Business Growth Architect Show: Founders of the Future

Ep #196: Donovan Pyle: Fired for Telling the Truth: How the Insurance Industry Really Works

• Beate Chelette • Episode 196

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Why are healthcare costs skyrocketing for small businesses—while coverage keeps getting worse? 🤯 Benefits are important incentives for businesses to provide to their employees. And then you find out how your “advisor” really gets paid.


In this episode of the Business Growth Architect Show: Founders of the Future, I sit down with Donovan Pyle, a former benefits broker who was fired for calling out the lack of fiduciary duty to their insurance clients. He uncovered how brokers profit from rising costs instead of saving clients money and that’s when he had to do something about it.


Donovan exposes the truth and explains how a founder and small business owner can get a lot more coverage for a lot less. This conversation dives deep into ethics, courage, and what it really takes to build systems that serve people—not profits.


If you’ve been taken advantage of by consistently rising premiums and bad coverage this one will hit close to home.

👉 Learn more about Donovan’s work: https://donovanpyle.com/ 

🎧 Watch now and discover how one decision can change an entire industry.

➡️ Subscribe for more conversations with visionary thinkers challenging the systems we’ve outgrown.

💬 Share this episode with a leader who’s ready to do what’s right, even when it’s hard.


Other Resources Mentioned:  Website | LinkedIn | YouTube

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Donovan Pyle:

I was fired from the last job that I had. I thought my job was to act in a fiduciary capacity. Turns out that that could get you in a little bit of trouble. Brokers make more money when the employer's health care costs go up, not down. It would have violated my integrity and belief systems at a very deep level, when I was told You're being too hard on this health insurer. They pay us our largest bonus each year, that's when the light bulb went off. I shattered my ankle. Emily's pregnant with our first child. There is no plan B either. We're going to fix it in an orderly fashion or we're going to have even bigger political problems than we have today.

BEATE CHELETTE:

Today's guest, Donovan Pyle, was fired from his job. Donovan, what the heck did you do?

Donovan Pyle:

Wow, this was quite the opening. That is true. I was fired from the last job that I had, and I was working for a national employee benefits brokerage firm with which probably a lot of people don't even know what that is. But yes, I was basically fired for advocating on behalf of our customers. I thought my job was to act in a fiduciary capacity to them and serve them in that way. Turns out that that could get you in a little bit of trouble because of the financial incentives that are completely misaligned with businesses. So I just didn't understand a job, and that's a problem.

BEATE CHELETTE:

So I want to dive into this, and thank you for letting me ask you this really super provocative question at the very beginning, because, but you are not a guy who shies away from controversy, so I figured you're the perfect guest for doing something like this. Take me through what I think it is and what it really is in your industry, sure.

Donovan Pyle:

So just to level set for the audience here, so businesses in the United States cover 164 million Americans with health care benefits. And here's the thing, 81% of businesses rely on benefits brokers to help them get the most value for their money. In other words, we're going to spend all this money on health care and benefits, and since, let's face it, most CFOs and finance teams have little to no training or expertise in health care financing or procurement. And HR professionals often have literal or no training in this area as well. They rely on the financial recommendations of brokers to help them get the most value for their money. That is what the expectation is with that relationship. However, I think a lot of business owners, executives CFOs, have forgotten or never knew the history of the industry. The benefits. Brokerage industry was not developed to help you maximize the return on your investment and get the most value. It was developed to simply sell insurance products for insurers. That's what it was developed to do, and that is the dominant way that it gets that the brokerage industry gets compensated some 80 years later.

BEATE CHELETTE:

So here you are. So you are all enthusiastic. You want to help people. You get hired by this company. You do your job, you make good money. And then what exactly did you discover? Where you went? Hell no,

Donovan Pyle:

yeah. So basically, because the brokerage industry was developed to sell products for insurers. For health insurers, they get paid by health insurers to sell their products. They're their number one distribution partners are brokers. And so the disconnect is that basically, because brokers work, in many cases on a commission basis, and they also get paid bonuses from insurers for reaching certain sales targets at the end of the day, brokers make more money when the employer's health care costs go up, not down. There's the old Charlie Munger quote really applies here. "Show me an incentive and I'll show you an outcome." And it's no wonder that health healthcare is has become, for many businesses, a top three expense and also the fastest growing financial risk on their P & L in many cases, and it's all about incentives. So now

BEATE CHELETTE:

here you are. It almost sounds to me like you were at a moral crossroads here, right? So now you are okay. I have the choice here. Isn't this like the Tom Cruise movie, The Firm? Or something like that, where you're where you realize that if you do it the way they lay it out for you, you make more money, but if you do it the way they lay it out for you, then you're violating the fiduciary duty. Take me through that moment. Take me through that trigger moment, that that defining moment where you said I cannot do this,

Donovan Pyle:

yeah, so I mean, it's it's more than that. I couldn't fulfill my obligation as a fiduciary, which is the way I want it to work, but it would have created, resulted in a moral injury, right? It would have violated my integrity and belief systems at a very deep level. If the brokerage industry was, frankly, transparent about their business model and who they actually serve, I would have no bone to pick with them whatsoever, and I wouldn't have gone and worked for a national brokerage firm. But because they're not transparent about it, they, in many cases, hide these backdoor revenue streams paid by insurers and pharmacy benefit managers. From my perspective, they're committing fraud. When I was told during my termination that, hey, you're being too hard on this health insurer, and by the way, they pay us our largest bonus each year. We don't like what you're doing, that's when the light bulb went off for me. And I said, You know what, I've been reading and talking to people who have been really developing a different revenue model so that they can serve employers in a fiduciary capacity and give them unbiased advice they can financially align their revenue model their compensation to align with the employer's objectives. I said, You know what? I want to move in that direction too. And honestly, the company that fired me, they let me keep a new customer that I just brought on, like two weeks before that, and they let me keep that one client because the CEO of that 150 life business happened to be my uncle, and so there was a couple motivations for for starting a fiduciary based management consulting firm in 2018 and so one of one of them was that I really wanted to challenge the brokerage industry and show employers, Hey, here's a different way of getting unbiased advice that will help you achieve your objectives. And then two, I needed to, really need it to save face with with my uncle and help them in the years following my termination, I built them a bespoke health plan, which saved their or their company over $3,000 per employee that year and got them way better benefits. They parlayed that and actually exited at a nice multiple the year after. So it worked out really well for them, and it was a great case study right out of the gate. But yeah, it was a very it was an extremely challenging time, and there were some personal things going on, yeah,

BEATE CHELETTE:

well, let's talk about that, because you make it sound like it was just a moral dilemma. It was not just a moral dilemma you had. You had a whole lot of other stuff going on. Don when we talked about in the show that the intersection of spirituality and strategy really means that when you walk away from doing the wrong thing, when you're stepping into doing the right thing, it's not exactly like people handing you bonuses and roses and take good care of you, but they are taking but you are often in a complete breakdown before you get the breakthrough, before you get through the break breakout. And I want to stay on that. So what was going on in your life? Because you had, and I'm going to say this very clear, you had a bunch of Oh shit, moments in that, in that, in that scenario,

Donovan Pyle:

yeah, for sure. So let me just back up a little bit more before I joined the brokerage side of the business. Benefits brokers were actually my customers. I work for a multinational insurance company, great company, and benefits brokers were our customers. We sold our products through benefits brokers who sold them to employers. I'd be going to these open enrollment meetings with the broker, and too often, the executives were getting pissed off, the employees were pissed off, and these open enrollment meetings were so sad, because the employer's health care costs were going up. They were watering down the coverage. They were shifting costs to the employees, yada yada yada. People were mad. I live in Orlando, Florida, where we're very lucky to have a pioneer in this area by the name of Harris Rosen, who bootstrapped Rosen hotels in 1974 and in 1991 developed what would become rosencare, he actually pioneered his own ways of financing and procuring healthcare for his employees at his hotels. Since then, over the next 30 years, he saved his company over a half a billion dollars on healthcare, not. Not only that, but he did it by providing a superior plan to his employees, and so much so that his turnover rates were a fraction of what his competitors are in the hospitality industry. And he's able to he was able to do all kinds of great philanthropic work, and in our communities, he's actually more he unfortunately passed last year during the writing of my book. But he's more well known for his philanthropic work than anything else, and so you just think about the legacy that he Harris Rosen left because he started, he figured out how to stop wasting and overpaying for healthcare for his employees. So fast forward. I was very inspired by his work, and I kept on wondering, why don't more brokers at least recommend some of the strategies and solutions that Mr. Rosen had pioneered 30 years prior to that? And I very naively thought, Geez, if I just moved to the brokerage side of the business, I can probably scale these innovative solutions. I can probably help some people, and I might even make some money doing it. And as I learned, that's not the business that the brokerage industry is in whatsoever. And so that's a problem. But going back to your question, what was going on in my personal life? So basically, when you work for a national brokerage firm, they'll many of them will give you two options. You can work on 100% commission basis, because you're taking on a lot more risk. Are you just eating what you kill? There's a lot more potential upside, right? Or you can work with a base salary and get much less upside based on your sales. I said, You know what? I've been planning this move for several years. I've saved some money away. I'm going to work on 100% commission basis. So I basically didn't make any money. Make any money for about six months while I was while I was building a book of business. It's a very long sales cycle thing. It's things take a long time to get going. But I had fallen in love with my wife and and we had just purchased our dream home that was one of the oldest houses in our community and and we did you

BEATE CHELETTE:

just say fixer upper?

Donovan Pyle:

Oh yes, yes, yes, I did. I did. And we were fixing it up. Not only that, we had, like, we had basically demoed, like, half the house, like, completely gutted it. We were doing most of the work ourselves. We were working 16 hours a day for a long time, and so I basically taken on a lot of risk throughout this year to help get us where we want to be. When I got fired, I was like, Well, my goodness, look at, look at what's going on here. I was just starting to make money from the sales I had made. The house was in complete shambles. And then I did this is, I mean, this is just ridiculous. Two weeks after that, I, like, severely shattered my ankle working out in the house, so now I'm in the hospital. And a few weeks after that, we find out that Emily's pregnant with our first child. So you talk about a pressure cooker. This was an enormous amount of stress. And I say all that with the context that, listen, I'm a white guy that was born in America in the 20th century. I got no problems, right? But yes, this was an insane amount of stress. And so the only option, really was just an enormous amount of focus on getting this business off the ground, making sure that my first client was successful, and in taking care of my family, there's nothing like a lot of stress to really get you, get you motivated and get in gear. So

BEATE CHELETTE:

that's that, I think, that they call that when there is no plan B, there

Donovan Pyle:

is no plan B, well, yeah, well, yeah, you make your own plan B, right? I mean, you got to figure it out. And, you know, I had a leader in my Boy Scout troop when I was a kid and when I went off to college, he said, listen, when plan A doesn't work, go to plan B, when that doesn't work, go to plan C, and on and on and on. And he was right. I mean, if you think about it, life, life can be difficult, so you got to just be persistent and tenacious in that way.

BEATE CHELETTE:

I really want our audience just to go through this here for a second so you're discovering that there's really something going on in an industry where making money and meeting a bottom line has become more important than doing what the integrity or what the spirit of the business was, which is to help people to remain healthy, to help employers to give good incentives so that their employees are taken care of and now it's just an expense. You said something to me that really stuck with me. You said there's a difference between buying health care and buying health insurance. What's the difference?

Donovan Pyle:

So lots of businesses and executives are under the assumption that, listen, we buy the insurance and we rely on the insurance company to manage our healthcare supply chain. Let me explain. We rely on the insurance company to negotiate the discounts, which equals a price on how much we're paying for hospitalizations, surgeries. Is labs, imaging and drugs, they delegate the management of that healthcare supply chain to health insurers and brokers. If the financial incentives were aligned, that would all be good and fine and but the reality is that the way that the regulatory environment is structured and the way that the market conditions are structured right now, health insurers actually make more money when the underlying costs of hospitalization, surgeries, labs and imaging and drugs go up, not down. Did

BEATE CHELETTE:

you just say they make a commission? Yeah, the more I so if I get sick, let's say I go with my shattered ankle from my renovation into the hospital. If they sold me a shitty insurance and my co payments and my plan costs me a lot of money. Are you saying that they're getting an incentive for that? Yeah.

Donovan Pyle:

So, yeah. So basically, it's essentially a cost plus price fixing scheme. Under federal law in the United States, insurers have to spend 85 cents on every premium dollar on claims, and if they don't spend that money, they got to give the remainder back to the employer. And so Beate that they're publicly traded companies, and they've saturated the marketplace. They're not looking to reduce the revenue slash premiums for the employer. They want their the more their cost basis goes up, the higher their share value goes up. So it's a very interesting regulatory environment in which they work. But just to back up a second, you know, one of the chapters that I have in my book is on the history of this industry. And I think people will find this really fascinating that, you know, health insurance was actually developed not to help patients necessarily mitigate risk. It was really developed to help hospitals during the 1930s during the Great Depression, to stabilize their revenues. Yeah, prior to 1929 there was no such thing as health insurance, and so I detailed they went to the hospital. They couldn't afford it back in the 1900s if you ever watched the great I think it's an HBO special called the Nick about a hospital in lower Manhattan in the year 1900 they couldn't really cure people, right? I mean, they're saying was, their mantra was to keep people comfortable, etc, to keep people comfortable always, to cure seldom. I mean, it was something along those lines, just acknowledging that, like, listen, we're really not capable of doing a whole of helping a lot of these people. We can keep them comfortable, but we're not going to cure most of these people. We just don't know how. But as you know, medical advancements came to the fore, and they started able to cure people, and they started they had to train doctors and sterilize hospitals and all these different things. They had to increase their prices, and many, many of their patients couldn't afford to pay for it. So Baylor University Hospital in Dallas, Texas, said, You know what? We have an idea. What if we got patients we partnered with a large employer in our area and had them pre pay for our services. What would that look like? And so they struck a deal with Dallas, the Dallas teachers union, and said, Listen for 50 cents per employee per month, your teachers can come to our nice, clean hospital and deliver their babies. And that became the first Blue Cross plan, and they they rebranded it as Blue Cross in 1934 here's the kicker, though, here's the thing, exact hospital executives across the country saw the success of this program and how it's how it's helped help stabilize hospital revenues. And they said, Geez, how can we develop our own Blue Cross plans in our own region so that we can stabilize our revenues? And so they actually put up the seed money to found health insurers. They created health insurers as a distribution vehicle for their hospital services.

BEATE CHELETTE:

It's just fascinating. You know what it reminds me of? I was doing an audit of my life insurance, you know, maybe like 10 years ago, and I realized that the insurance, there's the cash value, and there's the death benefit, and I realized that if I continued to pay I the amount that they wanted me to I literally had absolutely no benefit, because my death benefit would not go up, and neither would you mean my cash value may have gone up an insignificant amount of money. And so I asked them, and I said, Well, are you saying that if I pay $500 a year versus $160 a month. I'm still getting the exact same coverage. And they said, Yes. I said, then why? Why would I be paying more money to you? I. If I don't get any benefit. So it's almost like you're saying that there is a knowledge in here that is purposely withheld because it makes the spreadsheet looks better. So what are we doing instead? So now the business owner is listening to this and goes, I'm not liking the way this sounds. What do you recommend they

Donovan Pyle:

do? So basically, there are six steps for healthcare transformation at your organization, and let's keep in mind of what the you know. Why do you want to take these steps? Well, in the current state of things, the average business overpays for healthcare by $4,000 per employee per year, and that's a pretty conservative estimate. Okay, so it's $4,000 that should be sitting on your P and L for every employee that you have at your firm is going towards health insurance, and it's being wasted. I want executives listening to to think about what you could do if you had even just another $1,000 per employee per year in profits for your organization. What could you do with that? You know, investing in R and D, sales and marketing, on and on and on all these it creates all of these opportunities, which is fantastic. But as far as the transformation, how do you unlock that trapped capital? The first step is to get unbiased advice. If you're not getting unbiased advice on how to maximize the return on your benefits investment, you have absolutely no chance of reclaiming that lost profit because the people you're relying on financially benefit from that waste. Okay? They're not going to show you how to do these things. The bet the brokerage industry was designed to sell products, not give you financial advice. Financial advice is a service, right? It's a very different business than selling insurance products, and so they're just not tool to do that. So where do you find unbiased advice? How do you get it? There are two ways. Number one, you can do what you know. People like Mark Cuban have been advocating for across the country with CEOs, and he's saying, Listen, you need to bring benefits expertise in house. So if you're a company that has more than a few 1000 employees, you absolutely want to start strengthening your benefits team in house. This way you're definitely getting unbiased advice. They work for you, right? They're on your payroll, okay? But there's a whole bunch of companies out there that don't have that scale where bringing resources in house will necessarily make sense. So what do those businesses do? So for those businesses, what you want to do is you want to find and partner with a fiduciary based management consulting firm that actually specializes in healthcare, financing and procurements, right? They will protect your blind spots. They serve in their contract with you as a fiduciary to you, and they specialize in this area that your in house teams don't understand, don't know where the land mines are, and they will protect you. So for a list of them, you can go to there's an organization in Boston called the validation Institute, full disclosure on I'm a senior advisor there, but they have a list of fiduciary based management consulting firms, and I would invite you to take a look at them.

BEATE CHELETTE:

I like this a lot, and can I, but people can just get out of their contracts right? Contracts usually are done for the entire year, so they'll have to do this ahead of time and then wait until the contracts are expiring in order for them to

Donovan Pyle:

do this. Okay, can I level set there? I've got that. I'm

BEATE CHELETTE:

asking these educate. I think this is so freaking shocking to say that I'm going to an insurance company and I'm going to subject matter expert, because it's not my subject matter expertise, but all the time, they're only incentivized to line their own pocketbooks and not really watch out for me. Sort of watch out for me. Ish,

Donovan Pyle:

ish. There's a layer of apathy. Okay? And listen, I want to be perfectly clear, America needs benefits professionals now more than ever. Okay, and there are thousands and thousands of benefits professionals across the country who tirelessly work to help their customers. The challenge, though, is that they are stuck in a legacy system that does not reward them for doing so. Okay, so think about this, the more effective you are at your job, right? The less money you're going to make. Who wants to do that? Nobody. Nobody wants to do that. So what? I'm trying to do with my work here, as far as the industry goes, is to shine a light on and say, Listen, here is a path forward to evolve so that you can actually be rewarded for doing the right things and helping your customers and giving them what they need. Don't get penalized for helping your customers. Nobody wants to work in that environment, especially with the younger generation. They don't want that. They want a mission. They are mission driven people. If we look deep down inside, we want a purpose and we want a mission. So I just want to put that caveat out there. It

BEATE CHELETTE:

sounds like what you're saying is, if you came to me and I have, let's say, 2030 employees, and you're telling me that you're saving me on average, 20, 30,000 $40,000 a year on, and I'm getting better benefits. And when they have babies and they're being better taken care of, why would I not want to pay you an incentive for that 100%

Donovan Pyle:

I mean, if any marketing company. If there are any marketing companies listening, and

BEATE CHELETTE:

you want to hello and you want to work on a Hello, are you here? Yes. Are you listening?

Donovan Pyle:

I will give you my email address, and let's schedule a meeting right now. If you want to work on a performance basis, let's do it. Let's go. I'm all ears. And yeah, I mean, it's just That's how powerful incentives are so, yes, I mean, but so here's the thing I want to I want to go back to your previous comments about the timing of when you can switch benefits firms, when you can switch from a broker to a management consulting firm. Here's an analogy that kind of describes the role, and that is that you know your broker or your management consulting firm. They are your navigator on the ship. They're the one pointing the ship in a particular direction and hopefully getting you to where you want to go as an organization. They are not the ship themselves. The ship themselves is the health insurance products, the policies, yada yada yada underneath that, okay, so you can change your navigator almost any time without changing your ship. Okay. The only exception to that rule that I would say is that you don't want to change your navigators right before your renewal date, because, you know, it's kind of there is certainly an implementation process. And to mix metaphors, you don't want to start remodeling your kitchen the weekend before Thanksgiving. Probably not a good idea, but you don't. What you don't want to do is wait till you know you get this 30% renewal increase and then say, oh geez, we should probably start looking for a second opinion. That's going to be a tough, tough time to tackle that

BEATE CHELETTE:

problem. Thank you for that. And so for somebody who now goes, I really cannot do this by myself, why don't I talk to Donovan? Where do we send them? Donovan? What help do you have for

Donovan Pyle:

us? Sure, so you can go to fixinghealthcare.com and we're building out a bunch of resources there. And, yeah, just reach out and grab an executive summary of my book, which is coming out to mid-November, and happy to have a conversation.

BEATE CHELETTE:

And I really appreciate you coming on the show and sharing some of this information. Thanks so much. Yeah, I'll be, you know, I think this really good information. This information does need to be out there, and I'll be more than happy to help you in any way I can, because this is, this is not right. What's being done,

Donovan Pyle:

agreed, it's not only not right, it's not sustainable either. So either we're going to fix it through in an orderly fashion, or we're going to have, you know, even bigger political problems than we have today, 100%

BEATE CHELETTE:

thank you so much for being on the show, and that is it for us for today. Thank you, and thank you everybody for listening. If you like this show, please share this episode with somebody who needs to hear what we talked about today, and I see you again next time. And goodbye. That's it for this episode of the Business Growth Architect Show, Founders of the Future. If you're done playing small and ready to build the future on your terms, subscribe, share and help us reach more Trailblazers like you. And if you're serious about creating, growing and scaling a business that's aligned with who you are, schedule your uncovery session at uncoverysession.com lead with vision. Move with purpose. Create your future.

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Beate Chelette

Host
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Donovan Pyle

Guest

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