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EP512: 3 Kinds of Broker/EBC Rent-Seeking Payment Models—A Lawyer's Perspective, With Doug Aldeen

Relentless Health ValueMay 21, 202636m 56s

Attorney Doug Aldean joins Stacey Richter to discuss how brokers and employee benefit consultants (EBCs) engage in rent-seeking payment models that harm self-insured health plans. The conversation covers three main categories of problematic compensation: direct overcharges, rent-seeking solution recommendations, and undisclosed vendor payments. A six-step roadmap is offered for plan sponsors to evaluate and protect themselves from these practices.

Summary

In this episode of Relentless Health Value, host Stacey Richter speaks with healthcare attorney Doug Aldean about the ways broker and EBC compensation models can become predatory toward self-insured health plans. The conversation is framed around three layers of problematic compensation: direct fees that are opaque or inflated, indirect payments tied to rent-seeking vendor recommendations, and undisclosed payments from vendors at the book-of-business level.

The first category discussed is direct compensation complexity. Aldean notes that many plan sponsors have no frame of reference for what they're paying their broker because they've never conducted an RFP or compared rates. He references the Ohio Potato Company case, where a broker collected over $2 million in a level-funded arrangement, depleting the claims fund and leaving patients, doctors, and facilities unpaid — while the broker profited.

The second major category is rent-seeking solution recommendations, where brokers steer clients toward vendors that pay the broker a share of their revenue. Aldean gives the example of reference-based pricing (RBP) vendors using a percentage-of-savings model. Because hospital prices can be marked up 17,000%, the RBP vendor — and the broker who placed them — can earn enormous fees, often more than the hospital itself receives. He also highlights balance billing defense programs as another rent-seeking placement, citing a case where a plan paid $2.2 million in fees to a balance billing vendor to protect against $94,320 in potential claims — in a state (Texas) where balance billing wasn't even legally permitted. Voluntary benefits are identified as a third example, with commissions of 70–90% in year one going almost entirely to the broker, with minimal claims ever paid.

The third category involves undisclosed vendor payments. Aldean explains that brokers can receive compensation from point solutions, PBMs, or stop-loss carriers at the book-of-business level — tagged as 'marketing services' to the vendor — which may not require disclosure under the Consolidated Appropriations Act (CAA). He notes this practice is becoming more frequent and cites examples of PBM contracts paying brokers per-script fees (e.g., $7 or $2.50 per script), sometimes explicitly labeled as 'discounts' in contracts to avoid disclosure requirements.

The episode also addresses stop-loss coverage as a major area of risk, where discrepancies between plan documents and stop-loss reimbursement levels can create gaps that benefit undisclosed parties. Aldean warns about the entrenchment of brokers in public entities like school districts and municipalities, citing political patronage as a driver of corrupt arrangements, particularly in South Texas.

The conversation concludes with a six-step roadmap for plan sponsors: (1) Ask 'why' five times about any recommendation; (2) Demystify the commission structure — complexity is itself a red flag; (3) Use a third-party broker RFP; (4) Audit plan data and documents, especially stop-loss arrangements; (5) Watch for DEF CON 5 reactions — emotional demands can lead to being locked into bad contracts; and (6) Trust but verify, especially long-term broker relationships, which may mask years of rent-seeking behavior.

About this episode

I wanted to talk to a lawyer 'cause, yeah, lawyers are the ones that see stuff that falls the whole way down to the level of legal action. But I wanted to find out what are the main categories of things that wind up in legal land when it comes to broker or EBC (employee benefit consultant) payment agreements. Like, what are the top ways that compensation agreements go horribly awry? For a full transcript of this episode, <a href="https://relentlesshealthvalue.com/blog/transcript-for-ep512-with-doug-aldeen" rel="noopener" target="_blank">click here</a>. If you enjoy this podcast, be sure to subscribe to the free weekly <a href="https://relentlesshealthvalue.com/join-the-relentless-tribe" rel="noopener" target="_blank">newsletter</a> to be a member of the Relentless Tribe. Doug Aldeen, my guest today, rose to the challenge. And let me just state for the record that, while there are a whole lot of brokers and EBCs who would or do engage in some of these practices, there are also many who do not; and/or it might not be the broker/EBC themselves but the company that they work for who is up to some of the things that we're gonna be talking about in the episode today. But I really, for sure, want to support the gang of honest actors, great fee-based, integrity-based brokers and EBCs; and I wanna support them all day long, many of whom listen to the show and are part of the Relentless Health Value Tribe. But let's talk about how the rent-seeking ones roll so that you can spot them. See what they did there. So, yeah … the first kind of ground zero that Doug and I talk about today is just up-front direct compensation agreements, which may be just ridiculously complicated and/or ridiculously expensive compared to what others are charging for a similar group. Where there's mystery, there is margin. That is so relevant in so many situations, and this is just another one of them. So then, after that, Doug and I move on; and we get into three categories of stuff that sits in that undisclosed or maybe even disclosed zone, where just the whole model of payments is problematic on its face. First up (and this is a biggie), brokers/EBCs recommending rent-seeking solutions to their clients. Like, a broker or EBC suggests a solution to their client where the solution itself makes money on a perverse incentive, and then the broker or EBC gets a piece of that action, which might be called shared savings. So, yeah … even if the dollars to the broker or EBC are disclosed, a naive plan administrator might not see that overcharge for what it really is—and Doug gives a bunch of examples in the show that follows. Chris Deacon (<a href="https://www.linkedin.com/posts/cdeaconc_anthem-bcbs-reply-to-motion-to-dismiss-ugcPost-7434257255023357952-dCiF/" rel="noopener" target="_blank">post</a>) and Justin Leader (<a href="https://www.linkedin.com/pulse/tyranny-shared-savings-fee-justin-leader-aogie" rel="noopener" target="_blank">post</a>) also wrote posts about this. Donovan Pyle wrote a whole <a href="https://www.linkedin.com/feed/update/urn:li:activity:7458868272734695424/" rel="noopener" target="_blank">book</a> about it. <img alt="" src="payerset" /><a href="https://www.payerset.com/" rel="noopener" target="_blank"><img alt="" height="161" src="//assets.libsyn.com/show/54094/payerset_banner.png" width="922" /></a><img alt="" src="payerset" /> Okay … the next big category of typical payment model methodologies that Doug Aldeen (again, a lawyer) has seen plans get themselves into trouble with their EBCs and brokers—the ones who are sharks, I mean, circling the plan like it's a gold mine—this big category is undisclosed payments from vendors who the plan doesn't realize have a business relationship with the EBC or broker. This can also be a whole basket of solutions that the EBC/broker wants to install, which is basically this problematic payment model at scale. And, right, this matters because then the plan doesn't know if this particular point solution, PBM, stop-loss carrier … Right? They think their broker EBC is recommending it because it's the best option for that particular plan, not understanding that it's the right option for the broker or EBC. And these dollars can be undisclosed because, to a certain extent, the Consolidated Appropriations Act, it's a little bit unclear on certain points. There's some loopholes if you go looking for them because you are so inclined. We get into more detail on this later on. After this, Doug offers a really great roadmap with six steps in it for any plan to really think about as they consider. First, the maybe integrity of their broker or EBC and what is being recommended to the plan. And that's important because, look—and we say this in the conversation that follows, but I'm gonna say it again here loudly—if a plan realizes that their broker or EBC is not really serving the best interest of the plan, there are great options out there. There are great EBCs and brokers who are honest, upstanding that really care about their clients, their plans, their members, and doing the right thing. But telling the difference between the not-so-good ones and the good ones takes some diligence, takes some validation on the part of the plan sponsor. It just does. But the amount of dollars that can be saved is millions, and this is actually, saving those millions is actually better for the plan because it's not like those dollars were going in somebody's pocket. It's not like they were being put toward better, safer, lower premiums. These are dollars that can be cut, and the plan is actually better. My guest today, as I have mentioned at least several times already, is Doug Aldeen, who is a well-known attorney who has spent many years in the self-insured space. This podcast is sponsored by <a href="https://www.aventriahealth.com/" rel="noopener" target="_blank">Aventria Health Group</a>, and I do want to give a shout-out and a thanks to our 2026 series underwriter <a href="https://www.payerset.com/" rel="noopener" target="_blank">Payerset</a>. Thank you so much for your financial support. That helps keep this podcast on the air. And with that, here is my conversation with Doug Aldeen. <div style="background-color: #fff5e9; border-radius: 10px; color: #000; padding: 20px; margin: 10px 0; width: 95%;"> Also mentioned in this episode are <a href="https://www.linkedin.com/in/cdeaconc/" rel="noopener" target="_blank">Chris Deacon</a>, <a href="https://www.linkedin.com/in/justindonaldleader/" rel="noopener" target="_blank">Justin Leader</a>, <a href="https://www.linkedin.com/in/donovanpyle/" rel="noopener" target="_blank">Donovan Pyle</a>, <a href="https://www.linkedin.com/in/mark-cuban-06a0755b/" rel="noopener" target="_blank">Mark Cuban</a>, <a href="https://www.linkedin.com/company/costplusdrugs/" rel="noopener" target="_blank">Cost Plus Drugs</a>, <a href="https://www.linkedin.com/company/aventria-health-group/" rel="noopener" target="_blank">Aventria Health Group</a>, <a href="https://www.linkedin.com/company/payerset/" rel="noopener" target="_blank">Payerset</a>, <a href="https://www.linkedin.com/company/patient-rights-advocate/" rel="noopener" target="_blank">Cynthia Fisher</a>, <a href="https://www.linkedin.com/in/leewlewis/" rel="noopener" target="_blank">Lee Lewis</a>, <a href="https://www.linkedin.com/in/capitalrx/" rel="noopener" target="_blank">AJ Loiacono</a>, <a href="https://www.linkedin.com/in/chasedave/" rel="noopener" target="_blank">Dave Chase</a>, <a href="https://www.linkedin.com/company/nautilus-health-institute/" rel="noopener" target="_blank">Nautilus Health</a>, <a href="https://www.linkedin.com/company/32bjseiu/" rel="noopener" target="_blank">32BJ</a>, <a href="https://www.linkedin.com/in/andreas-mang-503927b/" rel="noopener" target="_blank">Andreas Mang</a>, <a href="https://www.linkedin.com/in/jon-camire-8b8b052/" rel="noopener" target="_blank">Jon Camire</a>, and <a href="https://www.linkedin.com/in/tomnash/" rel="noopener" target="_blank">Tom Nash</a>. For a list of healthcare industry acronyms and terms that may be unfamiliar to you, <a href="https://relentlesshealthvalue.com/healthcare-acronymns" rel="noopener" target="_blank">click here</a>. </div> You can learn more on Doug's <a href="https://dougaldeen.com/" rel="noopener" target="_blank">Web site</a> and by following Doug on <a href="https://www.linkedin.com/in/dougaldeen-erisa-healthcareattorney/" rel="noopener" target="_blank">LinkedIn</a>. Doug Aldeen is an Austin, Texas–based Employee Retirement Income Security Act (ERISA) healthcare attorney. From 1997 to 2006, he served both as associate general counsel and general counsel for provider-sponsored HMOs in Champaign-Urbana, Illinois, and San Antonio, Texas. During his tenure at Health Alliance Medical Plans in Urbana, Illinois, he had a front-row seat to the US Supreme Court ERISA case in Pegram v. Herdrich. Since 2007, Doug has owned and operated his own law firm that serves the US self-funded market. In 2016, he served as ERISA counsel for the Berkley Research Group, who served as an advisor to the private equity firm Hellman and Friedman that purchased a majority stake in MultiPlan for $7.5 billion. From 2019 to 2024, Doug served on the government relations committee for the Self-Insurance Institute of America during the period when the Consolidated Appropriations Act was being implemented. In 2022, Doug was featured by KXAN television in Austin in an investigative piece that examined the collection practices of a local hospital. KXAN's investigative work resulted in an Edward Murrow award for public service. For the past 10 years, he has published "The Sunday Morning Bathroom Read" on LinkedIn, which features a weekly tongue-in-cheek review of recent events and the implications to the self-funded market in the US healthcare industry. 00:00 Introduction to this episode. 00:59 A caveat for the record on this episode. 02:11 The first problematic payment model discussed in this week's episode. 03:27 The second problematic payment model discussed in this week's episode. 06:16 The conversation with Doug Aldeen. 06:27 Why is reviewing broker/EBC compensation so important? 08:05 The Ohio Potato Company anecdote. 10:28 The first way brokers/EBCs might get paid. 11:45 What "cost of savings" means. 12:31 <a href="https://relentlesshealthvalue.com/episode/ep457-its-a-big-thing-medical-spread-pricing-so-lets-talk-about-contract-transparency-with-cynthia-fisher" rel="noopener" target="_blank">EP457</a> with Cynthia Fisher. 14:07 A rent-seeking solution that requires a cost-benefit analysis. 19:16 Why the broker/EBC is sometimes in the dark about vendor kickbacks. 21:46 Where the CAA is unclear. 22:23 <a href="https://relentlesshealthvalue.com/episode/ep508-why-dont-more-self-insured-ceos-take-bold-action-in-health-benefits-strategy-with-lee-lewis" rel="noopener" target="_blank">EP508</a> with Lee Lewis. 22:58 <a href="https://relentlesshealthvalue.com/episode/encore-ep379-how-much-money-really-are-employee-benefit-consultants-andor-brokers-making-from-plan-sponsors-with-aj-loiacono" rel="noopener" target="_blank">EP379</a> with AJ Loiacono. 24:04 Actionable advice for plan sponsors. 24:57 The second piece of actionable advice for plan sponsors. 25:22 The third piece of actionable advice for plan sponsors. 26:08 Demystifying the commission structure. 27:35 Using a broker RFP from an open source. 27:54 <a href="https://relentlesshealthvalue.com/episode/ep484-what-are-the-3-most-burning-questions-that-plan-sponsors-have-right-now-with-dave-chase" rel="noopener" target="_blank">EP484</a> with Dave Chase. 28:31 Why you should be auditing data and claims. 29:29 <a href="https://relentlesshealthvalue.com/episode/ep478-stop-loss-coverage-part-1-how-it-goes-right-and-how-it-can-go-horribly-wrong-with-andreas-mang-and-jon-camire" rel="noopener" target="_blank">EP478</a> (Part 1) and <a href="https://relentlesshealthvalue.com/episode/ep479-what-could-go-wrong-covering-high-cost-claimants-with-stop-loss-reinsurance-with-andreas-mang-and-jon-camire" rel="noopener" target="_blank">EP479</a> (Part 2) with Andreas Mang and Jon Camire. 31:29 The importance of having an "out." 33:11 Why the broker community may be at substantial risk. 35:30 <a href="https://relentlesshealthvalue.com/episode/ep419-the-financialization-of-health-benefits-for-boards-of-directors-and-c-suites-of-self-insured-employers-with-andreas-mang" rel="noopener" target="_blank">EP419</a> with Andreas Mang. Recent past interviews: Click a guest's name for their latest RHV episode! <a href="https://relentlesshealthvalue.com/episode/ep511-the-tension-when-clinical-teams-take-on-risk-for-policymakers-and-others-looking-to-rustle-up-future-perverse-incentives-with-dr-siva-and-monica-lypson-md-mhpe" rel="noopener" target="_blank">Dr Siva and Dr Monica Lypson</a>, <a href="https://relentlesshealthvalue.com/episode/ep510-the-impact-on-you-of-medicare-advantage-goings-on-2026-edition-with-betsy-seals" rel="noopener" target="_blank">Betsy Seals</a>, <a href="https://relentlesshealthvalue.com/episode/ep509-the-77-wake-up-call-a-roadmap-to-align-finance-teams-with-non-complacent-benefit-design-with-patrick-nelli" rel="noopener" target="_blank">Patrick Nelli</a>, <a href="https://relentlesshealthvalue.com/episode/ep508-why-dont-more-self-insured-ceos-take-bold-action-in-health-benefits-strategy-with-lee-lewis" rel="noopener" target="_blank">Lee Lewis</a>, <a href="https://relentlesshealthvalue.com/episode/ep507-4-core-concepts-to-buy-or-deliver-the-highest-value-healthcare-a-review" rel="noopener" target="_blank">Stacey Richter with 15 experts (EP507)</a>, <a href="https://relentlesshealthvalue.com/episode/ep506-how-other-employers-shareholders-and-clinics-are-using-price-transparency-data-and-its-an-arms-race-with-jerry-dimaso" rel="noopener" target="_blank">Jerry DiMaso</a>, <a href="https://relentlesshealthvalue.com/episode/ep505-the-death-of-the-what-is-value-guessing-game-for-clinical-and-plan-decision-makers-ready-to-move-on-with-ahilan-sivaganesan-md" rel="noopener" target="_blank">Dr Ahilan Sivaganesan</a>, <a href="https://relentlesshealthvalue.com/episode/ep504-a-back-to-basics-roadmap-through-the-perverse-incentives-to-advanced-primary-care-with-ryan-jacobs" rel="noopener" target="_blank">Ryan Jacobs</a>

Key Insights

Aldean argues that broker compensation problems exist on three distinct layers: the direct fee (which may already be inflated), indirect fees tied to vendor placements, and whether the recommended product or service is even appropriate for the plan at all.
Aldean describes a case (Ohio Potato Company) where a broker collected over $2.7 million across two years in a level-funded arrangement, completely depleting the claims fund and leaving medical providers unpaid — demonstrating that broker rent-seeking can cause direct patient harm.
Aldean explains that reference-based pricing vendors using a percentage-of-savings model can earn more than the hospital itself receives, because hospital markups can reach 17,000%, making the savings figure — and thus the vendor's fee — enormous regardless of actual plan benefit.
Aldean describes a case where a plan paid $2.2 million to a balance billing defense vendor over three plan years to protect against $94,320 in contested claims, in a state where the hospital lacked legal authority to balance bill — making the service both overpriced and entirely unnecessary.
Aldean states that brokers can receive undisclosed payments from point solutions and PBMs by tagging the arrangement as 'marketing services' rendered to the vendor rather than the plan, a structure that may fall outside CAA disclosure requirements.
Aldean notes he has seen one PBM contract that explicitly labeled broker payments as 'discounts' rather than compensation, with the stated purpose of avoiding disclosure obligations — describing this as 'boldly done.'
Aldean argues that the complexity of a broker's commission structure is itself a warning sign — he contends that a legitimate compensation arrangement should be explainable in two sentences, and that requiring a 'NASA scientist' to reverse-engineer it is a red flag.
Aldean warns that long-term broker relationships, while seemingly trustworthy, carry elevated risk because plans become complacent — he notes that in the lawsuits he has reviewed, the average tenure of a rent-seeking broker with the victimized plan was notably long.

Topics

Broker and EBC compensation transparencyRent-seeking vendor recommendationsUndisclosed payments and CAA complianceReference-based pricing fee modelsBalance billing program misuseVoluntary benefits commission structuresStop-loss coverage gapsPlan sponsor self-protection roadmap

Transcript

Episode 512, three kinds of broker slash EBC rent seeking payment models, a lawyer's perspective. Today I am speaking with Doug Aldean. American healthcare entrepreneurs and executives you want to know talking relentlessly seeking value. I wanted to talk to a lawyer because yeah, lawyers are the ones that see stuff that falls the whole way down to the level of legal action. But I wanted to find out what are the main categories of things that wind up in legal land when it comes to broker or EBC employee benefit consultant payment agreements? Like what are the top ways that compensation agreements go horribly awry? Doug Aldean, my guest today, rose to the challenge. And let me just state…

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