Legislative sponsors of insurance bills now work with brokers

Published 10:17 am Monday, December 10, 2012

By Tom Scheck

Minnesota Public Radio News

A Republican state legislator who steered legislation through the House to drop thousands of people from state-run MinnesotaCare is an independent contractor for an insurance brokerage firm that lobbied for the change.

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State Rep. Steve Gottwalt, R-St. Cloud, led the GOP effort to cut spending in the state’s health and human services budget when the Republicans controlled the Legislature. Now both he and his Senate counterpart have business links to the insurance industry, which has some other lawmakers asking whether the arrangement violates ethics rules.

Gottwalt, who served as chairman of the House Human Services Reform Committee, sponsored a bill that was designed to divert some recipients of the state subsidized health insurance program MinnesotaCare to the private insurance market. Months after the legislation passed in July of 2011, Gottwalt obtained a license to sell insurance and became an associate with a firm that pushed for the bill.

Gottwalt contends there was no conflict of interest, and that he is breaking no laws or rule.


But some Democratic lawmakers are raising questions about the arrangement.

“I can see why the owner of the business was pushing for the bill. It’s more business for him,” said Sen. John Marty, DFL-Roseville. “The fact that [Gottwalt] is now working for him, I’m disappointed in that.”

Health insurance brokers backed the legislation, championed by Gotttwalt’s counterpart in the other chamber, state Sen. David Hann, R-Eden Prairie.

Their actions have some lawmakers asking whether the arrangement violates ethics rules.

“If these are payoffs then the ethics committee needs to look at it,” said state Rep. Tom Huntley, DFL-Duluth, the incoming chairman of the House committee.

When Republicans took over control of the Legislature two years ago and confronted a big budget shortfall, one of the areas they identified for cost savings was the state’s health and human services budget. Gottwalt then tried to sell his colleagues on the plan to trim people from MinnesotaCare.

“This is a new approach,” Gottwalt told his colleagues in 2011. “It gives them a subsidy to buy that coverage in the private marketplace like the rest of us do and it takes a new role for Minnesota that is both sustainable and healthy for the state in terms of Health and Human Services programs.”

In July, more than 4,000 Minnesotans were dropped from MinnesotaCare and given the option of enrolling in the new insurance plan, the Healthy Minnesota Contribution Program. It was Gottwalt’s plan, which Gov. Mark Dayton signed into law as part of the deal that ended the state government shutdown.

But between the time the bill passed and people lost their MinnesotaCare coverage, Gottwalt became licensed to sell insurance. State records show he sells insurance products for 11 companies. Hann received a license to sell insurance in June.

One of the new program’s biggest advocates was John Tyler – an insurance broker who testified in support of Gottwalt’s bill in numerous committee hearings like this one in 2011.

“The objective here, without question, is to improve things, to improve access to health care, to improve the quality of the care that they are receiving,” Tyler said during a 2011 committee hearing on the bill.

But the new law also opened up a new market for insurance brokers, because they receive commissions from HMOs for the insurance that they sell.

Gottwalt’s bill required the state to create a website to refer applicants to health insurance agents who can help them find coverage — and he is now listed as one of those agents. Tyler’s firm, Boys and Tyler is listed as a broker on the site. The firm’s website also lists Gottwalt as an associate. Tyler and Gottwalt say Gottwalt is an independent contractor who shares commissions with the firm on sales.

Tyler initially agreed to an interview to discuss his role but canceled an interview and subsequently did not return calls.

Gottwalt’s involvement with Tyler and his role as an insurance agent came as a surprise to some members of the Legislature. Some said the arrangement raises questions about disclosure and conflicts of interest when lawmakers push bills from which they could potentially benefit.

Gottwalt never brought up his role as an insurance broker during committee hearings during the 2012 session. And minutes also show he didn’t disclose his position during meetings of a health care task force aimed at implementing the federal health care law.

When Gottwalt submitted the Statement of Economic Interests form legislators are required to file with the Minnesota Campaign Finance Board he did not disclose that he sells insurance. The form lists only his role as owner and president of Steve Gottwalt Consulting. Gottwalt said his page on the social media site LinkedIn shows he sells insurance and has a relationship with Tyler. As for the Healthy Minnesota Contribution Program, Gottwalt said he hasn’t sold to those clients.

When asked whether he has a conflict of interest, Gottwalt said he sees nothing wrong in working with a business owner who actively lobbied him to pass legislation.

“John Tyler and I have been working on health care reform in Minnesota for going on six years now, and it made sense for us at some point to partner and to work on some of this stuff,” Gottwalt said. “We believe in market-based reform. The fact that I’m involved in that doesn’t mean we were sneakingly trying to come up with something to benefit ourselves. It’s actually the other way around because we worked together.”

Even after he started selling insurance, Gottwalt authored legislation that would benefit health insurance brokers. Minnesota’s conflict of interest laws say elected officials can’t act, vote on or push legislation that directly benefits them or an associated business.

Gottwalt said he is no different from legislators who hold jobs as teachers and vote on education related bills or farmers who shape agricultural policy.

“If I were taking in 20 or 30 people and getting in lots of commissions off of them you might have an argument, but you would still have to argue that we’d built and passed legislation to benefit Steve Gottwalt, and that’s simply not the case,” he said. “It is a market- based reform. It certainly puts people in private health care coverage. I have been making that case since day one. That’s no different. It doesn’t benefit me uniquely, but the fact is I haven’t made one red cent off of it.”

That’s difficult to verify because commissions are private between HMOs and insurance brokers. Gottwalt said the commissions he shares with Tyler come from group health insurance sales unrelated to the Healthy Minnesota Contribution Program. Gottwalt said he doesnt see a problem with the business relationship, other lawmakers are concerned.

Tyler’s relationship with legislators goes beyond Gottwalt. He also has a connection to incoming Senate Minority Leader David Hann.

Hann, a Republican, was the chief Senate author of the Healthy Minnesota Contribution Program, and chair of the Senate Health and Human Services Committee. Like Gottwalt, Hann renewed his license to sell insurance this past June and listed on his campaign website that he is a “partnering agent” with Boys and Tyler. Hann also recently joined the board of directors for the Minnesota Association of Health Underwriters — which lobbied for the bill. Tyler is also a board member.

State records show Hann has not been appointed by a company to sell insurance yet and he said he isn’t sure if he will. He said he has not received any money from Boys and Tyler.

“What I did was perfectly legal and legitimate,” Hann said. “I didn’t have a license at the time I did that, was not contemplating having a license at the time I did that. After the fact, I got a license would no different than anybody in the state of Minnesota who decided to get a license after the law was passed.”

Like Gottwalt, Hann lists his occupation on state forms as a consultant. State law does not require lawmakers who work as consultants to disclose the source of their compensation.

State Sen. John Marty, DFL-Roseville, wants to change that. He said legislators should have to disclose their business ties if they list themselves as consultants.

“A case here where the business you’re working for is the one that’s coming there to the Capitol to lobby something that will particularly help people very much in their specific line of work, insurance brokers and the like,” Marty said. “I’m saying you can’t prevent it. I’m saying the least you can do is have it fully disclosed because if it’s disclosed, the public might say ‘I smell a rat.’ ”

For his part, Gottwalt said he’s been open about his business relationships. He said he sees the criticism from Democrats as politics and a distraction from his work on health care matters.

“It does seem partisan,” he said. “I haven’t made this a mystery. I haven’t stood on the table and yelled it out but I haven’t benefitted from it directly or indirectly and for anybody that or implied that this motivated my support for this particular bill is disappointing.”

Gottwalt has pushed in the past to expand the Healthy Minnesota Contribution Program to a greater number of MinnesotaCare recipients but he now says he isn’t interested in doing that.