Gamer or Crusader?

Depending on one’s vantage point, Santa Barbara insurance agent Brent Anderson is either a courageous David doing battle against an insurance Goliath, Blue Shield, on behalf of small businesses, or an unscrupulous operator trying to rig the system while selling his customers at the Carpinteria Fire Department a bill of goods. In either case, Anderson has hired a Woodland Hills law firm specializing in insurance litigation and a private PR company, and has enlisted the support of two of Sacramento’s most ideologically opposed politicians to help him make his case against Blue Shield.

Two days ago, Anderson, a South Coast agent for 40 years, filed a formal complaint with the California Insurance Commissioner, charging that Blue Shield’s practice of barring the sale of certain policies advantageous to small businesses are “unlawful, discriminatory, anti-employee, anti-employer, anti-competitive, anti-health care access, and contrary to public health, safety, and welfare.” Conversely, Blue Shield representative Aron Ezra claimed Anderson knowingly sought to sell insurance products the company had explicitly prohibited, and terminated the producer’s license that’s allowed Anderson to sell Blue Shield policies for the past 36 years. Where Anderson has accused Blue Shield of “cherry picking its customers” and selling policies that actively discourage people from seeking health care, Ezra complained Anderson “has been gaming the system” by “selling people illegal plans.”

The conflict began more than a year ago, when the Carpinteria Fire Department approached Anderson looking for more affordable coverage. The department’s insurance policies with Health Net had been increasing about 15 percent a year. Anderson steered the Fire Department—with 37 employees—to a Blue Shield policy with relatively low premiums and $3,000 deductibles. The Fire Department would pay its employees’ deductibles—as the costs were incurred—and that way keep the policy affordable. This practice is known as “wrapping.” The only problem was that Blue Shield explicitly forbade this practice. If the department wanted to pay its employees’ deductibles, Blue Shield has insisted it had to pay that money up front, and directly to the firefighters. That way, the employees would have an incentive to more strictly ration the amount of care they sought. “If the employer is paying the deductible, the employees have no incentive to be careful about how much care they get,” said Blue Shield’s Ezra. “A plan like that, where there’s no real deductible, would be priced much higher.”

About 10 years ago, all major insurance companies began cracking down on “wrapping.” Two years ago, Ezra said, Blue Shield began requiring agents and their customers to sign statements verifying that the employers would not “wrap.” In January 2009, Anderson refused to sign that portion of the contract and instructed Fire Chief Mike Mingee to do likewise. Even so, Anderson and his attorney Mike Adreani claimed Blue Shield “accepted” the contract. When Blue Shield discovered this omission two months later, company officials notified the Carpinteria Fire Department that its contract was not valid. In response, the Fire Department signed up for a new Blue Shield policy at an additional cost of $150,000. For refusing to play ball, Anderson was terminated by Blue Shield. Not only does that prevent Anderson from selling any new Blue Shield policies, but it makes it exceptionally difficult for him to service his existing Blue Shield customers, who he estimates make up 25 percent of his customer base. Incidentally, Blue Shield would later increase the cost of Fire Department’s policy by 47 percent, or $80,000, prompting Chief Mingee, once again, to look elsewhere.

Anderson claims the no-wrap policy is illegal, that it violates a 1993 state insurance law requiring that “all health care plans must be fairly and affirmatively marketed and sold to all small employers.” Written into this law is the goal of promoting greater access to health care for small employers, not less. Because Blue Shield’s no-wrap policy actively discourages people from seeking health care, Anderson contends, it’s illegal. Unfortunately for him, the Department of Insurance issued an official ruling in 2008 stating that the no-wrap policy was, in fact legal. “We don’t think the Department of Insurance is seeing all the issues,” said Anderson. “We’re asking them to take another look.” In the meantime, Anderson bristles at the suggestion he’s “gaming” the system. “We’re talking about losing hundreds of millions in premium dollars here,” he said. “Who do you think is playing games?”