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.”


  • 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

    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

    facebook - twitter on Facebook & Twitter

    Follow on TwitterFollow IBJ on Facebook:
    Follow on TwitterFollow IBJ's Tweets on these topics:
    Subscribe to IBJ
    1. By the way, the right to work law is intended to prevent forced union membership, not as a way to keep workers in bondage as you make it sound, Italiano. If union leadership would spend all of their funding on the workers, who they are supposed to be representing, instead of trying to buy political favor and living lavish lifestyles as a result of the forced membership, this law would never had been necessary.

    2. Unions once served a noble purpose before greed and apathy took over. Now most unions are just as bad or even worse than the ills they sought to correct. I don't believe I have seen a positive comment posted by you. If you don't like the way things are done here, why do you live here? It would seem a more liberal environment like New York or California would suit you better?

    3. just to clear it up... Straight No Chaser is an a capella group that formed at IU. They've toured nationally typically doing a capella arangements of everything from Old Songbook Standards to current hits on the radio.

    4. This surprises you? Mayor Marine pulled the same crap whenhe levered the assets of the water co up by half a billion $$$ then he created his GRAFTER PROGRAM called REBUILDINDY. That program did not do anything for the Ratepayors Water Infrastructure Assets except encumber them and FORCE invitable higher water and sewer rates on Ratepayors to cover debt coverage on the dough he stole FROM THE PUBLIC TRUST. The guy is morally bankrupt to the average taxpayer and Ratepayor.

    5. There is no developer on the planet that isn't aware of what their subcontractors are doing (or not doing). They hire construction superintendents. They have architects and engineers on site to observe construction progress. If your subcontractor wasn't doing their job, you fire them and find someone who will. If people wonder why more condos aren't being built, developers like Kosene & Kosene are the reason. I am glad the residents were on the winning end after a long battle.