Competition, not bonuses, will decide who sells health care insurance in the competitive Stark County market.
Give your insurance clients the best possible package or face losing them to the competition.
In Stark County’s health care market, local brokers say that’s one constant that remains, though there may be some changes ahead for sellers following Mercy Medical Center’s widely followed lawsuit against Aultman Health Foundation and its insurance subsidiary, AultCare.
A Stark County jury on Tuesday awarded Mercy $6 million on its claim that Aultman’s confidential bonus program with nine selected insurance brokers was part of a “pattern of corrupt activity.”
Douglas Brown, a broker with Brown & Associates in Jackson Township, said the trial won’t alter his approach.
“I’ve never aligned with one carrier, or even thought about not doing what’s best for the client,” he said. “It won’t affect anything I do.”
Brown is licensed to sell AultCare, but he was not one of the brokers selected to take part in the bonus program that was the subject of Mercy’s claims.
It’s too soon to tell if things will change for agents, said James Vallos, vice president of C.H. Vallos & Associates in North Canton. He specializes in property and casualty coverage, but the agency sells group health coverage, including AultCare. The Vallos agency also was not part of the bonus program.
Vallos expects those who buy health insurance for companies to be more informed thanks to the trial and the attention it drew.
“If buyers — which I’m sure they have — have been paying attention to what’s been going on, I expect nothing less than for there to be more questions,” he said.
Brown works with a number of local and national carriers in Stark County. He said he typically presents five or six programs that offer similar coverage.
“We try to mirror the existing plan,” he said.
“The rates can be all over the place,” he said. “Normally, employers will ask, ‘What’s your experience with them?’ They’ll ask for an opinion, and if I have one, I’ll give them mine” including the pros and cons of each carrier, he said.
“My loyalty is to the client,” he said, “not the (insurance) carrier.”
Vallos said his agency has been in business for 70 years and has always put clients first.
“Bonuses would have no bearing on that,” he said. If an agent doesn’t present the best package to a buyer, competitors will take business away.
“If they’re shopping the (insurance) business, chances are you’re not the only one they’ve called,” Vallos said.
Part of Mercy’s claim was that Aultman’s bonuses unfairly influenced agents to sell AultCare coverage.
Page 2 of 3 - “We don’t have enough business with any one carrier to be part of any bonus program,” Brown said, although he said bonuses are common in the industry.
He is not sure if the trial will prompt more questions from potential buyers.
“We’ve been asked before by clients” and have been honest about compensation, but questions don’t come very often, he said.
Testimony during the two-month trial in Stark County Common Pleas Court showed that disclosure rules changed while Aultman’s program was in effect. A former U.S. Department of Labor official testified that a disclosure form to buyers used to require only the agent’s commission to be reported. That changed to include any bonuses the agent might earn.
“It’s pretty black and white,” Brown said. “Maybe that’s why the questions aren’t asked.”
Vallos said bonuses are common and are strictly based on agency performance — how much an agency has increased the carrier’s business and its total amount of business with the carrier.
“When all the agents are playing on a level field, there’s nothing wrong with incentive programs,” he said.
The agents that were part of the Aultman program received preferential treatment, Vallos said.
“They were dealt a different deck of cards than we were. We’d be getting different numbers in rates and compensation.
“Morally and ethically, those (selected) agents should know better than to accept a deal like that,” Vallos said.
The Aultman defendants defended the practice in court, telling jurors the bonus broker payments were in line with the foundation’s charitable mission of providing quality, low-cost medical care.
Brown said bonuses, called overrides by some companies, are usually based on volume and production, i.e. how much an agency sells or maintains of the carrier’s business.
“You have to maintain a certain level to get bonuses,” he said.
The process of presenting coverage packages is the same, whether it’s to an existing client or a prospect, he said.
“I meet with the owners and listen to what they’re looking for,” he said.
Variables include what the company does, the number of employees that will be in the group and preferences for hospitals and doctors.
He said tentative rate quotes are available by submitting only the ages and genders of the group, but that will only give the base rate.
“There’s not much meat in those figures,” he said. “More times than not, there are some existing health conditions in a group.”
It’s more accurate to have employees fill out medical questionnaires to submit to the carrier. The forms will have to be completed eventually, so sooner is better than later.
Page 3 of 3 - The broker doesn’t want to come back to the buyer with a higher rate after carriers assess their risk.
“Then I tell the employer what we’ve found in the market as far as insurance rates,” Brown said. It’s at that point that he might share his opinion on the offers, he said.
Both agents said price and service are by far the biggest deciding factors in choice of insurance carrier.