9. David Contorno: Betting Your Pay On Your Client's Success

All right, welcome back to the Broker's Voice. I am very honored today to have the one, the only David Contorno, founder of E Powered Benefits, live from Lake Norman, North Carolina. David, thank you for joining.

Thanks, Andy. Good to see you.

You too, man. Now, most people know who you are, but for the very few that may not know who David Cantorno is, let's take a step back because I think you have an interesting story.

Of how you got in the benefits space, the benefits industry. And I also want to take it fast forward up to that epiphany, that aha moment when you had, wait a second. I have been doing this the wrong way for far too long. So let's start with how the heck did you end up in the health insurance industry?

Well, my very first job in insurance, believe it or not, I was 12 years old and I grew up in this very small school district outside of New York City. And the year that I was entering seventh grade, they had taken the seventh and eighth grade out of the elementary school building and combined us with the high school building. And in the high school building, they had a little employment office. I remember this very clearly. There was a board, like a board, and there were little job postings up on three by five cards. And most of them were like babysitting or tutors. But there was this one for telemarketer. And I don't know why exactly, I was possessed. But I remember ripping that card down and calling the phone number that afternoon. And I always sounded older, especially when I was young. And the guy didn't ask me how old I was. So he says, well, come on down for an interview. So I bike a long way and I was very out of shape at this age. And I get there and I'm all sweaty. And I walk up to this guy and he's like, whoa, whoa, whoa, how old are you? And I said, 12. And he said, no, no, no, no. I was looking for someone at least like 16, 17. And I go, dude, I just biked like six miles to get here. The least you can do is give me a shot. Well, I wound up being really good at telemarketing for life insurance. And so that was technically my first insurance job. But fast forward about five years. I'm 17 years old. I started college but didn't last very long. Left and went to work for my dad and totally different industry. But he was bringing in my stepmother to run the sales department. And she and I didn't get along well at the time. So I literally quit on a Friday with no job prospects for Monday. But I had my best friend and roommate and him and his dad were a small group health insurance broker on Long Island. And I basically just showed up at their office Monday morning and started selling group health insurance at 17. So I'm 45 now, so you can do the math on how long I've been doing it. But for the next however many years, almost 20 years, I did things traditionally I started off with 2 and 4 and 5 life fully insured plans and then did some stuff with level funding and then started to do some more self funded stuff. But I really wasn't getting very different results. No matter what I did, whether I went to high deductibles or low deductibles or HSAs, it just at the end of the day, maybe we got a one year reprieve. And I realized that the worse I did at what my clients really wanted me to do, which was control health care costs, the more money I made. That just felt wrong. And when I was trying to fix the results I was giving my clients, I asked lots of people lots of questions. I asked hospital administrators, carrier execs, you name it, and they all pointed the finger at someone else every time. So I said, you know, what should I be able to control? And I thought, well, my compensation is something I should be able to control. So I went to the next client. And you know, most of my clients, when I asked them, do you know how I'm paid? They would say, I guess you get something from the insurance company, but they really don't know, even to this day. And so I explained commissions and overrides and trips and bonuses and.

Blue Cross and Blue Shield North Carolina was giving an extra $2,500 kicker if you brought the Blue Cross rep with you to the closing appointment. Because they knew that having direct representation was going to make it more likely it would go their way. So that was an extra 2,500 bucks on top of the $10,000 bonus I was going to get for writing the case to begin with. And listen, I'm a good guy. I'd like to think that these didn't influence what I was putting in for my clients. But. And I know lots of people get a little ornery with me over this, but I didn't think they did at the time either. And I don't think very few anyway out there saying, let me put this in front of my client because it's best for me and not best for them. There's always some bad actors, but I don't think that's the way most brokers think. But at the end of the day, you become accustomed to this model, you become accustomed to the solutions within that model that pay you and you lose sight that there's this whole other world out there. And when the client is paying you directly and you don't need to go to sources that you're going to get paid because you're already being fairly compensated, this whole other world opens up of possibilities. And that happened about 10 years ago. Of course it's been an evolution, but.

I want to, I want to go right there. But something I wanted to say real quick. I can still remember, David, I think it was like 2007, sitting in our conference room with a Humana rep. I'll never forget this. And he was presenting the Q4 sales go. Sales promotion that Humana had going on. And if you sold so many small, medium, large, group size, obviously the larger the client, the less you had to sell. You could earn a cruise for the next year. And. And it just, I remember those days. And we didn't know any better. Right. We thought, like you said, we didn't, we weren't, we were naive, that it influenced our decisions. So two questions I have, and this leads to that epiphany you had. I love this story. Number one, you started in New York. Tell, tell us how you ended up in North Carolina running, you know, with Lake Norman Benefits. And then to take us to that moment, you pulled up to a client's building to do an open enrollment meeting. And the day you realized, I can't keep doing it this way anymore.

Yeah. So what happened is, is in 2004 or five, roughly, I had a couple of employees, high level employees, move to North Carolina. They were actually cousins, two different women, and they both worked for me. And I wasn't really optimistic to it working out, but I said, you know, let's try. I mean, remote working was not as much of a thing back then as it is now, but it actually wound up working out pretty well. And there were some other factors going on in my personal life where I just felt less of a connection to New York. And I came down to visit with the ladies just as part of, you know, just a work thing. And I don't know, there were things I found attractive about North Carolina. So I wound up moving down here in 2007, I think it was, and then started a new agency, Lake Norman Benefits. I sold that in 2014, I believe it was. I worked as a partner with the firm. I Sold it to for a couple of years. But one of the things that gave me a lot of freedom, and I know I was in a very lucky position for this. But by selling, you know, I would have UnitedHealthcare, which was the carrier we did the most amount of business with, come to my office and say, you know, David, if you don't close more business with us, we're gonna cut your contract completely. And that would have meant seven figures going away from my agency. That would have meant me firing people like they, they have a heavy hammer and they use it. So by selling and starting over and not even diving at all back into that world, we're totally unencumbered and able to give absolute best advice so that it's such a difference. And I just, I wish more people would stop fighting me on it and start trying it out, because I didn't understand the impact even until retrospectively as far as that, that moment, you know. So here I was in North Carolina. I had a pretty good agency going on. We had written a lot of business, gotten a lot of bonuses, and I was lucky. I drove a really nice German elongated sports car that was almost like a limo, and I had a driver on staff. And so there was this one wood mill in rural North Carolina, and I pull up and get out of the backseat of that car and walk into a meeting a month or two after this plan had gone live. And it was sold by one of my salespeople who put them into a. Basically an HMO type plan from a ppo. Didn't really explain the differences, just did what they had to do to get the business. And I was going in to try and save that business. And there's two women sitting at this conference table with stacks of bills and things not being paid and not being covered. And I try and go through it and give them a sense of comfort. We'll work on this, we'll get this fixed. And this guy comes in in the middle, he's about 5 foot 8, but he's just ripped and stacked. And you could tell he's a blue collar guy through and through. But he's quiet, doesn't say a word, just sits at the head of the table. When I finish doing the best I can with the two women, I turn to him and say, sir, how can I help you? And he says, blow smoke up my ass. I was like, excuse me, says, don't blow smoke up my ass. I saw you drive in, in your six figure car with your driver that you got in the backseat of Meanwhile, my wife is at home right now writhing in pain because the medication for her multiple sclerosis is no longer covered. She's a bad mother now, she's a bad wife, she's a bad employee, she can't handle any of her duties, and she's writhing in pain because of the plan you put in place while you drive in your six figure car. He got right, right to my chest to chest. And even though he was a little shorter than me, he could have kicked my butt. Matter of fact, the CFO got between us physically and that really shook me. I am not a violent person. And although this didn't get violent, there was the threat of it and it was pretty tense for at least for me. And that really shook me. I mean, I left that meeting with my heart pounding and I said, I gotta do something different. And it was on the way to the next client that afternoon that I disclosed how I'm paid and asked if they wanted to pay me in a different way. And they said yes. And I said, great, why don't you give me all the money? I won't take any money from anyone else, but I like getting bonuses, so why don't you bonus me when I do what you want me to do instead of what United or Blue Cross wants me to do. And he's like, great, yeah, I love it. I said, great, what do you want me to do? I want you to lower our healthcare costs. And it was at that moment that I had that like, oh, crap moment, because I realized that I had become an expert in health insurance. I knew health insurance backwards and forwards, but I didn't know anything about how healthcare is delivered and paid for. And at the end of the day, if you think about every type of insurance that we buy, life insurance, car insurance, homeowners, I don't care. The cost and quality of the insurance is reflective of the cost and quality of what it's covering. So if you're a risky skydiver and you're obese and you're an alcoholic, you're going to pay more for car insurance and life insurance, right? And they're going to raise your deductibles or make your coverage worse or bring your premiums up, all. All of which degrades the quality of the plan. Why? Because what it's covering is low quality and high cost. And so over the years, what I think we've really become an expert in is understanding how healthcare can be paid for and delivered, should be paid for and delivered, and identifying the value providers and when you incentivize and steer people on a plan to go to these value providers, not only do outcomes improve dramatically, I mean there is so much care that is given in this country just because doctors get paid more, the more care they give, not because the patients really need it. When you eliminate that and you get them to providers that just don't do that, at least not as much, and you get them to places where the readmission rates are lower, the infection rates are lower, the outcomes are better, the costs are way lower, it's not hard to save 30 or 40 or even 50%.

What's your opinion? What advice would you give? Because I agree, I think our industry still is too focused on peddling product versus solving the real problem, which I think there's not enough advisors in the benefit space that truly understand how important their job is right now in this country. You can keep businesses doors open, you can prevent a family from going bankrupt with the right decisions. How does somebody, whether it's changing the way you get paid or taking that first step, David, to starting to impact the way the healthcare is purchased inside a health insurance plan. For the advisors that are kind of stuck in, it's so easy just to keep doing it this way. What advice would you give them?

It's not just so easy to keep doing it that way, but employers, even though they get kicked in the shin every year, they, they beg for more. It's, it's really this weird dynamic. I call it Stockholm syndrome. But.

I think you can start with something that's going to help you understand better some of the games that are played. And I, you know, fortunately or unfortunately, in order to do a lot of what we do, you have to at least be in a partially self funded environment. And one of the myths that brokers who are used to fully insured and commission based payments put out there is that self insured is riskier. And that is absolutely false. It can be riskier. I can make it riskier if that's what the employer wants. But for most of our clients, the stop loss limits are less than the pooling points were in their fully insured plan. And so for those brokers out there that dig into the insurance side of things the way I used to, you should know that a pooling point is very similar to reinsurance in a self funded plan. And so if they're putting a higher limit because they're aggregating that over hundreds or thousands of employers, that actually means the employer is on the hook for more claims, which means if they have Bad claims, they're going to be more impacted by that. This notion that the insurance company is the payer of anything, I really push back against. And I think when we call the carriers the payers, it allows doctors and hospitals to disconnect themselves from the financial damage that they are about to throw that patient into. And it's the patient is the payer. At the end of the day, they're paying the bill. And I say to people all the time, you have two choices in health care. You can pull out of your pocket and pay cash right now or you can throw down your insurance card and pay later. Those are your two options, the only two options that exist. And so when we start to understand the, the dynamic that it has, you can start to really see where you can do things. And so the pharmacy for me is the low hanging fruit. The games that go on in prescriptions and they're numerous but you know, we just took over a small client. It's a senior living facility, a couple hundred employees. They were self funded with Blue Cross and Blue Cross was like, listen, we'll give you a rebate credit per employee per month if you let us handle the pharmacy. And that rebate credit came to $33,000. The actual pharmacy rebates. If they said forget the credit, I just want the actual rebates would have been $78,000 more than double the credit they were getting. Those games are so easy to uncover and so easy to prove out. Then you can start to understand how healthcare is delivered and paid for. Because that's easy compared to the medical side. Because quality is not an issue on the pharmacy side. Right. But on the medical side it is. And that's where things get a little more subjective and a little more difficult, but also much more rewarding with bigger.

Well, you know, I think of what you've done for the past five or six years. I think of you and others who have blazed the trail. Bit I, you know, people like Kareem Cade, Rena Takia, others who've been doing this for a few years. It's the pioneers, as a friend once said to me, it's the pioneers who often come back with the arrows in their back, right? Both good and bad. You've stepped up and you've stepped out to really try to change this industry for the better. And I, I talked to a lot of advisors who see what you're doing from afar and say I want to be doing that. And I said, hold on, you know, it's David's been doing this for Several years. It's a step by step thing. You can't just jump from what you're doing today to full in on this without understanding what you have to do first. Which leads us I want you to talk to a little bit about E Powered benefits, your new agency. Yeah, talk to, you know, tell us about what you guys are doing, you and Emma, you know, co founder and wife Emma Fox, what you guys are doing to really build this a different agency to help launch our industry into the future.

Well, first of all, we don't accept commission or any overrides on our medical plans. The only payment that we get. There's one exception. We have a client that acquired a couple locations that have Kaiser. They maintain Kaiser because it's clinically integrated. I feel a little more comfortable with that. And they're fully insured. There's nothing we can do. But every other client and the rest of their plan, with that one exception, we get paid from the client directly. And with most of our clients it's a flat fee plus a performance bonus at the end of the year tied to typically lowering costs. Although with some clients it was tied to clinical improvements and employees risk factors, which was kind of cool. So what that did is it allowed us to start turning these dials that otherwise you didn't even know existed, let alone how to turn them. And I say to employers now all the time, I said, if you think 30 or 40% is a lot of savings, if you knew how much was really there, you'd think we're doing a bad job because there's so much more than that. This is, we're just going after the easy pickings. And so when for whatever reason I started to share some of this stuff online and people would ask is are you really doing this? You know, and some were skeptical, some were disbelieving, some were combative. But I took this mentality of just share like, you know, a rising tide raises all ships, as is often said. And people started to reach out and say, David, I want to learn more. And so I said, wait a second, why don't I partner up with you? Because I can teach you as much as I can. But until you actually get an employer to say yes and then execute on it multiple times because every employer is different, has different employees, different medical needs, you're not going to be able to do this on your own. And so we started to partner up with brokers and consultants to help them do it. It was really Emma coming on board that really formalized this program into what we now call our co consulting program. So we have dozens of brokers and consultants around the US and our goal is to partner with them on just enough cases until they're able to do it on their own and they don't need us anymore. And we do a split of the revenue on the ones that we help them on. But once they feel okay to do it on their own, we don't take a piece of that. We just have two asks. One is that when they feel good enough to teach someone else like we taught them, you do that. And when they learn new things along the way, because they will that they teach those things back to us and that's it. But I will say it's not easy. It's not easy to get an employer to say yes. It's not easy to get your agency to say yes if you're not an owner when they're used to that commission model. And, and then it's hard to get employee buy in. Like this is an uphill battle. But when you get it, when it works, when people start to see it and believe it and employers get angry over the way they've been taking advantage of for so long, it is so rewarding.

Well, I know the advisors I coach when they're, they're trying to do some of these things with pharmacy and musculoskeletal, just even moving a group to an unbundled self funded plan, that first time they do it once, they do it once, you can just see the confidence skyrocket, that okay, I can rinse and repeat this now over and over and over again. So I got an advisor listening in, David, let's say he or she wants to learn more about this. I think one of the best ways to do it is what you got coming up. Yeah, the youth benefits symposium. Now I will say I saw when you guys first posted, I'm like oh great, another industry event, another industry conference. But tell us why this is going to be different.

Sure. Again, I mean this was largely Emma's doing and continued effort and work. But the premise was first of all coming the pandemic now coming up on approaching two years by the time that this goes on, there was this need for reconnection. And you know, I think, I don't want to say the pandemic has gone away because it hasn't, but it's sort of settled into normal life again. And so we wanted to foster that in person connection again number one. Number two, you know, I feel like there's really kind of three types of conferences out there. There's ones that try to motivate you to do something different, but most of us go back Monday morning and do the same thing. There's ones that try and show you solutions like here's the other end of the rainbow, but they don't really give you a functional path of how to get there. And then the third is just to drink and socialize. And so, you know, we're gonna have little pieces of those. But what's really going to be different about this is that I don't care if you're a small group, fully insured, large group, self insured, Medicare individual, everyone is going to learn something about our health care system, about how they can help themselves, how they can help their, their clients, their family members access quality care, how to price it reasonably, how to make sure you get a reasonable price on it, why doctors are as much a cog in the system as anyone else, and how they are just like brokers, are unwittingly contributing to the increase in costs. So are doctors. We're going to have a bunch of doctors there. We're going to talk about every solution that we bring, why we bring it and what it does and how we do it, what, where we stubbed our toes, where we had successes. But I think the two things that are really going to be most influential, the number one most influential is Emma created a course called the Certified Health Value Advisor that has now been validated by the Validation Institute and.