passed legislation requiring residents to have basic medical coverage regardless of their income because it needs everybody in the pool. You have a car, you have to have insurance. You live in our state, you have to have medical insurance. I can't tell you how many meetings I'm in where the talk is about the Massachusetts plan. Other states have different takes on it, but something like that has to happen.

When you look to who is motivated to fix the healthcare system, it is the states. I don't know how we could provide universal coverage at the federal level.

You said Benefitfocus is helping reduce some healthcare costs.

We're trying to get at the easy stuff-administration costs. With our software, signing up for your insurance and paying your bill costs less to administer. But it's broader than that. It's booking appointments with your physician, getting your medical records from place to place, and getting a medical history. If we could get the 30 percent spent on administration down to, say, 15 percent, we could eliminate $350 billion.

What else are you working on?

Technology that would allow you to have all your medical and insurance information in one location. Then you could take it with you, print it out, and hand it to your doctor, or give the doctor authorization to zap it down. When you're done with the doc, he could upload prescriptions and test results.
 

CEO Files Résumé: Shawn Jenkins

Position: President, CEO, and cofounder, with chairman of the board Mason Holland, of Benefitfocus

Previous positions: Joined American Pensions (owned by Mason Holland) in 1994; bought part of the company in 1997; company sold to South Financial Group in 2003; after college, worked as a flight instructor and managed overseas Christian mission trips.

Education: B.A., Geneva College, Beaver Falls, Pennsylvania. 1989; MBA, Charleston Southern University, 1989.

Personal: Age 40. Born in Meadville, Pennsylvania (south of Erie). Has two children, 14 and 12. Hobbies include cars and flying. Lives in Charleston, South Carolina.