YOU BETCH’YER HEALTH IN THE GOLDEN STATE

For a long time I have been a student of the subject. Without belaboring (read boring) anyone with my own career situation, I found myself recently in a place to take a position with one of these health insurance companies. Anyone who has been in the job market lately will know that by having a resume out in cyberspace results in solicitations from life insurance companies looking for new agents. It’s a tough, direct sales, full commission type career and the dropout rate is high and so they constantly solicit on the internet job sites.

I knew enough about myself to know that insurance in general was not for me but what came along was an offer from a health insurance company from what appeared to be a reputable firm and an honorable cause. This seemed to be a nice convergence between my interest in public policy for universal health care and finding out from the inside how insurance companies think and operate. With no personal financial pressures my intention was not to profit nor to purposely go in and find muckraking opportunities. What I found was that the muckraking wrote itself.

The first contact was my response to a phone offer for an interview. Customarily an “interview” means that you meet with a person from the company one-on-one with the expectation that it will lead to a job offer. Instead, on the day of my interview with the sales manager, I found myself in a conference room with eight other candidates. This “interview” was a Power Point presentation designed to pitch us the company and the job. Then we broke off into private meetings whereby we were asked “…so how’s this sound? I think you’d be good at this.” This was clearly a sale’s close. We weren’t being interviewed—we were being sold.

Well the product line seemed legitimate enough. It was geared to the demographic of the self-employed, who by far are the most pushed to find affordable health insurance and I cared about that. There was also an association membership bringing to very small businesses many discounted services. They were licensed and admitted by the State of California…seemed OK.

I accepted and began the process to become legally qualified to sell health insurance. The first step is to independently acquire a state life insurance license (which includes disability or health) by taking a 7 day cram course, scheduling the exam, taking and passing and waiting a few weeks for the assignment of the license number. These cram courses are separate businesses—some good some not so good.

The folks who attended the course came from all walks of life. It’s an avenue for many minorities with less than a college degree to have an opportunity although there were many degreed persons as well. There were also many older people who were in transition from stressed industries. Because of the recent housing market collapse there were a lot of real estate agents in the class. It ran the gamut of our society.

The instructor was actually very good having been in the business over 25 years with his own independent agency. When we covered Medicare, I remember vividly his editorial aside—it sucks to be old in America with health issues. That is a direct quote. I actually learned a lot about the world of insurance including healthcare coverage.

While awaiting the license number from the Department of Insurance, I began training with the insurance company to learn about the product lines. In an industry that involves 32 or more chronic ailments, complicated morbidity tables (vice mortality for life insurance), balanced billing, usual, customary and reasonable charges, and a myriad of other important medical elements, the company training course was only four days long. And out of that four days, two days were devoted to marketing, lead generation, and closing the deal. The rest, they said, we would learn in the field.

As I will comment later, much of the equation of true quality coverage rests on the caliber of the agent. And the training at this company was woefully inadequate for such an important role. The only way to be adequately competent was to embark on a great deal of self-study and inquiry. Most new agents don’t do this.

To be fair, a few of the agents had been around for a while and I recognized them to be fairly competent but they were a small minority. Most of the agents had very little healthcare skill but were sent out anyway into the market to “sell” clients on healthcare coverage.

We had weekly sales meetings. All sales organizations do. These were designed not to talk about healthcare coverage issues but to listen to the top producers of the week describe how they “loaded up” a plan for a client and thus bumped up the premium. This was to motivate more sales. Whether it really took care of the client was immaterial.

The sales manager would open the meeting with a small stack of 100 dollar bills in his hand. There was a lot joking around and back slapping. When a top-of-the-week agent’s story was finished he would be recognized with applause and cash on the spot. Smiles all around. If it wasn’t so comical it would be sad or maybe vice versa.

One week the meeting was postponed because the sales managers and top producers were whisked away to Hawaii for their annual sales celebration. When they got back, they told us how much fun it was bragging with other agents from around the country while getting “liquored” up at the bar. Don’t get me wrong, I like a good party but remember this is healthcare we’re talking about here.

For those who don’t want to scroll on I recommend renting the Danny De Vito movie, “Tin Men” to see for yourself the inside culture on how some sales companies work in the health industry. Otherwise stick with me.)

One unique marketing features of this particular company was the selling of memberships in a business association. The idea was to contact small business owners and attract them first to the discounted services of the association for their business with only a scant mention of the health insurance. (As a licensed agent you are required to mention insurance as the reason for any client call). If they bought the membership then the door was opened to pitch them health insurance. And pitch them they did--heavily. It wasn’t exactly bait and switch, because the membership was a real association with real benefits, but it had the same effect because healthcare insurance was the real purpose. That’s where the money was.

Many of the leads for the client contact are generated from expensive national and regionalized advertising on radio and television. The heaviest campaigns are during April and November of each year. Why? Those are open enrollment periods for many providers such as HMO’s and the Blue’s (Blue Cross and Blue Shield). A large phone center fields the calls and the leads are then “sold” to the regional sales managers. These “A” leads are then distributed to the top producers and the cycle goes on. Are there any dollars going toward reining in premium rates here? No. I have been involved with political campaigns and know first hand these operations are very expensive. Think how much a trip to a fancy resort in Hawaii for hundreds of people costs.

So now I began calling to get appointments. Not leads (those are not given to new agents) but associates I had met in other business activities and some friends to see what the response would be. What I discovered stopped me cold.

To meet with and hear people’s stories about how difficult it is to find effective and affordable coverage is an experience that is difficult to convey in words. How do you put the image of a stressed face on paper? A self-employed Dad with a family of four pays 1500 dollars a month for an HMO. An attorney fresh out of the corporate umbrella will soon have his COBRA expire and will need to self-insure at great expense through his new practice. Ok, I had a product that could probably help here but it wasn’t cheap. However it was my third contact that blew me away.

I found a referral to a person who had been covered by the very same product and company I was promoting and told me that when he was hospitalized he had to shell out close to 20,000 dollars out of his own pocket because his hospitalized condition didn’t quite fit the agreed to coverage. While he was in the hospital, the drugs needed for his recovery were covered. Once he was released, the plan did not cover the same expensive drugs in an out-patient status. That is what drained his pockets. He had been paying his premiums faithfully for three years and yet his illness did not “fit”. It nearly bankrupted him. For others it would have. It turns out that this story was not an isolated occurrence.

I stopped immediately promoting this company. While my purpose originally was to just take a look see at the insurance world and get people some coverage in the process, I was literally sickened (please no pun here) at what I was seeing. I could not by any ethical means continue my association with them and so I quit. This prompted me to dig deeper into what this was all about.

While the company is truly licensed to sell by the State of California, elsewhere they turned out to be embroiled in a great deal of adverse legal activity. The state of Washington had at one point issued a cease and desist order for a brief period because of complaints from customers about the agent’s claims. Most noteworthy was the bait and switch scenario with the association membership then selling health insurance.

The State of Massachusetts had, until recently, a class action suit against the carrier. This company also had one of the highest settlement complaint rates in the country. Many of the lawsuits were similar to the testimony above where clients assumed they had coverage when in fact they didn’t and the pay-out settlements, while timely, were woefully short of the expectation and thus burdensome to the point of bankruptcy.

Interestingly I found complaints about almost every other company, from private for-profit to non-profit. HMO stories are notorious for having to get by the “gatekeeper”. Blue Cross, once a non-profit now very much for profit, has a reputation for being difficult with timely settlements. Blue Shield will also “sit on” claims or push back. In the healthcare coverage world it seems the mantra is “we’re not happy until you’re not happy”. Did they learn customer service from the airlines?

The company I saw up close continues in business to this day and does very well. It is owned by a large successful parent company that stretches worldwide. It makes a nice return on its investment. After a few years, agents can make a nice income. They take nice trips once a year to exotic destinations. Ah yes, white sand beaches.

Much of the effectiveness and appropriate coverage written for a client heavily depends upon the skill of the agent. While these agents are required to take compliance tests (different from the basic license) before entering the market, tests required by the Department of Insurance, the companies themselves write the tests, submit them for approval, and require the agents to pass them. The problem is that the bar is set very low and it varies state by state. California has one of the better standards but that is not saying much.

The agents are on full commission and are often not employees of the company but independent contractors and so are under terrific pressure to sell with no real loyalty from the company. Many of them are young minorities working very hard but under great strain to create income. Some are older folks shoved out of the corporate world with no pension and unable to find “classic” work. This is not an environment to engender good advice and counsel to a client.

There are companies where agents are employees but they have a much more rigorous entry programs and product training cycles. They tend to have better products but also tend to be pricier. These products are often out of the reach of many of the self-employed or low-middle incomes.

And here’s the real Catch-22 in this segment of healthcare. The plans sold are purposely slimmed down to make them cheap but they are sold with the implication from sales motivated agents that they are fully comprehensive. When the client later needs care, especially emergency room care, these plans typically don’t cover it and the out of pocket expenses can bankrupt many.

If they build the policy with adequate coverage, a “Cadillac” plan as they call it, it becomes too expensive for the small business owner. That’s why so many small business owners and employees are un-insured. They can’t afford it, but companies like I experienced are preying on this market.

As much as we try to regulate this, many people are sold policies that are very inadequate under the implication from the agent that the plan is “comprehensive”. This is illegal under the California code but it happens all the time. This is the great breeding ground of the under-insured whose estates are wiped out from unexpected medical expenses which is thus the source of personal bankruptcy and qualification for Medi-Cal.

One overly neglected statistic is that almost half of Medi-Cal recipients land there because of destitution brought on by previous catastrophic medical expenses due to inadequate coverage. That costs California taxpayers nearly 6 billion dollars annually. Wouldn’t it be better to take that money and cover people with insurance in the first place?

Long gone from this company and through the help of some competent independent agents, I now have set up an agency to advise clients on where best to turn for coverage. I do this mostly through private referrals. It’s not ideal by any means but it’s the system we have. I feel I am at least helping a little. But knowing what I know now, I am a strong believer more than ever in a single payer, universal health care coverage system.

The point is that all this “selling” is expensive and is the source of a great deal of the waste in our healthcare system. This is why France, Switzerland, Canada, and others have so much cheaper costs. They don’t have all this administrative promotional overhead.

And the degree of adequate coverage rests too much in the hands of unskilled agents brought on by their drive to make a sale. Certainly there are good healthcare insurance companies. But healthcare, like power and light, is too basic a right for our citizens to be left in the invisible hand. Make no mistake, I believe in the free market system. But for the big games in the big leagues, I like referees roaming around the court so that we can all play fair to our full potential. Government is the right place for this critical issue.

So I have seen, and brought to you, a small slice of an inside story. Much of the criticism of insurance companies is old news. I hope by hearing a personal story it drives home the point a little better. We know all too well that it is the healthcare insurance industry that will push back hard against any change. And the pharmaceutical industry will be right there by their side. Why is that? Well, they have so much to lose. Remember, they all have visions of the white beached sands of Hawaii in their heads. They will not go easily into the night.

Do you need health insurance coverage? Good. Just sign here. Now let me hand you the dice—say, is that the dealer calling out? “….New shooter comin’ out! ….Cocktails!”

Steve Filson is a Democratic candidate for the 15th Assembly District seat being vacated by Republican Guy Houston who is termed out. In 2005, he joined the fight against then incumbent Richard Pombo by running for Congress. While not successful in the primary, his fight continued when he joined in to help Congressman McNerney win over Pombo. Retired from airline management, Steve has joined efforts to bring affordable healthcare insurance to small businesses and their families as a licensed agent.