WEBVTT - Telemarketers’ New Trick to Sell Bare-Bones Health Plans

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Sarah Strominger and her husband Joe had always gotten health

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<v Speaker 2>insurance through Joe's union job, but last year, Joe left

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<v Speaker 2>that job to start his own small business, and that

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<v Speaker 2>meant the couple had to shop for a new health plan.

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<v Speaker 3>We just started googling and looking up insurance brokers, and

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<v Speaker 3>they started flooding our.

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<v Speaker 2>Phone, Sarah says. Once they filled out a form requesting

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<v Speaker 2>a health insurance quote, they were inundated by telemarketers calling

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<v Speaker 2>with enticing offers promising great cheap health plans, plans those

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<v Speaker 2>agents said would cover the couple's expensive medical needs.

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<v Speaker 3>My husband has a small brain tumor on his pituitary glands.

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<v Speaker 3>He also is pre diabetic, and I have mental health

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<v Speaker 3>insurance coverage I needed, and basically we were promised that

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<v Speaker 3>all of that was going.

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<v Speaker 2>To be covered, Sarah says. A telemarketer found them a

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<v Speaker 2>plan and convinced them to pay for a full year's

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<v Speaker 2>coverage upfront for almost nine thousand dollars, But over time

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<v Speaker 2>they realized the plan wasn't what they'd been promised. The

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<v Speaker 2>first sign came when they called the pharmacy for Joe's

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<v Speaker 2>blood sugar medication, which costs fifteen hundred dollars a month

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<v Speaker 2>out of pocket.

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<v Speaker 3>We slowly found out that none of our prescriptions were covered.

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<v Speaker 3>We started getting his blood work bills back in the MA,

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<v Speaker 3>also his lab four thousand dollars a pop. So slowly

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<v Speaker 3>just talking to doctors and realizing that none of this

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<v Speaker 3>stuff is being paid.

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<v Speaker 2>The straw Mangers are just one of more than one

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<v Speaker 2>hundred thousand US households that have signed up for similar plants,

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<v Speaker 2>and Bloomberg zach Mider says it's a growing, largely unregulated

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<v Speaker 2>corner of the healthcare industry that's leaving many Americans without

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<v Speaker 2>the coverage they need.

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<v Speaker 1>It's a kind of health plan that falls in this

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<v Speaker 1>basically legal no man's land where nobody claims to be

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<v Speaker 1>able to regulate it in most states, and essentially all

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<v Speaker 1>the rules that are set up to kind of govern

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<v Speaker 1>our health system in the US don't apply to it.

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<v Speaker 2>I'm Sarah Holder, and this is the big take from

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<v Speaker 2>Bloomberg News today. On the show the health plans that

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<v Speaker 2>have some Americans feeling dooped, we dig into the telemarketing

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<v Speaker 2>group selling them the legal loophole that's let them flourish

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<v Speaker 2>and what it could mean for the American health system

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<v Speaker 2>if more people turn to them. The story of how

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<v Speaker 2>the Stromongers ended up getting sold a health plan that

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<v Speaker 2>resembled health insurance but wasn't actually starts with an idea

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<v Speaker 2>from one man, Bill Bryan. Who is he and how

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<v Speaker 2>did he come up with us?

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<v Speaker 3>Sure?

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<v Speaker 1>So, Bill Brian is actually For most of his career

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<v Speaker 1>he was a comedy writer. He wrote for night Court

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<v Speaker 1>and Coach and other sitcoms of the eighties and nineties.

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<v Speaker 1>And after his successful career as a comedy writer, he

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<v Speaker 1>gets into real estate investing and eventually ends up being

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<v Speaker 1>fairly wealthy guy and gets really involved in making different

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<v Speaker 1>kinds of business investments, and he comes across this idea

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<v Speaker 1>to sort of fund this new way of financing healthcare

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<v Speaker 1>in America. The idea is that Obamacare is too restrictive, right,

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<v Speaker 1>The cheapest plans you can buy are too expensive. They

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<v Speaker 1>have these super high deductibles, which means they're not of

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<v Speaker 1>much use, especially for people who are just well off

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<v Speaker 1>enough that they don't get the subsidies, and who are

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<v Speaker 1>self employed or gig workers. They can't get health insurance

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<v Speaker 1>through their employer. There's over twenty million people in America

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<v Speaker 1>who don't have health insurance, and so he sees this

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<v Speaker 1>opportunity if you could provide something that was less expensive

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<v Speaker 1>than Obamacare, that was more affordable for people like that,

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<v Speaker 1>people like the stro Mangers.

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<v Speaker 2>But what did that look like in practice? What did

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<v Speaker 2>he do?

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<v Speaker 1>So typical health insurance in the United States, if you're

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<v Speaker 1>buying it as an individual in the marketplace, as opposed

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<v Speaker 1>to just getting it from your job, it has to

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<v Speaker 1>meet all the standards of the Affordable Care Act, which

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<v Speaker 1>means it's got to cover pre existing conditions, and it's

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<v Speaker 1>got to meet this checklist of ten items that has

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<v Speaker 1>to cover, like hospitalization and emergency room visits, Joe, basic

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<v Speaker 1>stuff like that that you think of as like health insurance.

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<v Speaker 1>If you are an employer and rather than bring in

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<v Speaker 1>an insurance company to provide insurance for your employees, you

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<v Speaker 1>just do it yourself. You say, here's a copy of

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<v Speaker 1>the plan, here's what we'll cover, and we'll just fund

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<v Speaker 1>it out of our pocket. There's no insurance company involved.

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<v Speaker 1>Almost all those Obamacare rules I talked about do not apply.

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<v Speaker 1>It can be basically anything. And so what these guys

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<v Speaker 1>are doing is say we're going to have that arrangement

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<v Speaker 1>with our customers. So when we call these people up

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<v Speaker 1>on the telephone and sell them a health plan, they're

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<v Speaker 1>actually going to become employees of us. And so then

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<v Speaker 1>we can offer these health plans that don't meet all

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<v Speaker 1>those minimum requirements under the law.

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<v Speaker 2>So essentially these plans are employing people.

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<v Speaker 1>I can see why you're confused, and it is super confusing. Okay.

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<v Speaker 1>So the idea is that when a salesman calls you

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<v Speaker 1>up on the telephone says, hey, would you like a

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<v Speaker 1>health plan and you say yeah, sure, in the process

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<v Speaker 1>of that conversation, you are actually becoming an employee of

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<v Speaker 1>this random company with a name like Outreach Data Partners LP.

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<v Speaker 1>And your work for them is going to be downloading

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<v Speaker 1>an app on your phone and using it maybe to

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<v Speaker 1>like browse the Internet or something. And by agreeing to

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<v Speaker 1>do that work, and also by signing a bunch of

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<v Speaker 1>papers and stuff, you are now an employee for legal

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<v Speaker 1>purposes of this company, and so they can sell you

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<v Speaker 1>this plan that they couldn't sell you unless you were

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<v Speaker 1>an employee.

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<v Speaker 2>Wow. So instead of buying health insurance, you are basically

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<v Speaker 2>applying for a job at this company without even knowing it,

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<v Speaker 2>and that company is giving you insurance, although.

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<v Speaker 1>To be clear, you're paying full freight. Most companies cover

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<v Speaker 1>at least some of your health care costs. Here you're

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<v Speaker 1>paying the full amount. The idea was to come up

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<v Speaker 1>with a way to sell health insurance. It was more affordable, right,

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<v Speaker 1>and this was the vehicle to do that. And so

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<v Speaker 1>once they come up with this idea, they go to

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<v Speaker 1>the government, the Department of Labor, and they say, we

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<v Speaker 1>think that these plans comply with the employee benefits laws

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<v Speaker 1>for regular employees, and so we think that this is

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<v Speaker 1>an insurance and we could be able to sell these

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<v Speaker 1>without having to comply with insurance laws.

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<v Speaker 2>So the Labor Department agrees this is a legal way

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<v Speaker 2>to offer coverage to people.

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<v Speaker 1>No, the Department of Labor said, it's not. They basic

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<v Speaker 1>he said, these people are just buying health insurance. This

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<v Speaker 1>isn't an employee relationship. And so that kind of kicked

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<v Speaker 1>off a now five year legal battle between Bill Brian

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<v Speaker 1>and his allies and the Department of Labor, which still

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<v Speaker 1>is going on. It's still not a resolved issue. But

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<v Speaker 1>meanwhile Brian started selling these plans in the market. So

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<v Speaker 1>even though the kind of underlying legality is still being

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<v Speaker 1>sort of fought over. He's actually selling them through telemarketers.

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<v Speaker 2>You mentioned that Bill Brian part of his pitch and

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<v Speaker 2>his promise with this new form of insurance was that

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<v Speaker 2>it would be cheaper and it would offer new options

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<v Speaker 2>for people. How has that worked out in practice.

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<v Speaker 1>There's different ways of looking at cheaper. Certainly in terms

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<v Speaker 1>of the ticket price of these plans versus an Obamacare plan,

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<v Speaker 1>they're usually less, right, like the dollars you pay per

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<v Speaker 1>month to just have the plan is a lot less,

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<v Speaker 1>and they're typically no deductibles or low deductibles for a

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<v Speaker 1>lot of services. So in that way they're more affordable.

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<v Speaker 1>But if you look at the amount of actual medical

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<v Speaker 1>coverage that's being funded by those plans, you know, I

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<v Speaker 1>found one plan where it was something like twenty five

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<v Speaker 1>percent of the monthly cost that the person was paying

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<v Speaker 1>was actually going to the cost of the medical care.

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<v Speaker 1>So most of the rest of that money was going

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<v Speaker 1>to commissions and other kind of fees collected by middlemen

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<v Speaker 1>such as the sales agencies. So sales agencies like these

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<v Speaker 1>plans because they can add a big commission on top

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<v Speaker 1>and they're still cheaper than Obamacare, so they can sell them.

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<v Speaker 2>And is that something that would be allowed under Obamacare.

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<v Speaker 1>No, under Obamacare, you can't spend less than eighty percent

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<v Speaker 1>of the customer's premium costs on actual care.

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<v Speaker 2>Zach says. Despite Brian's ongoing legal dispute with the Department

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<v Speaker 2>of Labor, which is now playing out in court, and

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<v Speaker 2>despite the shortcomings of these plans, agencies have sold a

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<v Speaker 2>lot of them.

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<v Speaker 1>We can tell just from Department of Labor statistics that

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<v Speaker 1>over one hundred thousand people have been signed up across

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<v Speaker 1>the most of them quite recently. And because Bill Brian

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<v Speaker 1>has had some success in his court case, even though

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<v Speaker 1>it's not resolved, that's inspired a lot of copycats who

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<v Speaker 1>are doing a similar kind of thing to what he's doing.

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<v Speaker 1>In fact, there's probably more of them now than there

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<v Speaker 1>are people signed up for Bill Brian's plans. Labor Department

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<v Speaker 1>says we don't regulate them because they're not employees, but

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<v Speaker 1>a lot of state insurance regulators who would normally regulate

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<v Speaker 1>them are saying those fall under Department of Labor. We

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<v Speaker 1>can't regulate them, and so in a lot of states

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<v Speaker 1>there's really no one who is regulating.

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<v Speaker 2>Them, so they're caught in this kind of legal gray

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<v Speaker 2>area for now. Absolutely we get into the consequences of

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<v Speaker 2>that legal gray area and what the government might do

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<v Speaker 2>about it. After the break, I've been speaking with Bloomberg

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<v Speaker 2>reporter Zach Meider about a new kind of health plan

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<v Speaker 2>that offers less coverage than is required of other policies

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<v Speaker 2>in the marketplace after creating an employment relationship with its customers.

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<v Speaker 2>For now, the Plans live in this legal gray area,

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<v Speaker 2>and their business model, which relies on a vast network

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<v Speaker 2>of telemarketers, might sound just as complicated, but Zach says,

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<v Speaker 2>you can think about it like the car industry.

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<v Speaker 1>There's a car dealer and there's the car.

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<v Speaker 2>In this analogy, Bill Bryan, the guy who came up

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<v Speaker 2>with the earliest version of the Plans, is the car maker.

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<v Speaker 1>But he's making a kind of car that, for various reasons,

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<v Speaker 1>regulators can't really figure out if anyone is responsible for

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<v Speaker 1>regulating it, and so that makes it different from other

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<v Speaker 1>cars on the road.

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<v Speaker 2>But there are other people responsible for selling what Brian

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<v Speaker 2>and other copycat companies are making, and.

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<v Speaker 1>A lot of the concerns we hear about the way

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<v Speaker 1>people are selling it right. Are they saying it's a

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<v Speaker 1>Cadillac when it's a less valuable car, that kind of thing.

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<v Speaker 2>And in the case of the stromengers, the car dealer

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<v Speaker 2>or telemarketer who sold them their plan was employed by

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<v Speaker 2>another company called Quick Health.

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<v Speaker 1>Which is based in Pennsylvania. It's call center. There's people

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<v Speaker 1>there work in the phones, calling people all over the

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<v Speaker 1>country trying to sell them various health related products.

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<v Speaker 2>A lot of what they were selling were Bill Bryan's

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<v Speaker 2>health plans, and according to a former Quick Health employee

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<v Speaker 2>who Zach interviewed, the company's salespeople were trained to exaggerate

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<v Speaker 2>the plan's benefits, to describe them as comparable to a

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<v Speaker 2>Blue Cross or an ETNA plan, but cheaper. The company's

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<v Speaker 2>CEO at the time, Arthur Walsh, says the company didn't

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<v Speaker 2>misrepresent plans and that it strives to have satisfied customers.

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<v Speaker 2>Quick Health's tactics had already gotten it in trouble with regulators.

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<v Speaker 2>By twenty twenty four, it had been banned in four

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<v Speaker 2>states for using deceptive salescripts, selling with the other a license,

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<v Speaker 2>and lying about coverage. Bill Rosh, a Quick Health lawyer,

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<v Speaker 2>says the company's regulatory issues were the result of misplaced

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<v Speaker 2>blame and mistakes by previous counsel. Sarah and Joe didn't

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<v Speaker 2>know about any of this at the time they signed

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<v Speaker 2>up for their plan. When they realized the coverage they'd

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<v Speaker 2>bought wasn't what they expected, they called Quick Health back.

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<v Speaker 1>And say, hey, this isn't what we signed up for.

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<v Speaker 1>We wanted something that would cover all this stuff, and

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<v Speaker 1>it doesn't. They eventually get rid of to a different

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<v Speaker 1>salesman who says, well, we got to sell you a

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<v Speaker 1>slightly more expensive plan that'll cover everything.

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<v Speaker 2>After a series of confusing transactions, the straw Mangers say

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<v Speaker 2>they ended up paying even more money and still didn't

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<v Speaker 2>get the coverage they needed, and they were unable to

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<v Speaker 2>get a refund. Quick Health says it didn't mislead the

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<v Speaker 2>straw Mangers, that it frequently gives refunds and that it's

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<v Speaker 2>tried to in their case, to avoid getting hit with

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<v Speaker 2>more bills. Joe started skipping visits to the tumor doctor.

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<v Speaker 1>So after they kind of realized we're not ever going

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<v Speaker 1>to get this money back, they complained to the New

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<v Speaker 1>York state insurance regulator, the Department of Financial Services, and

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<v Speaker 1>they immediately get an answer that we're just not.

0:13:14.640 --> 0:13:16.720
<v Speaker 2>Going to help you, and what do they do next,

0:13:16.760 --> 0:13:19.400
<v Speaker 2>is or anyone else that they can call for any

0:13:19.400 --> 0:13:22.079
<v Speaker 2>sort of accountability or recourse. No.

0:13:22.800 --> 0:13:25.199
<v Speaker 1>Essentially, all the rules that are set up to kind

0:13:25.200 --> 0:13:27.400
<v Speaker 1>of govern our health system in the US don't apply

0:13:27.480 --> 0:13:27.720
<v Speaker 1>to it.

0:13:29.920 --> 0:13:33.400
<v Speaker 2>The stro mangers aren't alone. Hundreds of people have filed

0:13:33.440 --> 0:13:36.680
<v Speaker 2>similar complaints with state and federal regulators and the Better

0:13:36.720 --> 0:13:40.360
<v Speaker 2>Business Bureau. Many come from customers who say they thought

0:13:40.440 --> 0:13:43.240
<v Speaker 2>they were buying a pretty standard health insurance plan at

0:13:43.280 --> 0:13:46.840
<v Speaker 2>an affordable cost, who didn't realize they were agreeing to

0:13:46.880 --> 0:13:49.840
<v Speaker 2>be an employee of a company they'd never even heard of,

0:13:50.400 --> 0:13:52.760
<v Speaker 2>and who came to find out the plans didn't cover

0:13:52.880 --> 0:13:56.960
<v Speaker 2>everything the telemarketers promised. Are there people for whom these

0:13:57.000 --> 0:14:00.160
<v Speaker 2>plans serve a really important purpose? Are they working for

0:14:00.200 --> 0:14:00.640
<v Speaker 2>some people?

0:14:00.920 --> 0:14:01.000
<v Speaker 3>So?

0:14:01.200 --> 0:14:04.079
<v Speaker 1>Bill Brian says that he has thousands of satisfied customers,

0:14:04.360 --> 0:14:07.520
<v Speaker 1>and I think for people who really aren't going to

0:14:07.559 --> 0:14:10.040
<v Speaker 1>have a lot of medical expenses, you can see why

0:14:10.080 --> 0:14:12.280
<v Speaker 1>they'd be attracted to a plan with much lower costs

0:14:12.320 --> 0:14:16.280
<v Speaker 1>than like an Obamacare plan. But we buy insurance for

0:14:16.720 --> 0:14:20.640
<v Speaker 1>the downside risks, right for something unexpected happening, and it's

0:14:20.800 --> 0:14:23.240
<v Speaker 1>hard to tell always like how satisfied people would be

0:14:23.280 --> 0:14:24.400
<v Speaker 1>if something actually went wrong.

0:14:24.720 --> 0:14:28.920
<v Speaker 2>What has his reaction been to your reporting that shows

0:14:28.920 --> 0:14:33.280
<v Speaker 2>that some of these salesmen are perhaps misrepresenting what they're selling.

0:14:33.400 --> 0:14:36.360
<v Speaker 1>So Brian blames the Labor Department for all this because

0:14:36.360 --> 0:14:38.920
<v Speaker 1>he says, look, this ought to be legal. The Labor

0:14:38.960 --> 0:14:42.000
<v Speaker 1>Department is fighting us on it, and that means that

0:14:42.040 --> 0:14:44.560
<v Speaker 1>we're stuck in this legal gray area where the only

0:14:44.560 --> 0:14:47.320
<v Speaker 1>people who are willing to sell it are some of

0:14:47.360 --> 0:14:52.400
<v Speaker 1>these telemarketers who might be coloring outside the lines here

0:14:52.440 --> 0:14:55.320
<v Speaker 1>and there. And he's trying to cut down on that

0:14:55.440 --> 0:14:58.560
<v Speaker 1>and catch the telemarketers that are no good and tell

0:14:58.600 --> 0:15:01.800
<v Speaker 1>them they can't sell his product anymore. But he's saying,

0:15:01.840 --> 0:15:05.280
<v Speaker 1>if the Labor Department would just agree that these are legal,

0:15:05.320 --> 0:15:07.880
<v Speaker 1>then we wouldn't have all these problems. He's also saying

0:15:07.880 --> 0:15:10.680
<v Speaker 1>that he's going to try to bring sales in house

0:15:10.760 --> 0:15:12.920
<v Speaker 1>and have his own distribution for us so that he

0:15:12.960 --> 0:15:15.760
<v Speaker 1>doesn't have to rely on these third party marketers that

0:15:15.880 --> 0:15:18.280
<v Speaker 1>might be doing things without his knowledge.

0:15:18.440 --> 0:15:21.400
<v Speaker 2>And what is the status of that Labor Department battle?

0:15:21.640 --> 0:15:24.320
<v Speaker 2>How my Trump's Labor department look at this case.

0:15:24.880 --> 0:15:27.480
<v Speaker 1>You may recall that Trump last year during the campaign,

0:15:27.560 --> 0:15:30.280
<v Speaker 1>was talking about how he had concepts of a plan

0:15:30.920 --> 0:15:35.080
<v Speaker 1>to replace or improve on Obamacare. And we haven't seen

0:15:35.080 --> 0:15:37.360
<v Speaker 1>a lot from the new administration about exactly what they

0:15:37.640 --> 0:15:41.080
<v Speaker 1>would like to do. But you know, here's a case

0:15:41.120 --> 0:15:44.000
<v Speaker 1>where I think Brian and his allies could make an

0:15:44.080 --> 0:15:47.880
<v Speaker 1>argument that this would be a sort of back doorway

0:15:48.160 --> 0:15:52.880
<v Speaker 1>of deregulating the healthcare industry. And that's been kind of

0:15:52.880 --> 0:15:55.840
<v Speaker 1>the dream during the first Trump administration. So you could

0:15:55.880 --> 0:15:59.320
<v Speaker 1>imagine a scenario where maybe the Trump administration decides we're

0:15:59.360 --> 0:16:01.400
<v Speaker 1>not going to fight this one. We're going to agree

0:16:01.600 --> 0:16:03.880
<v Speaker 1>to allow these plans to be sold. Now, we asked

0:16:03.960 --> 0:16:06.480
<v Speaker 1>the Department of Labor that you know, there's a new

0:16:06.520 --> 0:16:09.120
<v Speaker 1>secretary has just been in there a little while, and

0:16:09.200 --> 0:16:12.320
<v Speaker 1>we haven't gotten an answer back as to how committed

0:16:12.320 --> 0:16:14.920
<v Speaker 1>they are to continuing this fight or rethinking it.

0:16:15.400 --> 0:16:17.640
<v Speaker 2>If there were to be an explosion in these kinds

0:16:17.640 --> 0:16:19.960
<v Speaker 2>of plans in the coming years, how might that impact

0:16:20.040 --> 0:16:23.080
<v Speaker 2>other participants in the health insurance marketplace.

0:16:23.840 --> 0:16:26.080
<v Speaker 1>So some of the opponents of this kind of idea,

0:16:26.560 --> 0:16:30.080
<v Speaker 1>people like incumbent health insurers and you know, the leukemia

0:16:30.040 --> 0:16:33.280
<v Speaker 1>and Lymphoma Society and other kind of organizations like that

0:16:33.640 --> 0:16:36.360
<v Speaker 1>are very worried about plans like this becoming more common.

0:16:36.800 --> 0:16:39.760
<v Speaker 1>And the thinking is as follows. If these kind of

0:16:39.800 --> 0:16:43.200
<v Speaker 1>less expensive plans that don't cover as much were to

0:16:43.360 --> 0:16:46.280
<v Speaker 1>peel a lot of really healthy people out of the

0:16:46.320 --> 0:16:51.240
<v Speaker 1>Obamacare market, then what would happen is, right now, healthy

0:16:51.280 --> 0:16:55.600
<v Speaker 1>people kind of subsidize sick people in the Obamacare marketplace, right,

0:16:56.080 --> 0:16:57.800
<v Speaker 1>and so if you take a lot of those healthy

0:16:57.840 --> 0:17:01.040
<v Speaker 1>people out, the costs of Obamacare are going to rise,

0:17:01.400 --> 0:17:04.800
<v Speaker 1>and that could eventually cause what some people call an

0:17:04.840 --> 0:17:08.680
<v Speaker 1>insurance death spiral, where as they become more and more unaffordable,

0:17:08.720 --> 0:17:12.119
<v Speaker 1>more people leave, which then eventually makes the whole market

0:17:12.359 --> 0:17:13.400
<v Speaker 1>not function anymore.

0:17:18.160 --> 0:17:21.119
<v Speaker 2>This is the big take from Bloomberg News. I'm Sarah Holder.

0:17:21.359 --> 0:17:24.720
<v Speaker 2>This episode was produced by Julia Press. It was edited

0:17:24.720 --> 0:17:28.639
<v Speaker 2>by Aaron Edwards and Robert Friedman, additional reporting by Zeke Fox.

0:17:29.240 --> 0:17:31.800
<v Speaker 2>It was fact checked by Rachel Lewis Chrisky and mixed

0:17:31.800 --> 0:17:35.159
<v Speaker 2>and sound designed by Alex Sugia. Our senior producer is

0:17:35.240 --> 0:17:39.240
<v Speaker 2>Naomi Shaven. Our senior editor is Elizabeth Ponso. Our deputy

0:17:39.320 --> 0:17:43.159
<v Speaker 2>executive producer is Julia Weaver. Our executive producer is Nicole

0:17:43.200 --> 0:17:47.399
<v Speaker 2>Beamster Boor. Sage Bauman is Bloomberg's head of podcasts. If

0:17:47.440 --> 0:17:50.439
<v Speaker 2>you liked this episode, make sure to subscribe and review

0:17:50.480 --> 0:17:53.280
<v Speaker 2>The Big Take wherever you listen to podcasts. It helps

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<v Speaker 2>people find the show. Thanks for listening, We'll be back

0:17:56.920 --> 0:18:00.560
<v Speaker 2>tomorrow