Conflicts of interest in the health insurance industry: “Who’s in charge of the Guard?” | | BenefitsPRO

“Who watches the watchmen” is a quote from the popular comic book, movie and TV show “The Watchmen.” But winners and their stories aside, the question is good. When people or companies are placed in positions without supervision, what is to stop them from taking advantage of the situation? This question is at the center of a lawsuit between the School Board of Osceola County, Florida (SBOC) and Gallagher Benefit Services, one of the nation’s largest and best-known health care businesses.

In November 2021, SOB filed a lawsuit claiming that Gallagher breached their contract, ignored a negotiated annual salary of $195,650, and secretly collected additional commissions totaling nearly $4 million over four years. Furthermore, the SBOC alleges that Gallagher committed willful fraud and breached their fiduciary duty for a simple reason: greed.

That last paragraph is a bit technical, so let’s cut it short, so we can understand why every employer and lender in the country should pay attention to this issue.

What is the role of a health care broker?

At the most basic level, for a group that has adequate insurance, the health insurer must generate a quote from the insurance broker to insure the group. For self-funded groups, instead of carriers, the broker generates prices from the Internet, and possibly additional vendors including a third-party administrator (TPA), pharmacy benefit manager (PBM), stop-loss carrier, and so on. Clients rely on the broker’s skill and expertise in strategic planning and guidance in developing plans, changing plans, and selecting service providers. This is important because the health insurance business is very difficult to run on your own.

What is the carrier/network service?

The carrier/network is responsible for negotiating with health care providers across the country to ensure that participants are covered for health care costs. Assuming no separate TPA is involved, the carrier/network will also process the claim for approval and payment. Very few employers have the bandwidth to manage contracts with doctors and hospitals across the country, or the expertise to know if they are negotiating the best prices in each market, so customers rely on the carrier’s / network’s expertise and technology to ensure they are providing the value they need. for the participants.

Unfortunately, until now it has been difficult to measure how well either of these groups have done their jobs. Carriers and networks closely monitor negotiated rates as proprietary information and businesses hide information about who pays them – and how much. Both retailers and carriers/networks have had unregulated power for years, and we believe that ethical and business principles will protect us from abuse. Unfortunately, SBOC feels that confidence has been eroded.

Also: United Behavioral Health’s success in the fight against coverage

According to the lawsuit, Gallagher recommended that SOBC choose Cigna as their network, which SOBC calls “an irreversible disaster.” The SBOC says Cigna did not negotiate competitive pricing for medical or co-pays, citing two examples:

  • Two heart surgeries that should have cost about $220,000 each were approved and cost $2 million, and
  • Items sold for less than $20 per counter were accepted for $250.

In addition, noting that Gallagher was “paid a lot from the carriers [hired] supervision and control rather than from the School Board itself,” the case highlights the ongoing controversy surrounding health benefits.

Conflict of interest

A “disagreement of interest” is be explained such as:

Words of words

conflict between personal interests and the duty of a person who has a fiduciary duty

By agreeing to higher reimbursements for procedures and prescription drugs, Cigna benefited from increased interest, fees, and reimbursements for SBOC fees. By promoting Cigna, Gallagher received millions in undisclosed commissions, bonuses and more. Cigna and Gallagher were both trusted as “watchdogs,” and they hid their disagreements in order to benefit from SBOC’s money.

After six months of arguments, United States District Judge Anne Conway recently denied Gallagher’s actions to settle the case and said, “The actual statements of the School Board provide a reasonable basis for believing that.” Gallagher made deliberate mistakes. These fraudulent claims are enough to make a statement punitive damages.”

A moving market

New laws require transparency in the health industry. Carriers/networks are now required to disclose their negotiated rates to customers, and the public knows that the carrier’s “discounted” rates are often higher than if participants had signed in and paid cash! Brokers and advisors are now required to disclose all compensation related to a client’s plan and link that fee to performance. But transparency is a double-edged sword. With increased transparency comes increased responsibility, and employers are now responsible (as plan fiduciaries) for overseeing the performance of providers, and ensuring that their payments are fair.


If you are an employer who provides health care services, now is the time to review the services of your sponsors! Are you prepared to certify to the DOL that you have received full and accurate disclosure of your sponsor’s compensation? As a plan believer you must “watch the watchmen.”

Also: Sell a new song: transparent rules have ushered in a new era

If you are a beneficiary, now is the time to start this discussion and provide each of your clients with complete and accurate information about the compensation you receive under their plan. Match the amount to the resources you’ve contributed and the energy you’ve earned to show your worth.

The Department of Labor is preparing to implement these new rules, and we should all be watching closely Osceola v. Gallagher to understand how the decision will be. This case could be an exciting time for the health industry!

Jed Cohen and co-founder and COO of OneVision Analytics. Jed is an extraordinary entrepreneur who thrives in the fin-tech and health-tech industries.