Group & Prepaid Legal Service Plans: A Way to Build Your
Practice
As the legal equivalent of health insurance, group and prepaid
legal service plans foster preventive law by making legal services
affordable to more people. While these plans can boost a lawyer's
business, they require careful scrutiny before getting
involved.
By Dianne Molvig
t's human nature to postpone anything that may
cause pain, bring bad news, or cost too much. Thus, most people put off
seeing the dentist, the doctor ... and the lawyer. It's some consolation
that a good health insurance plan, for those fortunate enough to have
one, will pay for the first two. But for most consumers, attorney fees
are something they have to pay out of their own pockets.
No wonder contacting a lawyer ends up on the
bottom of most people's lists. They procrastinate making the call or,
worse, never do make it. Attorneys know all too well the potential
consequences of such inaction: What once was a minor legal matter
mushrooms into a full-blown legal disaster before a client seeks
help.
The movement to establish group and prepaid legal service (GPLS)
plans, dating back nearly 30 years, aims to remedy that situation. As
the legal equivalent of health insurance, GPLS plans foster preventive
law - that is, preventing legal questions from becoming legal problems.
"Lawyers have an ethical duty to make legal services available to
everyone," says Milwaukee attorney Tom Domer. "That ethical duty is
well-served by participation in legal service plans because they take
away the consumer's initial reluctance to telephone an attorney."
A common denominator among all legal service plans is the provision
of at least some legal help for free, in return for paying a reasonable
fee to join the plan. From there, plans vary widely in what they cost
and what legal services they cover. Typically, a plan will cover free
consultation, often by telephone, plus additional basic services, such
as document review or preparation of a simple will. In some plans, help
for more complex legal matters is available from participating attorneys
who agree to charge a discount rate.
Sometimes the employer pays the fees for employees as a company
benefit. Or plan members may pay part or all of the fees themselves,
through payroll deduction, union dues, or other methods. Many people
join a plan through their workplace, union, or other organization, while
others sign up for individual enrollment plans offered through banks,
credit unions, credit card companies, or prepaid legal service companies
that market plans directly to the general public.
Whatever form it takes, the idea behind a GPLS plan is to make legal
services more affordable to more people. While indigent people charged
with a crime have a right to legal help at no cost, and the rich can
hire all the legal advice they can afford, "it's the people in the
middle who don't always have access to legal services," points out
Milwaukee attorney Karma Rodgers. "That's what the group and prepaid
legal services industry is designed to provide."
Lawyers Benefit, Too
Consumers aren't the only ones who stand to gain from legal service
plans, Rodgers notes. In her 10 years as a practicing attorney, she's
participated in two national legal service plans, one for five years,
another for three years. She credits the plans with boosting her firm's
income by at least 50 percent compared to the days when she had no plan
involvement. It's helped her firm grow from a one-lawyer operation to
having a total of five attorneys.
"It's generated more income for the firm," Rodgers says, "and we
don't have to advertise as much as we once did. Before, I spent a great
deal of money on advertising, but I wasn't always sure I got the return.
If you have 3,000 members in the plan, at some point one of those 3,000
will call. The clients come to you, rather than you having to go out to
find the clients."
Just as plans vary widely in what they offer to the consumer in
services and costs, there also are diverse models for attorney
involvement. For example, one of the plans Rodgers belongs to has two
groups of law firm participants: access providers and service providers.
As an access provider, Rodgers' firm does only telephone consultations
and simple wills. Plan members needing additional help are referred back
to the plan company, which then passes the matter on to a firm in the
service provider group.
Under the second plan, Rodgers provides telephone consultation,
simple will preparation, representation for traffic violations, and
other basic services covered by members' plan premiums. For legal
services beyond those basics, she works for members at a rate of up to
$95 per hour. Her firm is the exclusive provider within Wisconsin under
this plan, meaning she fields calls from members statewide. As the
state's provider firm, she's responsible for recruiting attorneys who
will serve plan members throughout the state.
"If it's a misdemeanor or real estate transaction in Eau Claire, it's
not cost effective for us to drive up there to handle the matter,"
Rodgers explains. "So we find attorneys in that area who will provide
the service for up to $95 per hour. Other cases in Milwaukee, Racine,
and Kenosha we handle ourselves."
Under the telephone access plan, Rodgers' firm is paid per call,
while in the other plan her firm receives a captivation fee per member
for providing the basic services. Services beyond basic are billed
directly to the client at the discounted rate. Rodgers says that about
20 percent of her firm's time now goes to serving plan clients, who
account for an average of 40 to 50 inquiries per week.
Unlike Rodgers, Eau Claire attorney John Wilcox gets little business
from the three national plans his firm participates in, averaging about
two cases a month. "It amounts to less than 1 percent of our total
business," Wilcox says. "But it's worth it because it involves very
little on our part other than signing an agreement that we're willing to
(provide services). We don't pay a fee. We get paid at a slightly lower
rate than our normal charges, but it's for business we probably wouldn't
otherwise have."
Other key advantages to attorneys are spinoff and referral business,
points out Domer, who's participated in legal service plans for 20
years. Plan members may pass the attorney's name on to friends who are
not plan members. Also, members often use the attorney for additional
matters not covered under the plan, such as estate planning or a
personal injury matter. "Legal service plans also are a good way for
start-up attorneys, who may not have other contacts, to cultivate
clients," Domer says. Some plans, however, require a minimum number of
years of experience before an attorney can sign on as a provider.
Sizing Up a Plan
While plans can boost a lawyer's business, they also require scrutiny
before getting involved. Some plans have turned out to be scams that
promised a guaranteed number of clients and assessed lawyers a hefty fee
to participate, but the clients never materialized. Some Wisconsin
attorneys were stung by such a marketing ploy a few years ago.
What should you look for in evaluating a plan? For John Wilcox, one
of the first tests is examining the plan's intention. "Is it just a
money-making scheme for the people promoting it, or is it really an
attempt to provide legal services to a membership base? If it's the
latter, we're interested. If it's the former, we're not," he says.
Wilcox also has shunned any plan asking him to pay a fee to
participate. Another attorney who shares that sentiment is Jay Nixon of
Racine. He's worked for 10 years under a variety of plans, which all
told account for about one-third of his firm's business. "Usually I
wouldn't give a second look to plans that want money from you," Nixon
says. "Too often those turn out to be boiler-room operations, or they
have no intention of ever doing anything but pocketing that money."
One exception that initially attracted Nixon, although he's since
dropped his involvement, is the relatively new legal service plan
sponsored by the American Association of Retired Persons (AARP). AARP's
arrangement with attorneys is somewhat different in that lawyers pay a
flat amount for each area of practice in which they wish to be listed
and share the costs of advertising in their local yellow pages. Some
Wisconsin attorneys are deciding AARP is worth the investment,
considering it's an organization with a solid reputation and 670,000
members in the state, many of whom are prime candidates for legal
services.
Nixon also advises attorneys to check into a plan's payment system.
Does the plan pay the attorney directly for services rendered, or do you
have to bill clients yourself? Nixon has a strong preference for the
former. Considering he's already working at a reduced rate, he doesn't
want the hassle of chasing after the client's payment. In fact, that's
the primary reason he dropped his involvement with AARP. "In return for
accepting lower compensation," Nixon notes, "instead of getting
guaranteed payment, you get the guarantee of an argument. That's not
much of a service in my opinion. Although I'm still with some of those
plans (in which he must bill clients himself), I'm actively lobbying
those plans to change the way they do it, and go to the prepaid model
instead." In the latter, the plan administrator pays the lawyer
directly, just as health insurance companies pay health-care
providers.
Plan companies market heavily to lawyers, by mail or telephone, to
enlist them into their networks. The best way to protect yourself from a
scam is to check with the State Bar of Wisconsin Group and Prepaid Legal
Services Committee, points out Domer, a past committee chair. The
committee monitors whether plans offered in Wisconsin comply with the
Wisconsin Supreme Court Rules. Wisconsin lawyers can participate only in
plans that pass the committee's approval. "We're also a resource for
attorneys," Domer says. "They can check with us about a plan to see if
we've had any experience with it." (Legal service plans are generally
exempt from insurance regulation if the total annual cost does not
exceed $200 per member and the plan's services are limited to advice,
consultation, and preparation of routine documents.)
Even if a plan is on the Bar's approved list, you'll need to look
closely at the contract to be sure the arrangement works for your firm,
in light of the diverse assortment of arrangements available. In
reviewing the contract, "treat it as if you were doing this for a
client," advises Alec Schwartz, director of the American Prepaid Legal
Services Institute in Chicago. "You ought to do the same kind of due
diligence as you would for a client."
Is It Right for You?
Generally, plans are best suited to small- to
mid-size firms that need to expand their client base; larger firms
usually have other client-generation strategies available to them. "The
main thing, however, is that you are in general practice," Schwartz
says. "These cases are not business problems; they don't tend to be big
cases. These are standard, everyday legal problems that people need help
with. If you enjoy that kind of practice, then this may be for you."
Another factor to consider is whether legal service plans match your
personal philosophy about law practice. It works best when you're
"philosophically in tune with the idea that people should have better
access to lawyers," Schwartz says, "and when you're interested in the
people who call you. If you feel you already have a pretty good practice
and steady referrals, and you don't want to talk to a lot of new people,
don't do this."
Any lawyer worried about being inundated and interrupted with
members' calls would best avoid getting involved in plans, Schwartz
advises. "You have to have the attitude that those calls are not
burdens, they're opportunities," he says. He also recommends that if a
lawyer decides to work with one plan,
he or she may as well participate in several, thereby enhancing chances
for client contacts.
People skills are crucial for any lawyer in general practice, and
perhaps all the more so for attorneys involved in legal service plans.
Because plan members have legal advice readily at hand, they may be
inclined to call with trivial complaints, not just genuine legal issues.
Patience and willingness to listen are vital attributes for plan
attorneys.
Also, members - especially those paying the fees themselves - may
have unrealistic expectations. "Every once in a while," Rodgers notes,
"you run into an individual who believes the attorney ought to be able
to move mountains, without charging any more (than the membership fee to
cover basic services). For a complicated matter, the question comes up,
'Why am I paying a fee if I have to pay you more money to handle this
matter?' That is one challenge. You have to handle such situations
gingerly."
Lawyers' expectations also must be realistic. Attorneys signing up
with a plan and counting on having their firm's business double in six
months are setting themselves up for disappointment. Keep in mind that
this is a client-development tool, not a magic bullet. "What I tell
lawyers is that if this is a matter of you just getting on a panel, and
you're not otherwise obligated (to pay a fee, and so on), then this is a
no-brainer," Schwartz says. "If you're in general practice and you want
some new clients, with low-cost marketing, put your name on the list.
You may get some clients or no clients, but you have nothing to
lose."
A Square Deal All Around?
Legal service plans have raised questions and concerns, however, for
both lawyers and consumers. For attorneys, one worry is ending up in a
financial bind; the reduced rates they agree to work for may not fairly
compensate for time invested in serving plan members. To avoid that
problem, the key is to be as efficient as possible, say attorneys with
plan experience. Success from a business standpoint hinges on delegating
work to paraprofessionals and smart use of technology - strategies many
attorneys, whether in plans or not, find vital to making it in today's
marketplace.
A Glance at Legal Service Plans
Operating in Wisconsin
Below are a few statistics gleaned from the 1998 annual reports
submitted to the State Bar by legal service plans operating in
Wisconsin. Services covered ranged from phone consultation only to more
comprehensive services.
Number of national plans operating in Wisconsin:
43
Estimated number of plan members in Wisconsin: 1.5
million (not all plans have figures)
Types of sponsors: labor unions, corporate
employers, colleges, credit unions, professional organizations, small
business owners, independent consumer groups
Most prevalent areas of inquiry (descending order):
domestic relations, landlord/tenant, real estate, wills/estate planning,
criminal, city/municipal ordinances, creditors' rights, contracts,
traffic, employment, bankruptcy (the area accounting for the most users
was "other")
|
Another pitfall to safeguard against is what Domer calls "intake
burnout." An attorney can get bogged down handling inquiries and
telephone consultations, which may not lead to any substantive legal
work. "That can result in frustration for the intake attorney," Domer
says, "because he or she doesn't see the cases through to fruition. The
calls may be more counselor as opposed to lawyer questions. So you need
to rotate intake (among the firm's attorneys) and assure there's ample
support staff." For sole practitioners, of course, there's no one to
rotate to. The only remedy is to keep reminding yourself those calls are
opportunities that could eventually lead to substantive work.
Some critics have questioned whether plan participation could place
an attorney's professional independence at risk. For instance, plan
members might steer toward use of basic legal services, because those
already are covered in the plan, rather than asking for other legal
services they really need, but can't or don't want to pay for
themselves. And what happens if an attorney spots a conflict of
interest? Or realizes he or she can't possibly do an adequate job on a
case for the compensation offered? Some lawyers foresee potential
problems paralleling those that doctors already face in HMOs.
But Nixon doesn't feel he's sacrificed his professional autonomy. "I
don't have problems in the plans we deal with," Nixon says. "They do a
good job of selecting the basic services people need. I think the free
market will sort that out to some extent. If the plans aren't providing
what people want, people won't subscribe to them."
Nixon has met good cooperation in gaining approval for additional
fees for additional services, in instances when the plan pays for those
rather than the individual. Also, in good plans the attorney always has
the right to decline cases. The Wisconsin Supreme Court Rules mandate
that plans operating in this state protect that right. "If I think
there's a conflict," Nixon says, "or I don't think I can do the job
because I'm not getting paid a fair rate for that particular service, I
have the right to say no. The plan doesn't own you."
As for consumer concerns, critics question whether plans'
discount-rate legal services could result in lesser quality. This echoes
arguments that arise in debates about the merits of the flat-rate fee
versus the billable hour. "That's an issue whether you're working
through a legal services plan or for an individual client," says Bill
Bolger, executive director of the National Resource Center for Consumers
of Legal Services in Gloucester, Va. "I don't think that issue is faced
in any greater degree in legal services plans."
Good plans also provide consumers formal mechanisms to register
complaints. "What a plan does offer to the consumer is, if anything, the
incentive for the lawyer to do a better job," Bolger contends, "because
an unhappy client has recourse through a plan. The plan is a repeat
player in a way the individual consumer is not. A plan has clout, like a
major client. So the incentive is to make sure the plan member is well
taken care of."
Bolger notes that 105 million Americans now are legal service plan
members, according to 1997 figures. He estimates a 1998 increase in
membership of about 7 percent, and he expects the number to keep
climbing every year.
That's good news to lawyers like Jay Nixon, who already have their
foot in the door. "More and more consumers are subscribing to plans, and
that's making it more worthwhile for lawyers to be involved," he says.
"We have a head start in knowing how to work with them. It's a slow wave
right now. But lawyers who represent consumers are going to have to deal
with this eventually."
Dianne Molvig operates Access Information Service, a Madison
research, writing, and editing service. She is a frequent contributor to
area publications.
Legal Service Plans Terminology
Automatic enrollment group plan - All members of the
sponsoring organization automatically are members of the plan (although
they might not use it).
Voluntary enrollment group plan - Members choose
whether to join and pay the enrollment fee or premium (usually covers
all household members).
Individual enrollment plan - Not sponsored by a
group, this plan is marketed to individual consumers.
Prepaid plan - Members, employers, or sponsoring
organizations pay in advance to participate. All voluntary and
individual enrollment plans are prepaid.
Access plan - Members have easy access to legal
advice and services, usually in the form of free in-office or telephone
consultation and basic follow-up services.
Comprehensive plan - Provides additional legal
services on demand in return for a fee or premium. Benefits and fees
vary considerably from plan to plan.
Open panel plan - Members choose their own lawyers
under this plan.
Closed panel plan - Members must consult the lawyer
or lawyers selected by the plan.
Modified panel plan - This plan has a closed panel
that any lawyer can join.
Sponsor - The group or organization that endorses
the legal services plan and, in some cases, pays fees for its
members.
Provider - The lawyer who gives advice and
assistance to members.
Member - The individual who receives legal services
under the plan.
Administrator - The party who handles enrollment,
billing, accounting, and so on.
State Bar Group & Prepaid Legal Services Committee
The Group & Prepaid Legal Services Committee monitors whether
plans offered in Wisconsin comply with the Wisconsin Supreme Court
Rules. Wisconsin lawyers can participate only in plans that pass the
committee's approval. To find out whether a plan is on the Bar's
approved list or if the committee has had any experience with a plan,
please contact any committee member.
Another way to Generate Clients:
Register for Lawyer Referral and Information Service
The State Bar of Wisconsin Lawyer Referral
and Information Service (LRIS) offers members an opportunity to
reach new clients and build your practice. Registration for the
1999-2000 Lawyer Referral and Information Service panel is underway. The
new panel year begins July 1.
LRIS offers a wide variety of areas of practice to choose from
including: family law, criminal law, probate, real property,
business/corporate law, administrative agencies, alternative dispute
resolution, elder law, constitutional law, tort/injury, school, taxes,
commercial/consumer law, bankruptcy, federal issues, municipal law,
immigration, intellectual property, and labor/employment law. LRIS also
has added five new specific areas: Internet law, Y2K compliance issues,
qualified domestic relations orders, ERISA, and school harassment.
For more information, contact Shell
Goar at (800) 444-9404, ext. 6172, (608) 250-6172; or Jennifer Kersten at (800)
444-9404, ext. 6171, (608) 250-6171.
Wisconsin Lawyer