Rep. Steve Gottwalt, R-St. Cloud, pictured in his office in St. Paul, Minn., on Thursday, Nov. 29, 2012, sponsored a bill designed to divert some recipients of the state-subsidized health insurance program MinnesotaCare to the private insurance market. MPR Photo/Jeffrey Thompson

A Republican state representative who steered legislation through the House to drop thousands of people from the state-run MinnesotaCare program is an independent contractor for an insurance brokerage firm that lobbied for the change.

State Rep. Steve Gottwalt, R-St. Cloud, led the GOP effort to cut spending in the state's Health and Human Services budget when the Republicans controlled the Legislature. Now, both he and his Senate counterpart have business links to the insurance industry, which has some other lawmakers asking whether the arrangement violates ethics rules.

Gottwalt, who served as chairman of the House Human Services Reform Committee, sponsored a bill that was designed to divert some recipients of the state-subsidized health insurance program MinnesotaCare to the private insurance market.

Months after the legislation passed in July 2011, Gottwalt obtained a license to sell insurance and became an associate with a firm that pushed for the bill.

Gottwalt contended there was no conflict of interest and that he was not breaking any laws or rules.

But some Democratic lawmakers are raising questions about the arrangement.

"I can see why the owner of the business was pushing for the bill. It's more business for him," said Sen. John Marty, DFL-Roseville. "The fact that [Gottwalt] is now working for him, I'm disappointed in that."

Health insurance brokers backed the legislation, championed by Gotttwalt's counterpart in the other chamber, state Sen. David Hann, R-Eden Prairie.

The incoming chairman of the House ethics committee, Rep. Tom Huntley, DFL-Duluth, said: "If these are payoffs, then the ethics committee needs to look at it."

When Republicans took over control of the Legislature two years ago and confronted a big budget shortfall, one area they identified for cost savings was the state's Health and Human Services budget. Gottwalt then tried to sell his colleagues on the plan to trim people from MinnesotaCare.

GOTTWALT SELLS THE PLAN, THEN SELLS INSURANCE

"This is a new approach," Gottwalt told his colleagues in 2011. "It gives them a subsidy to buy that coverage in the private marketplace like the rest of us do, and it takes a new role for Minnesota that is both sustainable and healthy for the state in terms of Health and Human Services programs."

Boys and Tyler Financial Group in Eden Prairie, Minn., offers health and retirement insurance plans. Rep. Steve Gottwalt, R-St. Cloud, the chairman of the House Health and Human Services Reform Committee, is a licensed insurance producer for Boys and Tyler Financial. MPR Photo/Jeffrey Thompson

In July, more than 4,000 Minnesotans were dropped from MinnesotaCare and given the option of enrolling in the new insurance plan, the Healthy Minnesota Contribution Program. It was Gottwalt's plan, which Gov. Mark Dayton signed into law as part of the deal that ended the state government shutdown.

But between the time the bill passed and when people lost their MinnesotaCare coverage, Gottwalt became licensed to sell insurance. State records show he sells insurance products for 11 companies. Hann received a license to sell insurance in June 2012.

One of the new program's biggest advocates was John Tyler, an insurance broker who testified in support of Gottwalt's bill in numerous committee hearings.

"The objective here, without question, is to improve things, to improve access to health care, to improve the quality of the care that they are receiving," Tyler said in a 2011 committee hearing on the bill.

But the law also opened a new market for insurance brokers, because they receive commissions from HMOs for the insurance they sell.

Gottwalt's bill required the state to create a website to refer applicants to health insurance agents who can help them find coverage -- and he is now listed as one of those agents. Tyler's firm, Boys and Tyler, is listed as a broker on the site. The firm's website also lists Gottwalt as an associate. Tyler and Gottwalt say Gottwalt is an independent contractor who shares commissions with the firm on sales.

Tyler agreed to an interview with MPR to discuss his role, but later cancelled it and did not return calls.

SOME LAWMAKERS RAISE QUESTIONS

Gottwalt's involvement with Tyler and his role as an insurance agent came as a surprise to some members of the Legislature. Some said the arrangement raises questions about disclosure and conflicts of interest when lawmakers push bills from which they could potentially benefit.

Gottwalt never brought up his role as an insurance broker during committee hearings in the 2012 session. Minutes also showed that he did not disclose his position at meetings of a health care task force aimed at implementing the federal health care law.

"The least you can do is have it fully disclosed, because if it's disclosed, the public might say, 'I smell a rat.'"

When Gottwalt submitted the Statement of Economic Interests form that legislators are required to file with the Minnesota Campaign Finance Board, he did not disclose that he sells insurance. The form lists only his role as owner and president of Steve Gottwalt Consulting.

Gottwalt said his page on the social media site LinkedIn shows he sells insurance and has a relationship with Tyler.

As for the Healthy Minnesota Contribution Program, Gottwalt said he hasn't sold to those clients.

When asked whether he had a conflict of interest, Gottwalt said he saw nothing wrong in working with a business owner who actively lobbied him to pass legislation.

"John Tyler and I have been working together on health care reform in Minnesota for almost six years now, and it made sense for us at some point to partner and to work on some of this stuff," Gottwalt said. "We believe in market-based reform. The fact that I'm involved in that doesn't mean we were sneakily trying to come up with something to benefit ourselves. It's actually the other way around because we worked together."

Even after he started selling insurance, Gottwalt authored legislation that would benefit health insurance brokers. Minnesota's conflict of interest laws say elected officials cannot act, vote on or push legislation that directly benefits them or an associated business.

Gottwalt said he was no different from legislators who hold jobs as teachers and vote on education-related bills or farmers who shape agricultural policy.

"If I were taking in 20 or 30 people and getting in lots of commissions off of them, you might have an argument," he said. "But you would still have to argue that we'd built and passed legislation to benefit Steve Gottwalt, and that's simply not the case.

"It is a market-based reform. It certainly puts people in private health care coverage. I have been making that case since Day 1. That's no different. It doesn't benefit me uniquely, but the fact is I haven't made one red cent off of it."

That's difficult to verify because commissions between HMOs and insurance brokers are private. Gottwalt said the commissions he shares with Tyler come from group health insurance sales unrelated to the Healthy Minnesota Contribution Program.

While Gottwalt said he does not see a problem with the business relationship, other lawmakers are concerned.

SEN. DAVID HANN'S CONNECTION

Tyler's relationship with legislators goes beyond Gottwalt. He also has a connection to incoming Senate Minority Leader David Hann.

Hann, a Republican, was the chief Senate author of the Healthy Minnesota Contribution Program and the chairman of the Senate Health and Human Services Committee. Like Gottwalt, Hann renewed his license to sell insurance in June and listed on his campaign website that he is a "partnering agent" with Boys and Tyler.

State Sen. David Hann, R-Eden Prairie, in a file photo from November 2011. Hann sponsored a bill designed to divert some recipients of the state-subsidized health insurance program MinnesotaCare to the private insurance market. MPR Photo/Elizabeth Stawicki

Hann also recently joined the board of directors for the Minnesota Association of Health Underwriters, which lobbied for the bill. Tyler is also a board member.

State records show Hann has not been appointed by a company to sell insurance yet, and he said he isn't sure if he will. He said he has not received any money from Boys and Tyler.

"What I did was perfectly legal and legitimate," Hann said. "I did not have a license at the time I did that, was not contemplating having a license at the time I did that. After the fact, I got a license, [which] would no different than anybody in the state of Minnesota who decided to get a license after the law was passed."

Like Gottwalt, Hann lists his occupation as "consultant" on state forms. State law does not require lawmakers who work as consultants to disclose the source of their compensation.

Marty, the Roseville DFLer, wants to change that. He said legislators should have to disclose their business ties if they list themselves as consultants.

"A case here where the business you're working for is the one that's coming there to the Capitol to lobby something that will particularly help people very much in their specific line of work, insurance brokers and the like," Marty said. "I'm saying you can't prevent it. I'm saying the least you can do is have it fully disclosed because if it's disclosed, the public might say, 'I smell a rat.'"

For his part, Gottwalt said he has been open about his business relationships. He said he saw the criticism from Democrats as politics and a distraction from his work on health care.

"It does seem partisan," he said. "I haven't made this a mystery. I haven't stood on the table and yelled it out, but I haven't benefited from it directly or indirectly. And for anybody that implied that this motivated my support for this particular bill is disappointing."

Gottwalt has pushed in the past to expand the Healthy Minnesota Contribution Program to a greater number of MinnesotaCare recipients, but he said he is not interested in that now.

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