This week on Everything Is Up, Donovan Pyle breaks down the flaws in the U.S. employer-sponsored healthcare system and how legacy brokers profit when costs rise. He makes the case for fiduciary consultants—paid directly by employers—to bring transparency, accountability, and real value. Donovan shares why managing the healthcare supply chain, demanding data access, and engaging the C-suite are key to cutting costs and improving benefits. Plus, a preview of his upcoming book, Fixing Healthcare, a roadmap for reform that calls for transparency, fiduciary responsibility, and smarter consulting models to reduce waste and deliver better care.
Time Stamps
00:00 – Introduction
Welcome to Everything Is Up and introduction of Donovan Pyle.
06:40 – Legacy Brokers & Misaligned Incentives
Why brokers profit when healthcare costs rise.
11:20 – The Case for Fiduciary Consultants
How being paid directly by employers ensures transparency and value.
21:10 – Data Access Challenges
Why employers struggle to get claims data and why it matters.
27:45 – Engaging the C-Suite
Why executive involvement is crucial for cutting costs and improving benefits.
33:30 – Fixing Healthcare: The Book
A sneak peek at Donovan Pyle’s roadmap for healthcare reform.
38:00 – Closing Thoughts
Final takeaways on transparency, fiduciary responsibility, and new consulting models.
Quotes
"Most people realize the healthcare system is broken - I don't think they realize how broken it really is." -Tammera Hollerich
"We're on a mission to clarify what agent, broker, and consultant actually mean, and how they aren't the same." -Tammera Hollerich
"The moment I realized it was time to make a big change was when I got fired from a national brokerage firm for advocating on behalf of my clients." -Donovan Pyle
"Independent brokers were still getting paid by the carriers- they make more money when the employer's costs go up, not down." -Donovan Pyle
Websites
Tammera Hollerich
https://everything-is-up.simplecast.com/
Donovan Pyle
Intro
(00:01) Welcome to everything is up a podcast about the real life stories of people who have created extraordinary levels of success. These are conversations with people who are constantly striving to take things to the next level. And now here's your host.
Tammera Hollerich
(00:21) All right, welcome to Everything is Up with Tamara. Today's guest is Donovan Pyle. Very excited. He's a colleague, so I'm very excited to have him on the show with us today. He is the founder of Health Compass Consulting, senior advisor to the Validation Institute, and soon to be author of a new upcoming book called Fixing Healthcare, How Executives Can Save Their People, Their Businesses, and the economy. He's been named benefits advisor of the year and is shaking up how employers really think about the healthcare spent. We'll dive into why the system feels broken and what leaders can actually do about it and how stewardship and transparency might be the future. Welcome Donovan. Thank you for joining me today. How are you?
Donovan Pyle
(01:11) Great to be here. Thanks for having me.
Tammera Hollerich
(01:14) This is a near and dear topic of conversation for me. And having you on the podcast today is very exciting. We are going into a super busy season for benefits consultants with most employers, HR departments. And so I think that the timing is prudent here. to have this conversation this morning. So you have spent time on both the insurance carrier side. You've also spent time in the legacy broker. And that's all before you started Health Compass, right, consulting. So what was the actual moment that you realized it was time to make a big change?
Donovan Pyle
(02:06) Well, the moment that I realized that it was time to make a really big change was when I got fired from a national brokerage firm for advocating on behalf of my clients. That's really when the light bulb went off and I fully realized how misaligned the incentives were in the architecture of this industry against employers. So that really was the spark that set me down this path.
Tammera Hollerich
(02:32) So, legacy broker. We all know what the big insurance companies are. We're talking, you know, Blue Cross, UnitedHealthcare, Cigna, Aetna. We refer to them as BUCA in our language world.
Donovan Pyle
(02:47) Very, very lovingly,
Tammera Hollerich
(02:48) yes. So those refer to them, don't we? BUCA. And then you have legacy brokers. That is a term that is not quite quite as readily familiar to employers and HR teams. Kind of describe a legacy broker. Who are they? What are they? And obviously walking away from a legacy broker had some challenges, I'm sure. So kind of give us a little bit of that background just because I don't know who's listening and they may need that quick education.
Donovan Pyle
(03:20) Sure. And actually, I would say that most employers, at least the ones we talked to, don't really know what bouquet is either. So yes, I'm glad you're digging in to actually define what these terms mean, because people apply different definitions to different words. And so I think it's very prudent of you to really define what we're talking about here. So when I say legacy broker, what I mean is typically a top 10 national brokerage firm, they often have a PNC division in addition to an employee benefits practice. They're typically publicly traded, not always, but I'm talking about the really big box brokerage firms. But I would even like to take a step back even further and define what a broker is and what role they play, because I think a lot of people really are unaware of that in itself. So that might be instructive.
Tammera Hollerich
(04:17) Well, let's do that because I am doubling down here in the next few months on what the difference is between an agent, a broker, and a consultant. So I'd love to have you explain that.
Donovan Pyle
(04:31) I'll explain it from my point of view and everyone again has different you know applies these these words agent broker consultant advisor entertain interchangeably and has their own definitions and that's really confusing for the marketplace I think it's really an industry problem that we need to solve for. So just to the level set for your audience who maybe doesn't live in this stuff every day, employers cover 164 million Americans with health care benefits each year. And that's about 82 million employees. They spend about $1.3 trillion doing that. At least that was the number in 2024. And I think that what's shocking and unknown to many executives especially at mid-sized businesses, is that 25% of what they're spending is completely wasted. And so if you break it down to the employee level, that equals $4,000 per employee per year in waste. And so, you know, my company's whole mission is to help businesses reclaim that lost profit. And here's the really cool thing is that the way that you, and you know this, of course, but the way that you do that from a fiduciary perspective is by actually improving benefits and coverage for your employees. It's not by watering these things down. and shifting costs onto them, the way that you actually save money is by managing your health care supply chain so you can actually drive value towards your employees. So that's really the opportunity that people like you and I pursue every day on behalf of our clients. But when we talk about what is the role of brokers, so I've got a book coming out in November that has a chapter on this exact topic. People are kind of shocked to learn this, but hospitals actually put up the seed money to create health insurers back in the 1930s. And I'll say it again, they actually founded health insurance plans in the 1930s. They didn't do it so that they could, you know, really help the patients, so to speak, they did it primarily because we're there in the middle of the Great Depression, and they needed to stabilize their revenue. Right. And so they said, geez, what if we developed a prepaid subscription plan, so that our patients wouldn't have to be so apprehensive about coming to our nice clean hospitals that we now that we have, you know, we know how to sanitize things we know how to train doctors we know how to do all these things now, we can actually improve the health of our patients which is kind of a new concept back in the 20s. Now, how do we actually stabilize our revenue? And so they actually put up the seed money to create these health plans. By 1940, there were about 14 Blue Cross plans throughout the country, and 6 million people quietly enrolled in those plans at about 50 cents per employee per month.
Tammera Hollerich
(07:35) Wow. Wow. OK. So hospitals years ago, almost, right? 95 years ago-ish. So today we have a similar problem only on the pharmaceutical side, right? Because we have pharmaceuticals that are out there paying, obviously, commercials to get people in. And, you know, I was talking to a doctor friend who said that the pharmaceutical industry was paying for him to go through med school. I don't think people realize that while everyone realizes that the healthcare system is broken, because we hear it every day, right? I don't think they realize how broken it really is. So we've now kind of got a good history of where we came from, how we got here. It's not getting any better, right? But as you said, 25% of what an employer is paying towards the health care supply chain is lost revenue. So that kind of brings us back to the consultant, advisor, broker, agent, right? Everything that's being intertwined Right, you and I both on a mission to kind of clarify a lot better of what those terms actually mean and how they aren't the same. Right. So, big brokerage houses right out of these national chains most of them publicly traded like you said, not all, but most of them are. You take the word broker and you move it into another industry. So let's take the construction industry or something along those lines. The definition of broker becomes much more clear than it does in our industry, right? They know that they're hiring somebody to broker a deal for them somewhere else. The question then becomes, do they really need a broker in healthcare to broker a deal for them, what ends up happening? Can you address that for me?
Donovan Pyle
(09:46) Sure. I'd say that the quick answer is no. However, though, let's again go back to the history because this is really instructive and will really help to clarify why there's so much confusion in this market right now. So, so, you know, going just to put a pin in our last, you know, topic on the history of hospitals, you know, in today's environment we like to think and the media likes to play out this, this egg, you know antagonistic relationship between hospitals and and and health insurers when at the end of the day. You know, health insurers are simply a distribution their distribution partners for hospital services. That's what health insurers are that was the original intent of health insurance was to serve as distribution for hospital services. Now, in the commercial sector, meaning the employer sponsored sector. health insurers and hospitals both make more money when health care unit prices go up, not down. So as a CFO, delegating the management of your health care supply chain to a publicly traded insurer does not work because you're basically asking them to negotiate against their own interests, which, as we all know, nobody's very good at doing that. So it doesn't work. So but let's talk about, again, going back to the history. So And leading up to 1938, these new health insurance companies, they had in-house sales teams, in-house what we call captive agents. And so these people were paid on a commission basis. They basically ate what they killed. Every time they sold a policy, they'd make a commission on it and move on. There wasn't a whole lot of servicing to be done. They were actually known as field underwriters because back then they had to underwrites get some information from the customer to produce a price for the product. So that's why our National Trade Association used to be called the National Association of Health Underwriters because agents were out in the field underwriting, pricing the risk. But what happened, though, is when the federal minimum wage laws went into effect in 1938, a lot of these health insurers said, well, this presents a risk to us because we don't want to have to pay our underperforming sales staff a minimum wage. That creates a lot of risk for us. And let's face it, in any sales organization, you know, half the people don't sell anything or hardly anything. Right. So so that that was a risk that they wanted to avoid. So they did something very, very normal. They reclassified their sales agents. They said, OK, now you're all 1099 contractors and you can sell our stuff. But here's what they probably didn't anticipate, is that these now independent sales agents could sell multiple carriers products, not just their own. At the time, this served employers because now employers didn't have to go to each health insurer and ask for proposals and run their own procurement. They could basically use a broker and say, hey, you run procurement for me, go get a bunch of proposals from these carriers and let me know what you think the best fit is for us. And so the brokers started kind of positioning themselves as, as, you know, being able to provide financial advice and consulting, right? Who are you and let's match you with the right products. And that's, that's a strong value proposition, especially given that, you know, by 1960, there were 700 health insurers in the market. 700. Compare that to today where we've got a few dozen. So this creates an interesting dynamic, though, because at the end of the day, these independent brokers were still getting paid by the carriers. They still were distribution partners at a retail level for these health insurers. And so Because so much of the history of the compensation model is based on commissions, they actually make more money when the employer's costs go up, not down. So they're not really necessarily always going to show people the best ways to finance and procure health care. And if I only get paid to sell a product, then that means I'm always leading with products. Whereas, as you and I know, sometimes in many cases, the best thing you can do is not buy a product, right? So there's other, there's other ways to do this, that a lot of employers don't even know about. But anyway, that's, that's really at the core of the misalignment. And let's face it, Tamara, like, you know, this whole industry, it's not like someone had this grand vision for here's the strategy on how we can really help businesses and employees and patients. There was no grand vision around this. We're dealing with the changing landscape on the ground, the changing regulations, and they're just adapting to that. There was no one that said, we've got this grand vision. It's a messy marketplace, like many marketplaces are. And so my argument is, someone just invented that years ago, and we can invent new things. to serve the needs and demands of consumers today. And that's what we should be doing.
Tammera Hollerich
(15:01) Absolutely. You know, to make sure that we're very clear for everyone who's listening, that model still exists today. When a broker from one of these large legacy brokerage firms walks in and they're like, my services are free to you, right? I'm sorry, you're paying for it somewhere. which has existed for 100 years, is really where this misaligned incentive...