In a substantial news piece today in both the New York Times and Politico, it seems that both parties are coming to the rescue of the endangered health insurance broker! Don’t look now, but there are about a half million health insurance brokers that are buying new cars today! (I bought one over the weekend).
Somehow, our weakened brethren have attracted bipartisan support for our beleaguered cause. (Yes this is dripping wet with sarcasm!) Currently, on individual health insurance, there is a new Medical Loss Ration of 85 cents of every dollar being paid to medical costs. The first year commissions for most individual products was right around 20% up until this year (now it is closer to 10%). Second year and forward commissions usually dropped to an average of about 5% (and that stayed pretty close to that level). This meant about a 50% drop in income for most health insurance brokers who have either left the business or figured out a way to cross sell other products such as life insurance or disability.
One of the best arguments I heard about health commissions was that because health insurance premiums increased every year, why should brokers get 10% raises every year? This is a great point in theory, but in practice actually most consumers opted out of their plans and went with either another less expensive carrier or lowered their benefits to keep their premiums at the old rates. In essence most brokers made the same money every year unless they pursued aggressive growth. Still, I am of the opinion that most brokers were overpaid when compared to property & casualty insurance brokers who average about 10% across the board (I would have loved this). But, most health insurance plans only last about 9 months before they are canceled as opposed to p&c which last considerably longer. Some brokers have also discussed moving toward more of a fee-based system of being paid, where the person or company buying coverage would pay a fee for the broker’s services.
The other argument is that we as brokers will have increased volume once health insurance is available (and even mandatory) and in theory that is correct, though we will be competing with the US government and their healthcare site which has a huge amount of funding behind it. Also, this volume will go to brokers/brokerages like me that have large internet presences, not the small guys that work alone that might actually visit you in your house.
“Many agents are seeing a net reduction of their business incomes of 30 to 50 percent. This means that fewer agents and brokers will be able to afford to stay in business, and many will have to begin reducing services to their clients and cutting jobs,” she said.
In conclusion, I am not sure of what should be done about this commission issue as I am a broker and a in fact someone that believes health insurance is a right not a privilege. But I also am sure that this new law will make us compete with the US government which to me reeks.
