IBJNews

Brokers get hope on commissions

Back to TopCommentsE-mailPrintBookmark and Share

Health insurance brokers got a glimmer of hope last week that their fees might not get squashed by regulations coming from the 2010 health overhaul.

The National Association of Insurance Commissioners passed a resolution Nov. 22 that urges Congress and the Obama administration to exclude benefits brokers’ commissions from the new requirement that insurers spend only 15 percent to 20 percent of the premiums they collect on administration and profits. Any spending over that amount must be refunded by insurers to consumers.

Insurers’ efforts to reach that new goal, which is called a medical-loss ratio, or MLR, has led nearly all of them to squeeze commissions to benefits brokers. For example, Indianapolis-based WellPoint Inc. changed its commissions so that they no longer rise from year to year with premium increases, but only if a particular broker actually signs up more people to WellPoint’s health plans.

“Almost all of the insurers said they had decreased or planned to decrease commissions to brokers in an effort to increase their MLRs,” reported the U.S. Government Accountability Office in an August report on the issue.

The change has accelerated consolidation among brokers, particularly those that serve small employers. In Indiana, many brokers have sold their firms to Florida-based Brown & Brown Inc. Its net premiums written have soared from $190 million in 2006 to $915 million last year, according to IBJ research.

The Obama administration classified broker commissions as an administrative expense a year ago, largely following a proposal from the National Association of Insurance Commissioners. A year later, the organization has changed its tune, although the vote on the resolution was close, according to The Wall Street Journal. It passed by a vote of 26-20, with five commissioners abstaining.

There is support for removing brokers’ commissions from the MLR calculation in both Congress and the Obama administration. A bipartisan bill, H.R. 1206, is pending in Congress, which would declare broker comissions as neither a medical nor administrative expense.

However, the insurance commissioners noted that the bill is unlikely to pass in the bitterly divided legislative climate.

So the commissioners appealed to Obama’s Department of Health and Human Services to take action. HHS could approve state requests to remove broker commissions from the MLR calculation, order a halt to the implementation of the rule for brokers only, or reclassify broker commissions as an effort to improve health care quality, which would be counted as a medical expense, not an administrative one, under the rule.

The chances of the insurance commissioners’ recommendation being adopted are unclear.

In an August speech in Fishers, Janet Trautwein, CEO of the National Association of Health Underwriters, said Obama advisers in the White House worry that so many brokers will be forced out of business that it could undermine another key part of the health reform law: the health insurance exchanges that will serve as the main marketplace for individuals and small business to get health coverage. The exchanges will also be the place where consumers go to get subsidies for health insurance, one of the law’s key mechanisms for expanding overall health coverage.

Those exchanges are scheduled to begin operating in 2014.

“They actually want agents and brokers to remain part of the process,” Trautwein said of her contacts at the White House. “They worry that brokers and agents won’t be around in 2014 to enroll people in the exchanges.”
 

ADVERTISEMENT

  • HHS
    HHS just came out with their interim final rules and final rules, and did not discuss MLR. Brokers are the losers in this one...
  • Commissions
    Your analysis relies on poor assumptions. First, the broker fees are not flat; they rise with more employees before falling. Therefore, the amount paid to brokers would be more. Second, $10,000 per employee per year is on the high side. The percentage paid to the broker would be greater than 2%. Finally, assuming brokers are paid more like 3 - 5%, that becomes a large part of what is allowed for administration and profits. The conclusion is that insurance companies would benefit by removing agent compensation from the formula either by the proposal or by cutting fees .
  • Commissions
    Consider that Anthem pays a flat fee of $17.00 per person per month for commissions confuses me. Soooo... a group with 5 employees that pays $50,000/yr in premium pay the broker $1,020.00/yr to service this. That amounts to a 2% comm rate....peanuts in the grand scam of things.

    Post a comment to this story

    COMMENTS POLICY
    We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
     
    You are legally responsible for what you post and your anonymity is not guaranteed.
     
    Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
     
    No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
     
    We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
     

    Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

    Sponsored by
    ADVERTISEMENT

    facebook - twitter on Facebook & Twitter

    Follow on TwitterFollow IBJ on Facebook:
    Follow on TwitterFollow IBJ's Tweets on these topics:
     
    Subscribe to IBJ
    1. I had read earlier this spring that Noodles & Co was going to open in the Fishers Marketplace (which is SR 37 and 131st St, not 141st St, just FYI). Any word on that? Also, do you happen to know what is being built in Carmel at Pennsylvania and Old Meridian? May just be an office building but I'm not sure.

    2. I'm sorry, but you are flat out wrong. There are few tracks in the world with the history of IMS and probably NO OTHER as widely known and recognized. I don't care what you think about the stat of Indy Car racing, these are pretty hard things to dispute.

    3. Also wondering if there is an update on the Brockway Pub-Danny Boy restaurant/taproom that was planned for the village as well?

    4. Why does the majority get to trample on the rights of the minority? You do realize that banning gay marriage does not rid the world of gay people, right? They are still going to be around and they are still going to continue to exist. The best way to get it all out of the spotlight? LEGALIZE IT! If gay marriage is legal, they will get to stop trying to push for it and you will get to stop seeing it all over the news. Why do Christians get to decide what is moral?? Why do you get to push your religion on others? How would legalizing gay marriage expose their lifestyle to your children? By the way, their lifestyle is going to continue whether gay marriage is legalized or not. It's been legal in Canada for quite a while now and they seem to be doing just fine. What about actual rules handed down by God? What about not working on Sundays? What about obeying your parents? What about adultery? These are in the 10 Commandments, the most important of God's rules. Yet they are all perfectly legal. What about divorce? Only God is allowed to dissolve a marriage so why don't you work hard to get divorce banned? Why do you get to pick and choose the parts of the Bible you care about?

    5. Look at the bright side. With the new Lowe's call center, that means 1000 jobs at $10 bucks an hour. IMS has to be drooling over all that disposable income. If those employees can save all their extra money after bills, in five years they can go to the race LIVE. Can you say attendance boost?

    ADVERTISEMENT