In a presidential election cycle where job creation is a key issue, 15% of National Association of Insurance and Financial Advisors members surveyed recently say President Barack Obama’s health care reform law’s medical loss ratio provision has decreased their commissions enough to cause them to need to lay-off or reduce the hours of support staff in their offices — affecting an average of two employees per agency.
The NAIFA survey reveals the devastating effect on agents’ ability to maintain a high level of customer service to their clients.
Of the more than 860 organization members who sell health insurance, 14% say they have considered reducing staff and 21% say they will do so if commissions remain depressed.
“When health insurance agents and brokers are forced to cut their staff, then there are fewer people available to solve clients’ problems and answer complex questions that arise every day in a health care system that grows ever more complicated,” says NAIFA President Robert Miller. “Consumers are the ones who are hurt by the MLR when agents have to reduce service. Insurance agents do more than sell insurance; they help companies and their clients select the right plan, understand a plan’s coverage and assist with claims. All of this requires a level of expertise that is only gained with experience in the world of health care.”
The MLR provision in the Patient Protection and Affordable Care Act requires insurers to spend at least 80% of individual and small group health insurance premiums and 85% of large group premiums on medical or quality improvement expenses. The MLR has prompted most insurers to slash the commissions of brokers since it went into effect in January 2011.
According to the survey, 70% of members who sell health insurance have seen a decrease in commissions. Of that 70%, 53% say their commissions decreased by a quarter or more, while 18% say their commissions decreased by half or more. Of those who have not experienced a decrease yet, at least 12% have been informed by carriers that their commissions will be reduced in the near future.
In addition, since the MLR provision went into effect:
• 11% of respondents say they have gotten out of the market for individual health policies.
• 5% have stopped selling and servicing health coverage.
• 30% say that if commissions remain depressed they will stop selling and servicing individual health policies, while 22% say they will stop selling all health insurance.
Ninety percent say their clients’ premiums have increased or will increase in 2012, in spite of the MLR.
“Removing agent commissions from the MLR won’t have any impact on premiums, but leaving them in seriously dilutes customer service,” says Miller.
The Senate bill S.2288, Access to Independent Health Insurance Advisors Act of 2012, would change the way agent compensation is considered in the MLR. A similar bill in the House of Representatives, H.R. 1206, has more than 200 bipartisan cosponsors.
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6 Comments
Posted by: Fred O | May 9, 2012 12:06 PM
@David 1 obviously has no clue what an agent/broker does top earn that commission. Perhaps her should try it a while and see how his ideas work. As for the MLR provision costing jobs, part of this plan from its inception is to eliminate agents completely and replace them with government employed advisers to help individuals choose their plans. The idea that somehow a government (state or federal) employee is less expensive than independent agents is ludicrous from the outset. It is however inevitable in the single payer plans that are the real goal behind this whole movement. While no one has uttered the words single payer in a couple of years the rules written will drive the industry that way and when the Supreme Court tosses the individual mandate the force behind the legislation will say "Well we tried the free market but the Court won't let us so we have to go to a mandatory plan for all with payroll deduction. Of course you are free to buy more insurance on top of that but even if you don;t use it we're going to deduct it from your pay. It's only fair. . . "
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Posted by: FWB | May 8, 2012 2:27 PM
Well, if the objective of PAACA was to give an excuse for Health Insurance Companies to reduce commissions and put some brokers and their employees in the unemployment line then, "Mission Accomplished"Health Insurance Reform (should be the correct name) It did not reduce insurance premiums It did not guaranteed coverage for the uninsurable. It did not reduce the cost of health care. It increase administrative costs to health insurance companies It added to the Medicaid load to the statesIs it any wonder that Republicans are using this law as an example of overreaching by Democrats?I like Obama and I think he is a good guy, but this is a seriously stupid law.
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Posted by: David 1 | May 8, 2012 2:13 PM
Working for a health insurance provider gives me a totally different view than the brokers. I think it is about time that they are put on notice. It is time to justify the services they are providing to customers and show them what value is being brought to the table. If they are truly as valuable as they think, why don't they just add commissions on top of rates given without commissions added to the premium? Show the employer exactly how much money you are taking off of the top of the valuable premiums dollars that are being paid. I wonder if those companies would value those services as much as the total commissions being paid out. It is time that they learn to work more efficiently and realize that there is work involved. Living life on the golf course is over. Time to start providing real value to companies. If there is value in what you do, companies will pay for it.
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Posted by: David 1 | May 8, 2012 2:12 PM
Working for a health insurance provider gives me a totally different view than the brokers. I think it is about time that they are put on notice. It is time to justify the services they are providing to customers and show them what value is being brought to the table. If they are truly as valuable as they think, why don't they just add commissions on top of rates given without commissions added to the premium? Show the employer exactly how much money you are taking off of the top of the valuable premiums dollars that are being paid. I wonder if those companies would value those services as much as the total commissions being paid out. It is time that they learn to work more efficiently and realize that there is work involved. Living life on the golf course is over. Time to start providing real value to companies. If there is value in what you do, companies will pay for it.
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Posted by: Linda S. | May 8, 2012 1:09 PM
We have also had to lay off employees. In addition to the usual services provided by agents as mentioned above, we are providing more HR services for our clients because they, too, have had to cut cost in this dismal economy. We are working more hours, and providing more services than ever before for a lot less compensation.
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Posted by: blueman | May 8, 2012 1:02 PM
As a group health broker I can't help but think that the future of the health insurance business and the employee benefit business in general, is not bright. It reminds me of what happened to the milkman back in the 6o's and 70's as he saw his clientele and income dwindle due to the need for wives to join the workforce to make ends meet. No longer did people want their milk delivered to an empty house. This was an event completely out of his control, as is this healthcare law, that eventually put him out of business. Consultants to the healthcare market are now telling brokers that they'll need to make up the lss of income by selling ancillary products or advising individuals on buying health insurance through the exchanges. Both options sound like a lot more work for a lot less compensation. Time for a new line of work or retirement if your close enough?
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