Encore! EP379: How Much Money, Really, Are Employee Benefit Consultants and/or Brokers Making From Plan Sponsors? With AJ Loiacono

[00:00:00] On Core episode, how much money, really, are employee benefit consultants and or brokers

[00:00:06] making from plan sponsors?

[00:00:09] Today I speak with AJ Lojakano.

[00:00:19] American healthcare entrepreneurs and executives you want to know, talking.

[00:00:26] Relentlessly seeking value. to get employers to sign contracts that allow PBMs to corner the market and take all the profit. Even if you listen to this Encore in 2022, you might want to revisit it and consider what AJ says in the context of these recent shows with G. By, Joey Deason House, Mark Cuban and Farron Williams, and Benjamin Jolly, as I just mentioned. Also keep in mind

[00:01:41] the shows with Scott Haas and Paul Holmes from earlier, Olivia Webb as well. I'll link money may be the most money in these secret ways. All this money, money paid in secret backroom deals, let's not lose track. These dollars increase the total prices paid by plan sponsors and employees. Now I say this to say that my guests today, A.J. Loa Kono calls 2022 right now a magical moment for plan sponsors and

[00:03:03] for straight shooting EBCs and PBMs and all the others who are actually doing

[00:03:07] the right thing by their clients.

[00:04:04] paying or the people that you are paying who may be kicking back dollars to other people you are working with unbeknownst to you. The Department of Labor is putting as much emphasis right now on

[00:04:09] healthcare as they put on 401k plans in the early 2000s. So this is a big deal or it should be for

[00:04:17] plan sponsors. So obviously in order to comply with the CAA, self-insured employers should be

[00:04:22] requesting from their EBCs and brokers or winner of. Yeah, you as the plan sponsor really probably want to know that this is going on because it's your butt on the line. So in sum, the CAA is in effect right now. Penalties can be leveled right now against plan sponsors.

[00:05:41] For a deep dive into the CAA,

[00:05:43] listen to the show with Kristen Deakin from last year.

[00:05:47] So what's the process if I'm not a lawyer and I'm certainly not a class action ambulance chaser, but even I can figure out that strategy. AJ Loyakkino is the CEO of Capital RX, which is a PBM 2.0 as they call it. My name is Stacey

[00:07:01] Richter. This podcast is sponsored by Aventria Health Group.

[00:07:04] AJ Loyakkino, thank you so much for being on Relentless Health Value today.

[00:07:08] Thank you for having me, Stacey. got a good one if they're doing what. I always want to put forth the footnote here that there are wonderful broker consultants out there that do an outstanding job guiding the fiduciary to make the best decisions on behalf of their membership. And then there are a rogue's gallery of brokers and consultants, if they're doing an excellent job, no one's gonna fight them on their compensation. I think where it becomes unreasonable is when you have all of this undisclosed compensation, or it's bundled in ways that people can't see, or it's just kind of signed off on a 20-page document, and it's the last page,

[00:09:40] and it has these broad statements like time to time,

[00:09:43] broker consultant may have direct or indirect compensation

[00:09:46] for a variety of vendors for services rendered

[00:09:48] or marketing agreements, et cetera. four and a half years, which is on the PBM side. And perhaps I was naive coming into this equation where I was like, oh, you know, everyone is treated fairly and they're professionals, but there's a gangster approach with some of these firms when it comes to compensation.

[00:11:00] And these are true stories

[00:11:02] that my colleagues would tell you.

[00:11:04] A great example is I'm working with a national broker group

[00:12:02] is four to five bucks. And you're telling me you need 650 as the starting point.

[00:12:05] So you would like to make 120% over my fee.

[00:12:09] And you're not administrating it.

[00:12:10] You don't have a call center.

[00:12:11] You're not printing documentation.

[00:12:13] You don't have mobile applications, patient portal,

[00:12:16] clinical decision support.

[00:12:18] You have none of these things.

[00:12:20] So it's the very definition of arbitrage.

[00:12:22] They're providing no value in that transaction,

[00:12:25] but taking that override.

[00:12:27] Well, it gets even worse. You pay me a little more, maybe you win. But this is what is out there. And this is not a small firm. Some of these people hide under the guise of practice leader. And I am not dismerging all practice leads. I think there are some wonderful ones, but I think to figure out who the bad ones are, you need to go to CAA as the fiduciary

[00:13:42] and request from the broker and consultant

[00:13:44] to disclose direct and indirect compensation.

[00:13:46] Because they continue to package add-on services. This is where I think the conflict begins where someone says, you know what I heard is a good practice.

[00:15:00] I think it's a good practice

[00:15:01] if we carve out a certain class of drugs.

[00:15:04] Now that may be the case,

[00:15:06] but I would like to know if someone

[00:15:07] who's making that recommendation Appropriations Act because you can expose everyone. This is not a victimless situation. Just kind of going back to that Asiola case, the school district is seeking at least $2 million from these alleged secret payments that the broker had set up, which were coming out of teachers' pockets.

[00:16:22] It's not like there's some slush fund in the sky

[00:16:24] that this money has come from.

[00:16:26] There's hardworking teachers. I would say 1% or less of the discounted drug price is a reasonable, if you're gonna have a product based compensation and it's roughly a buck, let's just say on average, this is broad paint strokes, average discounted prescription drug price is like $100, let's just say across the plant.

[00:17:40] So 1% is a dollar.

[00:17:42] If it's a dollar, yeah, okay.

[00:17:44] You know, you start getting up to $2,

[00:17:47] that may become unreasonable. of the actual administration of the plan. It seems a little high, but maybe. But when you see people that are suddenly making equivalent numbers, $4, $5, $6, we've seen $10 asks. Suddenly the compensation starts to add up and oftentimes the compensation, this goes to direct and indirect, is over multiple pieces.

[00:19:02] So it's not just hiding in plain sight,

[00:19:05] hey, I charge a prescription fee.

[00:19:06] I also get an implementation allowance, disclose and represent the value of these applications. But what we're trying to have people understand is there's plenty of people that have been completely blindsided. The takeaway that we're crafting here is very much buyer beware. You listed several things that we need to be paying attention to. One of them, and I think you made this point very clearly, is there's money that can be

[00:20:23] made at every step along the process from any party in the process. who's like, hey, you should add this diabetes telehealth solution or whatnot. And they may not be telling you that the reason that they are recommending this particular diabetes point solution, because there's many. Yep. And there might be a really, really amazing one out there that went through the Validation Institute and has all kinds of credentialing, but they're recommending this other one because that point solution just happens to be the one that

[00:21:42] will pay them the most money.

[00:21:43] And think about this, Stacey, as if you're

[00:21:45] trying to do the right thing.

[00:21:46] You're a PBM the conflict of interest, which is things like let's pivot gently to overrides for the broker consultant.

[00:23:02] This is an additional payment made by a carrier and you don't want to think this way, but at the same time, the broker has a vested interest to keep an employer on a plan that might not be right

[00:24:22] for them anymore, say.

[00:24:24] Oh, you see this all the time. that employ many, many, many brokers and EBCs, even within that one organization, there may be great people and there may be some gangsters, to use your term. You've got, obviously it was Gallagher that was cited in the Osceola School District case. There's some great Gallagher EBCs. And then obviously there's ones who are allegedly

[00:25:43] doing something which got them embroiled in a lawsuit. went to us and said, look, the number starts at $40. I was so confused by the ask. I was like, what is $40? And they're like, that's how much I get paid by the PBM on every prescription. $40? I was like, out of morbid curiosity, how does this even work? They're like, I don't really care what you charge for a discount or mail or specialty.

[00:27:00] And you guys get to keep the rebates,

[00:27:02] but you just need to pay me the 40 bucks.

[00:27:05] Wow, these EBCs making seven are amateurs, huh? no, and it's a shame. You're looking for fair market access, you're looking for a fair evaluation. By no means anyone assumes they're gonna win all the time, but you can't win if you can't even pay the house fee to come in, which is some absurd amount of money that oftentimes is able to be sustained by healthcare companies that have opaque pricing schemes

[00:28:25] in which they can bury these asks or the money. getting taken out of people's paychecks that are going into the hands of someone who is receiving a rebate check that was mailed to their PO box. Like they know it's wrong. Anytime someone asks you to do that, like they are fully aware of the fact that- There's something amiss. Yes. Like, that doesn't sound right. What's interesting is a lot of people believe,

[00:29:40] well, this is just happening to unsophisticated,

[00:29:43] smaller employer groups.

[00:29:45] I had a discussion with a consultant the other day. there has been some bad advice provided to me. I need to step away from this. And I need to step away from you, the person who's provided me this information. And it's sad, but this is also a moment of kind of hope and triumph in the sense that there is now a way to determine precisely what that is, to make that judgment of is this compensation reasonable?

[00:31:03] I always say that there are plenty

[00:31:04] of reasonable folks out there.

[00:31:06] And are there any conflicts of interest? things you've signed us up for. Again, going back to this example, this is one of the people that you know, employer groups that made an early request fortune 500 and they were shocked. They could not believe all the compensation that had been loaded on over time. And you can now ask for this. And it's your responsibility as the fiduciary of the plan.

[00:32:21] Summarizing what we're talking about here, where can people go to learn more about your work

[00:33:40] into this area or capital R-X?

[00:33:44] Law firms are a great resource.

[00:33:47] Typically larger practices,