Walking the Fine Line

Tuesday, September 2, 2008 at 3:19am
Phil Wenk is in charge of steering new-market ventures for the holding company that includes Delta Dental of Tennessee. Matthew Williams/The City Paper

The CEO of a $200 million business that’s tops in its state spots the chance to grow beyond his traditional turf. He secures the backing of his local board as well as his holding company, which has the means to back up his ambition. The plan is set in motion.

The twist? One of his main competitors in those new markets is a corporate cousin expanding at a steady clip and prepared to take on the newcomer.

Welcome to Phil Wenk’s world.

In his ninth year as president and CEO of Delta Dental of Tennessee, Wenk oversees an organization that accounts for one in four dental insurance policies in the state. He has integrated his organization with a $2 billion holding company that also includes Delta Dental plans in Michigan, Ohio, Indiana and Illinois.

At the same time, he is president of Renaissance Holding Co., a vehicle created by that parent company to house several for-profit ventures. Wenk’s charge: Market Renaissance’s group dental plans to the rest of the Southeast and build a national business targeting individual retirees.

Wenk launched his push a year ago. In the process, he is essentially running an end-around play on Delta Dental of California, which controls 17 other Delta charters, including those from Texas to the Atlantic Coast.

All Delta plans are members of the Delta Dental Plans Association, a sanctioning body of sorts, and are limited to their states. Over the years, many of them have formally affiliated, creating regional powerhouses that share back-office and other operations. At the same time, DeltaUSA, a national accounts program offered through DDPA, allows each plan to sell to companies with multi-state footprints.

But Wenk says the sprawling $5.4 billion holding company led by Delta of California hasn’t paid enough attention to Florida, Alabama and other states in Tennessee’s orbit. Whereas Delta Dental has a 25 percent market share in Tennessee, its peers to the south hover in the single digits.

For Wenk, expanding into those states by using the Renaissance name and a separate operations model “is the path of least resistance” though walking a fine legal line.

Still, there is resistance. Jeff Album, director of public affairs at Delta Dental of California and its affiliates, said growing in the South is a priority for his company. In Mississippi, Alabama, Georgia and Florida alone, the organization has added more than 1 million plan members since the beginning of 2005 and now has 1.2 million people on its books in those states. By comparison, Delta of Tennessee finished 2007 with 840,000 enrollees.

Album said many Southern states have been relative latecomers to dental insurance, which accounts for the smaller base from which the Delta plans there have come. He called Wenk’s premise that the organization has neglected the South over the years “an untrue characterization.”

“We can call it an honest disagreement,” Album said. “Delta Dental is doing just grand in these states. If Renaissance wants to compete, it’s welcome to try.”

A different strategy for different groups

Renaissance quietly launched its push a year ago and has stepped lightly in a lot of ways. Its materials do not mention its Delta roots or its official headquarters is in Indianapolis. Wenk’s Renaissance card lists a Hendersonville address 10 miles north of Delta of Tennessee’s MetroCenter home.

With Renaissance, Wenk is thinking small in several ways. He’s not planting his flag in the region’s big cities, focusing instead on mid-sized markets. That takes a good number of his biggest competitors — the Cignas and MetLifes of the world — out of the picture.

Renaissance is also honing in on companies with fewer than 50 employees, accounts that Delta Dental of California’s operations there aren’t as focused on. Many of those smaller companies operate in blue-collar industries and have never before offered their employees benefits. They also are in the so-called “voluntary” market, meaning their employees will at least pick up part of the premiums.

Wenk also isn’t plowing dozens of salespeople into the region to cold call and burn $3.50-per-gallon gas. Instead, a sales support center in Indianapolis takes the lead in contacting agents and brokers in the Deep South — many times electronically — and then follows up to arrange meetings with a small group of road warriors. That lower-cost arrangement allows Renaissance to price its products lower than its competitors, a necessary evil for a new kid on the block trying to get noticed.

In terms of pure numbers, Renaissance hasn’t yet made much of a dent. It is on track to generate $6 million in revenue this year and its roughly 13,000 group subscribers amount to less than half the number of new enrollees Delta Tennessee alone brought on in 2007. The venture also recently narrowed its pitch to the Carolinas, Florida and Alabama.

But the pipeline is solid. Renaissance last month delivered quotes for groups comprising 30,000 potential subscribers— and Wenk said market share is not a goal in and of itself.

“It won’t be significant for 10 years,” he said. “Our intention is to grow a great big pool … and get to a positive bottom line in three years. It’s not a function of size, but of signing up the right people.”

Taking aim at the Fortune 500

Renaissance’s other strategic push takes aim the individual retiree dental market. Many of the millions of Baby Boomers leaving the work force are leaving behind at least part of their benefits. A good number of their former employers want to offer options for continuing dental coverage that can be funded by other sources, most often government programs.

Renaissance is licensed to sell its individual dental plans to retirees in almost every state and has begun selling to a pool of more than 70,000 retirees from Ford Motor Co. and Chrysler LLC, albeit under the Delta brand.

Unlike the patient approach he’s advocating with group plans, Wenk said the individual retiree business needs to move quickly. That plan is made trickier — and more expensive — by the fact that many of the retirees calling in are handling their insurance plans themselves for the first time after decades of simply seeing a line on their paychecks.

For instance, retirees are far less willing to enroll online. Also, the typical call center conversation for individual retirees is three times as long as those at a Delta plan and retirees call an average of three times before they actually enroll. That means Renaissance’s call center accounts for 14 percent of its revenue, double Delta Dental’s.

“We know there are still things we need to learn,” Wenk said. “That number will trend down, but I don’t see it getting below 10 percent.”

Deals with two other Fortune 500 companies, slated to be announced this fall, will help. They will bring Renaissance a pool of another 120,000 retirees and Wenk thinks his team can land 70,000 of them as customers. That would lift that business’ sales to about $50 million on an annual basis and give Wenk more blue-chip names with which to market his services.

Playing with the toys

In addition to the strategic rationale, the Deltas’ plans for Renaissance are an infrastructure play, a way to leverage many of the technology investments they have made as they have integrated their operations over the last decade. Claims processing and other back-office functions have been centralized and other operational areas have been brought in house.

Wenk said those moves have changed Delta of Tennessee from a tradition-bound mentality to a company “more strategically aligned with what we want to do.” In turn, Renaissance is now growing from that operational base.

“There’s no value if you create all these toys and no one can play with them,” Wenk said.

While the knowledge of the Delta organizations infuses Renaissance’s products and mindset, hitting the market has been an entirely different challenge. After quipping about getting a lot less sleep these days, Wenk said his team has had to adjust to the fact that many of Delta Dental’s strengths and advantages — chief among them the name recognition — simply don’t apply to Renaissance.

“It’s almost like starting this company over again,” he said. “You can see it in its infancy, but you can also see the great opportunities.”

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