Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Sarah Strominger and her husband Joe had always gotten health
Speaker 2: insurance through Joe's union job, but last year, Joe left
Speaker 2: that job to start his own small business, and that
Speaker 2: meant the couple had to shop for a new health plan.
Speaker 3: We just started googling and looking up insurance brokers, and
Speaker 3: they started flooding our.
Speaker 2: Phone, Sarah says. Once they filled out a form requesting
Speaker 2: a health insurance quote, they were inundated by telemarketers calling
Speaker 2: with enticing offers promising great cheap health plans, plans those
Speaker 2: agents said would cover the couple's expensive medical needs.
Speaker 3: My husband has a small brain tumor on his pituitary glands.
Speaker 3: He also is pre diabetic, and I have mental health
Speaker 3: insurance coverage I needed, and basically we were promised that
Speaker 3: all of that was going.
Speaker 2: To be covered, Sarah says. A telemarketer found them a
Speaker 2: plan and convinced them to pay for a full year's
Speaker 2: coverage upfront for almost nine thousand dollars, But over time
Speaker 2: they realized the plan wasn't what they'd been promised. The
Speaker 2: first sign came when they called the pharmacy for Joe's
Speaker 2: blood sugar medication, which costs fifteen hundred dollars a month
Speaker 2: out of pocket.
Speaker 3: We slowly found out that none of our prescriptions were covered.
Speaker 3: We started getting his blood work bills back in the MA,
Speaker 3: also his lab four thousand dollars a pop. So slowly
Speaker 3: just talking to doctors and realizing that none of this
Speaker 3: stuff is being paid.
Speaker 2: The straw Mangers are just one of more than one
Speaker 2: hundred thousand US households that have signed up for similar plants,
Speaker 2: and Bloomberg zach Mider says it's a growing, largely unregulated
Speaker 2: corner of the healthcare industry that's leaving many Americans without
Speaker 2: the coverage they need.
Speaker 1: It's a kind of health plan that falls in this
Speaker 1: basically legal no man's land where nobody claims to be
Speaker 1: able to regulate it in most states, and essentially all
Speaker 1: the rules that are set up to kind of govern
Speaker 1: our health system in the US don't apply to it.
Speaker 2: I'm Sarah Holder, and this is the big take from
Speaker 2: Bloomberg News today. On the show the health plans that
Speaker 2: have some Americans feeling dooped, we dig into the telemarketing
Speaker 2: group selling them the legal loophole that's let them flourish
Speaker 2: and what it could mean for the American health system
Speaker 2: if more people turn to them. The story of how
Speaker 2: the Stromongers ended up getting sold a health plan that
Speaker 2: resembled health insurance but wasn't actually starts with an idea
Speaker 2: from one man, Bill Bryan. Who is he and how
Speaker 2: did he come up with us?
Speaker 3: Sure?
Speaker 1: So, Bill Brian is actually For most of his career
Speaker 1: he was a comedy writer. He wrote for night Court
Speaker 1: and Coach and other sitcoms of the eighties and nineties.
Speaker 1: And after his successful career as a comedy writer, he
Speaker 1: gets into real estate investing and eventually ends up being
Speaker 1: fairly wealthy guy and gets really involved in making different
Speaker 1: kinds of business investments, and he comes across this idea
Speaker 1: to sort of fund this new way of financing healthcare
Speaker 1: in America. The idea is that Obamacare is too restrictive, right,
Speaker 1: The cheapest plans you can buy are too expensive. They
Speaker 1: have these super high deductibles, which means they're not of
Speaker 1: much use, especially for people who are just well off
Speaker 1: enough that they don't get the subsidies, and who are
Speaker 1: self employed or gig workers. They can't get health insurance
Speaker 1: through their employer. There's over twenty million people in America
Speaker 1: who don't have health insurance, and so he sees this
Speaker 1: opportunity if you could provide something that was less expensive
Speaker 1: than Obamacare, that was more affordable for people like that,
Speaker 1: people like the stro Mangers.
Speaker 2: But what did that look like in practice? What did
Speaker 2: he do?
Speaker 1: So typical health insurance in the United States, if you're
Speaker 1: buying it as an individual in the marketplace, as opposed
Speaker 1: to just getting it from your job, it has to
Speaker 1: meet all the standards of the Affordable Care Act, which
Speaker 1: means it's got to cover pre existing conditions, and it's
Speaker 1: got to meet this checklist of ten items that has
Speaker 1: to cover, like hospitalization and emergency room visits, Joe, basic
Speaker 1: stuff like that that you think of as like health insurance.
Speaker 1: If you are an employer and rather than bring in
Speaker 1: an insurance company to provide insurance for your employees, you
Speaker 1: just do it yourself. You say, here's a copy of
Speaker 1: the plan, here's what we'll cover, and we'll just fund
Speaker 1: it out of our pocket. There's no insurance company involved.
Speaker 1: Almost all those Obamacare rules I talked about do not apply.
Speaker 1: It can be basically anything. And so what these guys
Speaker 1: are doing is say we're going to have that arrangement
Speaker 1: with our customers. So when we call these people up
Speaker 1: on the telephone and sell them a health plan, they're
Speaker 1: actually going to become employees of us. And so then
Speaker 1: we can offer these health plans that don't meet all
Speaker 1: those minimum requirements under the law.
Speaker 2: So essentially these plans are employing people.
Speaker 1: I can see why you're confused, and it is super confusing. Okay.
Speaker 1: So the idea is that when a salesman calls you
Speaker 1: up on the telephone says, hey, would you like a
Speaker 1: health plan and you say yeah, sure, in the process
Speaker 1: of that conversation, you are actually becoming an employee of
Speaker 1: this random company with a name like Outreach Data Partners LP.
Speaker 1: And your work for them is going to be downloading
Speaker 1: an app on your phone and using it maybe to
Speaker 1: like browse the Internet or something. And by agreeing to
Speaker 1: do that work, and also by signing a bunch of
Speaker 1: papers and stuff, you are now an employee for legal
Speaker 1: purposes of this company, and so they can sell you
Speaker 1: this plan that they couldn't sell you unless you were
Speaker 1: an employee.
Speaker 2: Wow. So instead of buying health insurance, you are basically
Speaker 2: applying for a job at this company without even knowing it,
Speaker 2: and that company is giving you insurance, although.
Speaker 1: To be clear, you're paying full freight. Most companies cover
Speaker 1: at least some of your health care costs. Here you're
Speaker 1: paying the full amount. The idea was to come up
Speaker 1: with a way to sell health insurance. It was more affordable, right,
Speaker 1: and this was the vehicle to do that. And so
Speaker 1: once they come up with this idea, they go to
Speaker 1: the government, the Department of Labor, and they say, we
Speaker 1: think that these plans comply with the employee benefits laws
Speaker 1: for regular employees, and so we think that this is
Speaker 1: an insurance and we could be able to sell these
Speaker 1: without having to comply with insurance laws.
Speaker 2: So the Labor Department agrees this is a legal way
Speaker 2: to offer coverage to people.
Speaker 1: No, the Department of Labor said, it's not. They basic
Speaker 1: he said, these people are just buying health insurance. This
Speaker 1: isn't an employee relationship. And so that kind of kicked
Speaker 1: off a now five year legal battle between Bill Brian
Speaker 1: and his allies and the Department of Labor, which still
Speaker 1: is going on. It's still not a resolved issue. But
Speaker 1: meanwhile Brian started selling these plans in the market. So
Speaker 1: even though the kind of underlying legality is still being
Speaker 1: sort of fought over. He's actually selling them through telemarketers.
Speaker 2: You mentioned that Bill Brian part of his pitch and
Speaker 2: his promise with this new form of insurance was that
Speaker 2: it would be cheaper and it would offer new options
Speaker 2: for people. How has that worked out in practice.
Speaker 1: There's different ways of looking at cheaper. Certainly in terms
Speaker 1: of the ticket price of these plans versus an Obamacare plan,
Speaker 1: they're usually less, right, like the dollars you pay per
Speaker 1: month to just have the plan is a lot less,
Speaker 1: and they're typically no deductibles or low deductibles for a
Speaker 1: lot of services. So in that way they're more affordable.
Speaker 1: But if you look at the amount of actual medical
Speaker 1: coverage that's being funded by those plans, you know, I
Speaker 1: found one plan where it was something like twenty five
Speaker 1: percent of the monthly cost that the person was paying
Speaker 1: was actually going to the cost of the medical care.
Speaker 1: So most of the rest of that money was going
Speaker 1: to commissions and other kind of fees collected by middlemen
Speaker 1: such as the sales agencies. So sales agencies like these
Speaker 1: plans because they can add a big commission on top
Speaker 1: and they're still cheaper than Obamacare, so they can sell them.
Speaker 2: And is that something that would be allowed under Obamacare.
Speaker 1: No, under Obamacare, you can't spend less than eighty percent
Speaker 1: of the customer's premium costs on actual care.
Speaker 2: Zach says. Despite Brian's ongoing legal dispute with the Department
Speaker 2: of Labor, which is now playing out in court, and
Speaker 2: despite the shortcomings of these plans, agencies have sold a
Speaker 2: lot of them.
Speaker 1: We can tell just from Department of Labor statistics that
Speaker 1: over one hundred thousand people have been signed up across
Speaker 1: the most of them quite recently. And because Bill Brian
Speaker 1: has had some success in his court case, even though
Speaker 1: it's not resolved, that's inspired a lot of copycats who
Speaker 1: are doing a similar kind of thing to what he's doing.
Speaker 1: In fact, there's probably more of them now than there
Speaker 1: are people signed up for Bill Brian's plans. Labor Department
Speaker 1: says we don't regulate them because they're not employees, but
Speaker 1: a lot of state insurance regulators who would normally regulate
Speaker 1: them are saying those fall under Department of Labor. We
Speaker 1: can't regulate them, and so in a lot of states
Speaker 1: there's really no one who is regulating.
Speaker 2: Them, so they're caught in this kind of legal gray
Speaker 2: area for now. Absolutely we get into the consequences of
Speaker 2: that legal gray area and what the government might do
Speaker 2: about it. After the break, I've been speaking with Bloomberg
Speaker 2: reporter Zach Meider about a new kind of health plan
Speaker 2: that offers less coverage than is required of other policies
Speaker 2: in the marketplace after creating an employment relationship with its customers.
Speaker 2: For now, the Plans live in this legal gray area,
Speaker 2: and their business model, which relies on a vast network
Speaker 2: of telemarketers, might sound just as complicated, but Zach says,
Speaker 2: you can think about it like the car industry.
Speaker 1: There's a car dealer and there's the car.
Speaker 2: In this analogy, Bill Bryan, the guy who came up
Speaker 2: with the earliest version of the Plans, is the car maker.
Speaker 1: But he's making a kind of car that, for various reasons,
Speaker 1: regulators can't really figure out if anyone is responsible for
Speaker 1: regulating it, and so that makes it different from other
Speaker 1: cars on the road.
Speaker 2: But there are other people responsible for selling what Brian
Speaker 2: and other copycat companies are making, and.
Speaker 1: A lot of the concerns we hear about the way
Speaker 1: people are selling it right. Are they saying it's a
Speaker 1: Cadillac when it's a less valuable car, that kind of thing.
Speaker 2: And in the case of the stromengers, the car dealer
Speaker 2: or telemarketer who sold them their plan was employed by
Speaker 2: another company called Quick Health.
Speaker 1: Which is based in Pennsylvania. It's call center. There's people
Speaker 1: there work in the phones, calling people all over the
Speaker 1: country trying to sell them various health related products.
Speaker 2: A lot of what they were selling were Bill Bryan's
Speaker 2: health plans, and according to a former Quick Health employee
Speaker 2: who Zach interviewed, the company's salespeople were trained to exaggerate
Speaker 2: the plan's benefits, to describe them as comparable to a
Speaker 2: Blue Cross or an ETNA plan, but cheaper. The company's
Speaker 2: CEO at the time, Arthur Walsh, says the company didn't
Speaker 2: misrepresent plans and that it strives to have satisfied customers.
Speaker 2: Quick Health's tactics had already gotten it in trouble with regulators.
Speaker 2: By twenty twenty four, it had been banned in four
Speaker 2: states for using deceptive salescripts, selling with the other a license,
Speaker 2: and lying about coverage. Bill Rosh, a Quick Health lawyer,
Speaker 2: says the company's regulatory issues were the result of misplaced
Speaker 2: blame and mistakes by previous counsel. Sarah and Joe didn't
Speaker 2: know about any of this at the time they signed
Speaker 2: up for their plan. When they realized the coverage they'd
Speaker 2: bought wasn't what they expected, they called Quick Health back.
Speaker 1: And say, hey, this isn't what we signed up for.
Speaker 1: We wanted something that would cover all this stuff, and
Speaker 1: it doesn't. They eventually get rid of to a different
Speaker 1: salesman who says, well, we got to sell you a
Speaker 1: slightly more expensive plan that'll cover everything.
Speaker 2: After a series of confusing transactions, the straw Mangers say
Speaker 2: they ended up paying even more money and still didn't
Speaker 2: get the coverage they needed, and they were unable to
Speaker 2: get a refund. Quick Health says it didn't mislead the
Speaker 2: straw Mangers, that it frequently gives refunds and that it's
Speaker 2: tried to in their case, to avoid getting hit with
Speaker 2: more bills. Joe started skipping visits to the tumor doctor.
Speaker 1: So after they kind of realized we're not ever going
Speaker 1: to get this money back, they complained to the New
Speaker 1: York state insurance regulator, the Department of Financial Services, and
Speaker 1: they immediately get an answer that we're just not.
Speaker 2: Going to help you, and what do they do next,
Speaker 2: is or anyone else that they can call for any
Speaker 2: sort of accountability or recourse. No.
Speaker 1: Essentially, all the rules that are set up to kind
Speaker 1: of govern our health system in the US don't apply
Speaker 1: to it.
Speaker 2: The stro mangers aren't alone. Hundreds of people have filed
Speaker 2: similar complaints with state and federal regulators and the Better
Speaker 2: Business Bureau. Many come from customers who say they thought
Speaker 2: they were buying a pretty standard health insurance plan at
Speaker 2: an affordable cost, who didn't realize they were agreeing to
Speaker 2: be an employee of a company they'd never even heard of,
Speaker 2: and who came to find out the plans didn't cover
Speaker 2: everything the telemarketers promised. Are there people for whom these
Speaker 2: plans serve a really important purpose? Are they working for
Speaker 2: some people?
Speaker 3: So?
Speaker 1: Bill Brian says that he has thousands of satisfied customers,
Speaker 1: and I think for people who really aren't going to
Speaker 1: have a lot of medical expenses, you can see why
Speaker 1: they'd be attracted to a plan with much lower costs
Speaker 1: than like an Obamacare plan. But we buy insurance for
Speaker 1: the downside risks, right for something unexpected happening, and it's
Speaker 1: hard to tell always like how satisfied people would be
Speaker 1: if something actually went wrong.
Speaker 2: What has his reaction been to your reporting that shows
Speaker 2: that some of these salesmen are perhaps misrepresenting what they're selling.
Speaker 1: So Brian blames the Labor Department for all this because
Speaker 1: he says, look, this ought to be legal. The Labor
Speaker 1: Department is fighting us on it, and that means that
Speaker 1: we're stuck in this legal gray area where the only
Speaker 1: people who are willing to sell it are some of
Speaker 1: these telemarketers who might be coloring outside the lines here
Speaker 1: and there. And he's trying to cut down on that
Speaker 1: and catch the telemarketers that are no good and tell
Speaker 1: them they can't sell his product anymore. But he's saying,
Speaker 1: if the Labor Department would just agree that these are legal,
Speaker 1: then we wouldn't have all these problems. He's also saying
Speaker 1: that he's going to try to bring sales in house
Speaker 1: and have his own distribution for us so that he
Speaker 1: doesn't have to rely on these third party marketers that
Speaker 1: might be doing things without his knowledge.
Speaker 2: And what is the status of that Labor Department battle?
Speaker 2: How my Trump's Labor department look at this case.
Speaker 1: You may recall that Trump last year during the campaign,
Speaker 1: was talking about how he had concepts of a plan
Speaker 1: to replace or improve on Obamacare. And we haven't seen
Speaker 1: a lot from the new administration about exactly what they
Speaker 1: would like to do. But you know, here's a case
Speaker 1: where I think Brian and his allies could make an
Speaker 1: argument that this would be a sort of back doorway
Speaker 1: of deregulating the healthcare industry. And that's been kind of
Speaker 1: the dream during the first Trump administration. So you could
Speaker 1: imagine a scenario where maybe the Trump administration decides we're
Speaker 1: not going to fight this one. We're going to agree
Speaker 1: to allow these plans to be sold. Now, we asked
Speaker 1: the Department of Labor that you know, there's a new
Speaker 1: secretary has just been in there a little while, and
Speaker 1: we haven't gotten an answer back as to how committed
Speaker 1: they are to continuing this fight or rethinking it.
Speaker 2: If there were to be an explosion in these kinds
Speaker 2: of plans in the coming years, how might that impact
Speaker 2: other participants in the health insurance marketplace.
Speaker 1: So some of the opponents of this kind of idea,
Speaker 1: people like incumbent health insurers and you know, the leukemia
Speaker 1: and Lymphoma Society and other kind of organizations like that
Speaker 1: are very worried about plans like this becoming more common.
Speaker 1: And the thinking is as follows. If these kind of
Speaker 1: less expensive plans that don't cover as much were to
Speaker 1: peel a lot of really healthy people out of the
Speaker 1: Obamacare market, then what would happen is, right now, healthy
Speaker 1: people kind of subsidize sick people in the Obamacare marketplace, right,
Speaker 1: and so if you take a lot of those healthy
Speaker 1: people out, the costs of Obamacare are going to rise,
Speaker 1: and that could eventually cause what some people call an
Speaker 1: insurance death spiral, where as they become more and more unaffordable,
Speaker 1: more people leave, which then eventually makes the whole market
Speaker 1: not function anymore.
Speaker 2: This is the big take from Bloomberg News. I'm Sarah Holder.
Speaker 2: This episode was produced by Julia Press. It was edited
Speaker 2: by Aaron Edwards and Robert Friedman, additional reporting by Zeke Fox.
Speaker 2: It was fact checked by Rachel Lewis Chrisky and mixed
Speaker 2: and sound designed by Alex Sugia. Our senior producer is
Speaker 2: Naomi Shaven. Our senior editor is Elizabeth Ponso. Our deputy
Speaker 2: executive producer is Julia Weaver. Our executive producer is Nicole
Speaker 2: Beamster Boor. Sage Bauman is Bloomberg's head of podcasts. If
Speaker 2: you liked this episode, make sure to subscribe and review
Speaker 2: The Big Take wherever you listen to podcasts. It helps
Speaker 2: people find the show. Thanks for listening, We'll be back
Speaker 2: tomorrow