Is she a scamster or a good samaritan?

[Guest]

(Note: In CA small group health is GI)

At a party this weekend I met an agent from Los Angeles. She said she has built a good practice on getting desperate, uninsurable people coverage.

She is a rep for a well-known MLM company (household name company... I won't say which.) She signs them up as a member of her network or downside or whatever they call it in MLM.

She walks them through the process of getting all the legal papers in order including incorporation, tax-ID with Feds and state, bank account, a payroll system (ADP, Paychex, ect.) and makes sure they have local biz license... etc.

She makes sure there is 'audit trail' investment and cash-flow (usually negative) and that there is bonafide evidence of advertising and marketing efforts/expenditures. She helps them find customers, make sales and do pretty much what a good 'manager' would do.

You guessed it. After a month or so, she writes them a group policy. She puts together (what she says) is an impressive binder of paperwork and the application just sails through.

I asked if she thought it was a scam? Her reply was "I don't make that much money on a mom/pop group. I'm helping desperate people not lose their home and savings from (diabetes, cancer, Parkinsons, etc.)

Through word-of-mouth, people seek her out to help them get at least some kind of minimum (HDHP) plan. (I told her to write how-to book and sell to both people and agents!)

Is she 'gaming' the system? Do lawyers 'game' the justice system for their client's benefit? Do doc's 'game the payment system for their client's benefit? When you are talking about people losing their current savings, their retirement savings, their homes because they can't afford (or qualify for) insurance in a system that is very broken, I wonder if the ends justify the means.

What do you folks think?

Al

 

[LaffAgent]

It always amazes me the hoops that people will jump through to work an angle. I won't judge legality or ethics (for now), but it sure seems if she put that amount of time and effort into pursuing good, clean, straight business, she'd be more effective.

 

[Guest]

if she put that amount of time and effort into pursuing good, clean, straight business, she'd be more effective.

Effective at what? What are we here for?

What is the big deal in our industry about writing health coverage for healthy people? At best we are a fast and convienent information source. Yet they can learn and know all we know with some research. When it comes to people with no health issues, we're not all that important.

She sees herself as in the 'helping profession.' She's using her knowledge of the law, the state ins. rules, and the standard requirements for the start-up of a business to get for people what she says they are legally entitled to.

She does not try to 'cover-up' her practice. She's right there in the open, setting people up in her MLM biz (or other businesses she refers them to) and follows the strict "paper-chase" to qualify her clients for group.

I see it her way. But my mind is not made up. I'm too new at all of this to render a snap decision like those of you who have been out there for years and years and who have had the heartbreaking call "I was laid off my job two months ago and I could not afford payments and now the doctor says I have diabetes... can you help me?" I've had two calls this month. I'll bet some of you get two a day!

What are we here for? Are we here to make the carriers rich? Are we here to make ourselves rich by being, as Laff says "more effective?

Or are we here to help people?

Al

 

[LaffAgent]

What are we here for? Are we here to make the carriers rich? Are we here to make ourselves rich by being, as Laff says "more effective?

Or are we here to help people?

Al

Yes, yes, and yes. It's the backbone of a capitalist society. As insurance professionals we strive to earn a good income representing a company that makes a good profit by providing a product that is beneficial to our clients.

 

[djs]

Totally legal, totally unethical. You should write group policies for businesses, not create businesses to write group policies. Who suffers? Other small businesses who have premium increases to cover the losses on these types of plans.

What you'll see is health companies switching to requiring businesses be established for a certain amount of time prior to writing a small group plan. Something they can legitimately do as long as they do it uniformly. It's already a hurdle to get through the paperwork maze for small group, agents like this are the ones that cause increased paperwork.

Remember, as an agent, you have a fudiciary responsibility in the following order, it's easy to get this confused:
1. Do what is right for the company. Collect the right premium for the right risk. You are the first step in underwriting, not underwriting avoidance.
2. Do what is right for the client. Make sure their needs are met, and their coverage is understood and accepted.
3. Do the right thing for yourself.

Frequently as agents, we want to put the client ahead of the company. We probably even try to get the client to see it that way, that we will help them get more for less, that's our value. Part of the thing we need to do for the client is make sure the company is financially healthy and profitable, so they stay in business, and in the market. This doesn't mean they have to make any more money than they deserve from our clients, but it does mean we don't want to intentionally setup a situation where they are going to be taking a loss.

When I first started as an agent, I always thought the client came first, and in most ways, I still do. I have realized though, that from a fiduciary responsibility side, the company comes first, and then the client. These are not mutually exclusive goals.

This agent is using the guaranteed issue of group health to grow her MLM business, and her health business. She'll eventually get her appointment with the health companies cancelled, if her book of business is intentionally overweighted with high risk clients.

I do want to point out that what she is doing is legal. It's the one downside (or upside) to guarantee issue.

Dan

 

[Guest]

This agent is using the guaranteed issue of group health to grow her MLM business, and her health business. She'll eventually get her appointment with the health companies cancelled, if her book of business is intentionally overweighted with high risk clients.

Hmmm. Maybe you are right but when I looked at the appointment agreements that I have with carriers I don't see anything in there that says I have to maintain some kind of 'balance.'

I can see your point about her growing her MLM biz. But she also told me that she would recommend a bunch of other businesses... consulting, dog walking, house sitting, personal shopping... there are many hundreds of bsinesses a mom/pop can start that are totally legal entities.

If she acts as a 'consultant' (paid or unpaid) to walk people through the steps in starting a business (as all of the 'how to start of home-based biz' books do) and then writes them group, is there an ethical issue? What if she sends the client to you to write it? What if she is not even an agent but advises "Hey, start a biz and then apply for group."

I understand that being an agent means you 'work' for 'the man.' And I know that a carrier can revoke 'agency' for any and all reasons. But in your experience (collectively) does this ever happen?

What if a lawyer or CPA or doctor helped set up a lot of their "sick" clients in business and said "Go to Joe for insurance" would Joe get his appointment pulled for writing legit. (high risk) business? Is Joe supposed to ask "Mary, are you and your husband in business just to get insurance?" And if Mary says 'no' are we agents supposed to do further investigation or interrogation?

I won't agrue that you are supposed to 'look out' for the best interestes of the company. I know you cannot do things that are illegal. But can you do things that ARE legal?

It is illegal (in CA) to start a business TO get insurance. But it is legal to start a business AND get insurance.

Which applies in the case of this woman I met?

I tell people all the time when asked about group insurance "I'm not a lawyer and I'm not giving legal advice on what you should do, but to the best of my knowledge it is legal to start a business and apply for insurance."

Am I going to lose my ticket for saying the above? (And if so, I don't think I'd want to sell for a company that would do so... and I'll tell you another thing... I'd have it on the front page of the WSJ the next day... and I know how to do that.)

Al

 

[LaffAgent]

It is illegal (in CA) to start a business TO get insurance. But it is legal to start a business AND get insurance.

Which applies in the case of this woman I met?

You already know the answer.

I can't speak for all contracts and I haven't pulled mine out to quote it directly, but it has a clause to the effect that if I subvert the guidelines in fact or intent, I can be terminated.

 

[Guest]

I can't speak for all contracts and I haven't pulled mine out to quote it directly, but it has a clause to the effect that if I subvert the guidelines in fact or intent, I can be terminated.

Hard to 'prove' intent. However, the carrier does not have to prove anything as I understand it. Most contracts I've seen say that agency can be terminated for any reason at any time by the carrier. Then many of them have a clause saying that if there is a dispute about this (or anything) you can't sue... you have to go to arbitration? What is there to arbitrate?

If it says "I can fire your ass for any reason" what can you contest?

Anyway, I think this woman is doing a good service for her clients and her community. I guess I'm just not "company man" in a gray flannel suit
(http://en.wikipedia.org/wiki/The_Man_in_the_Gray_Flannel_Suit)

I should probably get out of this business as I'm never going to be able to put the carrier first and my client second. It's just not 'me.' I maybe should have worked for TIAA-CREF who preaches "working for the greater good." I dont know if they do, but that sums up my feellings about insurance and business in general. I think this woman is working for the greater good. She is doing nothing illegal that I know of.

Al

 

[Dave020]

On balance I am sure it works out fine for the carriers. Group is pooled risk, so they will simply raise the RAF to max (1.10) and balance costs against healthier groups submitted by other agents. If overall group health costs go up, then they raise premiums and/or adjust group RAFs at the next focal review.

I have no problem with what she is doing except that is seems she is somehow using her side business to do it. If she is double dipping in some way, then I would consider it conflict of interest.

 

[LaffAgent]

I think the other oldtimers will agree with me that after a while you understand the reasoning behind the underwriting guidelines. If we subvert the guidelines and bring adverse selection to the company, eventually it comes out in the wash. The rates go through the roof, the company goes out of business, something.

Allow me a little cynicism. If this is a job and two years from now you're going to be selling cars or paving driveways or managing a retail store, what the hell, subvert the guidelines and make a lot of money and think that you're doing the right thing for the client.

If this is a career, two years from now you're going to need a company that didn't go out of business because of horrendous claims losses. You're also going to need clients who aren't pissed off that you had them jump through hoops and join some Amway program just to get insurance, only to have the rates triple or the company go out of business and they wind up with no insurance anyway.