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Vol. 72, No. 6, June 1999 |
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."
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