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.
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.
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?
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.
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.
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.)
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.
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?
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.
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.
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.
I understand where you are coming from. But I don't sleep well at night knowing that I could help someone but kept my mouth shut out of fear that maybe the carrier might make less money or even go out of business.
I put people before carriers, but I fully understand your position so don't take this as me being critical of you. There are always two sides to everything, and in this area I don't think there is a wrong side.
I'm not saying that you or anyone should do what this woman is doing, I'm just wondering if you (all) think she is doing anything illegal or unethical.
I think that it is a gray area, for someone to do this once in a while, as it is legal. Everyone would have to make their own decisions. However, when you build your entire practice around this concept, and even make extra money off of the mlm side, then I think that it is being dishonest.
If Robin Hood would keep 10% of the money that he stole from Prince John, as his fair wages for helping people out, then I think more people would consider him a thief, than a hero.
Charity is terrific, but less so when it comes at someones expense. Most likely, the extra cost gets paid by other small businesses, as opposed to the evil corporation.
I have done 2 man groups in the past but in every case the company was already in place...now I do have a client that this is a possibility..... to set this up I told him what I need to write a 2 man .....but making this a main business practice can get you black listed by your carriers.....
I think that it is a gray area, for someone to do this once in a while, as it is legal.
If it is legal 'once in a while' why is it not legal or not honest all the time?
when you build your entire practice around this concept, and even make extra money off of the mlm side, then I think that it is being dishonest.
Dishonest to whom? The carrier? You said above it is legal? I know carriers might think otherwise and pull your ticket, but what would "your god" say? When I get to meet my maker, I don't think he's going to ask "So Al, how much money did you make for the carriers" as opposed to "So Al, tell me how many people you were able to help get insurance when no one else was there for them?"
If Robin Hood would keep 10% of the money that he stole from Prince John,
I think it was King John... the only "John" to ever rule... he was so terrible no other king would assume that name again!
Most likely, the extra cost gets paid by other small businesses, as opposed to the evil corporation.
What is the difference if two women read this list and say to each other "Let's go into business and then we can get insurance and maybe make some money... but at least we will be covered under AB1672 [GI issue for small biz.]" as opposed to someone asking "Sam, if I start a business, can/will you write me group insurance?"
It all comes down to personal priorities. Do you serve the carrier or the client? It's hard to serve two masters. This woman I met has answered it for herself. What would you do if someone came to you and said "I'm starting a biz so I can get insurance." What would you do?
I'd say "TTBOMK, it is not legal to start a business JUST to get insurance. While I'm not a lawyer and don't give advice, TTBOMK it is legal to start a business AND get insurance. Tell me again what you are doing?"
Is that not ethical? Maybe. But I'm in the biz to help people and I'm willing to skate close to the edge of the 'legal' pond and hope I don't fall through the ice! YMMV.
If it is legal 'once in a while' why is it not legal or not honest all the time?
Legal and honest are not the same thing. It may well be legal to do all the time, and it may even be honest, but I think that making it a practice is unethical.
Dishonest to whom? The carrier? You said above it is legal? I know carriers might think otherwise and pull your ticket, but what would "your god" say? When I get to meet my maker, I don't think he's going to ask "So Al, how much money did you make for the carriers" as opposed to "So Al, tell me how many people you were able to help get insurance when no one else was there for them?"
My point is that if you claim to be helping everyone, and you are performing such kindness, and in reality, you are making a lot of money off of it, then your claims are dishonest.
The god point is silly, I don't think he will ask how many books you published either. If you want to give charity, or actually devote yourself to altruism, then that is very commendable, but if you enrich yourself while doing so, the I question your motivations, and so will your god.
I think it was King John... the only "John" to ever rule... he was so terrible no other king would assume that name again!
Carriers that write small group understand they are going to take it in the shorts. The only folks that buy small group plans, particularly 2 - 3 life plans, are those who are uninsurable.
My only question is, how are they getting by the payroll issue? All of my carriers require payroll forms to verify there are 2 full time, W2 employees. If mom & pop are not making at least $200/week (each) from the business & paying taxes, this is a house of cards that will fall and fall hard.
I can write all kinds of folks with sideline businesses (including yard sales) as long as they have the payroll records.
That's usually where it falls apart.
If they have an MLM that is generating enough to pay $400/week ($200 for mom and another $200 for pop) plus cover the payroll taxes and health insurance, then perhaps I need to find out what they are doing.
Most MLM'rs make less than $500 per year. . . despite what they would have you believe.
Carriers that write small group understand they are going to take it in the shorts. The only folks that buy small group plans, particularly 2 - 3 life plans, are those who are uninsurable.
not necessarily....2 of the 2 mans I have done in the past was to cover maternity..(one was preg. and one wanted to get preg)...after the kid was born in both cases the plans are still in place 3 to 5 years later......one had 2 kids in 3 years and has grown to a 5 man group......the other just likes the rich benies and is a self~emp home builder.....
I can write all kinds of folks with sideline businesses (including yard sales) as long as they have the payroll records.
That's usually where it falls apart.
If they have an MLM that is generating enough to pay $400/week ($200 for mom and another $200 for pop) plus cover the payroll taxes and health insurance, then perhaps I need to find out what they are doing.
Most MLM'rs make less than $500 per year. . . despite what they would have you believe.
Well, TTBOMK the carriers don't care if a business makes money or not. Lots and lots of start-ups lose money for years and years. But if payroll is being paid out of initial capitalization, (as is usually the case) I don't see a problem. And any half-way decent payroll service will generate all the reports necessary (and of course file the taxes with the various jurisdictions.)
I can see how setting people in business in her own MLM downside is a conflict, but if she counsels them to start a pet-sitting biz or something similar, something she has no interest in, I see no crime in that.
We can argue the details until the moon turns blue. What I'm interested in is the marco level. Is this agent a 'crook' (a la Nixon!). Is she doing wrong?
My only question is, how are they getting by the payroll issue? All of my carriers require payroll forms to verify there are 2 full time, W2 employees. If mom & pop are not making at least $200/week (each) from the business & paying taxes, this is a house of cards that will fall and fall hard.
Generally the businesses are set up corp or partnership with both spouses in the capacity of partners or corp officers. One form for that with supporting documentation. No need for DE-6 (wage tax report), payroll or anything else (in California). Now many carriers will requires spousal groups to submit draw receipts, banking records and other information in an effort to discourage them (Al's favorite dark colored carrier is one of them). The other dark colored carrier couldn't care less as long as the group is qualifying. Kaiser and Western Health will even do Sole Props as long as both spouses are on the tax returns. Key is knowing how the carriers operate on very small and spousal groups. Income is not a requirement in California, just weather the carrier wants to make it an issue or not. They do need to be actively engaged in the business.
Dishonest to whom? The carrier? You said above it is legal? I know carriers might think otherwise and pull your ticket
Actually, I believe it may be a DOI violation to engage in this activity where income can be derived from client source outside of the insurance commission. It seems in the dim recesses of my memory that licensing requirements prohibit earning commissions on insurance sales with those we are engaged with in another business.
Is she a scamster or a good samaritan?
Linear Mode
