Group & Prepaid Legal Service Plans: A Way to Build Your Practice

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.

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