Confessions of a Reformed Health Insurance Broker – From Innocence To Darkness

Slowly we saw the rise of third party administrators, the evil purveyors of self-funded employee health & welfare plans…..

By Bill Rusteberg

PART ONE: Transitioning From Innocence to Darkness & Intrigue.

The Beginning

I started in the health insurance industry as a salesman for a major BUCA in the early 1970’s, over 40 years ago. Back in those days we were selling indemnity health plans with two year rate guarantees, no underwriting whatsoever, with average monthly rates that today would not even cover a dinner for two at your typical family restaurant.

Competition was almost non-existent. I enjoyed a virtual monopoly as my employer was a national leader in that space, a name synonymous with health care. We were direct writers, not relying upon the insurance brokerage community for business. In fact, most insurance brokers were not willing to risk their client base by selling health insurance, with low commissions and a lot of extra work producing a lot of unwanted headaches.

The passage of ERISA in 1974 presaged change to come, although we were told it would be business as usual and not to worry. “Be aware but don’t announce” we were admonished. Of course Medicare was passed in 1966 which was supposed to bring change too, but evidence of that was not yet apparent. Little did I know that both events would forever change health care delivery and financing. My role was changing and I didn’t know it yet.

Slowly we saw the rise of third party administrators, the evil purveyors of self-funded employee health & welfare plans. Alarmingly, I was spending more time defending retention of larger group clients in my sales territory and less time selling new business. Making sales quota was becoming a challenge, a quota which was based on a formula tied to new business and retention of existing business. The evil TPA’s were winning, and winning a lot. We were beginning to realize company branding was less important than pricing.

Alarmed, my employer issued a call to action by announcing a special three day training session to learn something foreign. We were going to fight back against the evil, ERISA empowered TPA’s who were stealing our business. We were to be introduced to self-funding, becoming experts in that field. “You must know the enemy in order to win” we were told. “You will be trained and armed. You weapon of last resort will be Minimum Premium Plans!”

“What’s a Minimum Premium Plan?” we asked. “It’s a fully insured health plan that looks, acts, walks and talks almost like a self-funded plan yet we will always eventually collect the entire premium at some point. But, from a client’s perspective, it will look just like an evil TPA’s offer on a spread sheet. We will appear to be competitive without sacrificing control and cash flow!”

The class instructor began by announcing “Gentlemen, we are going to train you on our newest product, minimum premium plans and self-funded plans. But, we DO NOT want you to sell self funded plans! We want you to sell against it. We are going to train you on everything you need to know. You will become experts without peer.  Only as a last resort will you sell a self-funded plan and only with prior permission from the home office! Is that clear?”

My life was going to become more complicated. I was going to have to adapt. Transitioning from Cadillac salesman to used car salesman would not be in alignment with our corporate culture, yet I instinctively knew black market sales tactics brought survival in an emerging competitive market. I was up to the challenge, even eager to slay the TPA dragon without mercy. It was going to be fun. Let’s rumble!

To be continued…………….