Pass-Through Commissions (NAHU) & MLR
It appears NAHU (via Janet Trautwein) is attempting to justify the exemption of agent commissions from MLR because the commission is a “pass-through” expense that the carrier simply collects and distributes as a cost of aquisition/servicing. I believe this the be a very slippery slope which could cause damage to agent compensation long-term. I have a blog intended to be published early next week regarding this issue.
If commissions are considered “pass-through” and thus a part of the subscriber’s cost of aquisition/servicing, then that leaves room for the subscriber to want to negotiate on the ‘pass-through’ commission expense (see: rebating) and ALSO would allow carriers to reduce the cost of insurance purchased direct from the carrier by the amount of the pass-through or some amount lower than the cost of aquisition/servicing under the current model (see PacifiCare).
This strategy is may be a bad one and could cost agents in the long run a lot more than the current MLR cuts to commission. We could end up competing with carrier direct sales units for sales in the field on an uneven pricing schedule.
Your thoughts?
by: Dave020
Tags: Pass-Through Commissions (NAHU) & MLR
Readers Comments (11)
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Glass pockets exist with ERISA plans where the client is given full disclosure on compensation and it is reported on form 5500. I doubt some clients bother to read those things. A broker buddy of mine told me he was making $160k off a 200 life group. That was everything, not just health. He had a fair amount of PRD business that boosted the comp.
But still . . .
I do agree that informing the public on our compensation is counter-productive. Even though some believe we make 50% commission on health (major med) I believe many would feel 8% is too much and would drive even more to buy direct.
Chumps told me to get out now while I still can. What do you think?
I agree with Dave…be careful what you ask for when it comes to NAHU removing commissions from the MLR. The net result will be adding to ins co profits to the detriment of agents.
I see a fee based model in the future. Our advice is obviously necessary today and it will be tomorrow. It’s more personally tailored and better than any direct service center could ever bring. I don’t need to list the obvious reasons. But one is………. I’m available on Sundays.
If we are left to negotiate our own compensation, you’ll see a race to the bottom as far as price for that service. I plan on charging a $300-$500 flat fee or $50-100/hr. As a past mutual fund wholesaler, I’ve already seen this take place as stock brokers/wirehouse transitioned to a fee based model.
Today, any fee based investment advisor, CPA, or lawyer commands a price when they simplify the current monstrous government rules/regs. Advice from these entities have long term negative implications to the client if not done right. Just like health insurance, you’re handling not only someone’s money (how much spent and or protected), but someone’s access to the best healthcare when needed.
If you feel you can’t justify a fee in the future, you don’t deserve a commission in today’s environment and should vacate the profession immediately.
The cost of commissions the carrier pays the agents shouldn’t be that much of a factor. The carriers should think of it as a marketing expense. How much more are they going to have to spend on marketing if they cut the agents completely out? How much more is it going to cost to provide the customer service that you guys provide now? I don’t see how cutting out the agent is going to make it cheaper for anyone.
As I say……everyone of my clients saved money by using my services. Otherwise, they didn’t become a client
Consumers won’t pay a consulting fee for major med, especially once it is available on the Exchange and they can talk to $10/hr govt navigators.
The carrier direct model is a non-starter, even for big Blue. Exception would be in GI states where Blue is the only choice.
Of course come 2014 . . . .
Some can do on their own, some cannot. I just need a few hundred that can’t do it on their own.
Get out guys. Veer in another direction now. It is getting too late.
Really, if you haven’t been making other plans and stacking other policies, it’s going to be brutal in ’14.
Is 2 years enough time for a medium size health producer to maintain income? I don’t know, it took years to build these books and the renewal stream that came with them.
Is 2 years enough time for a medium size health producer to maintain income? I don’t know, it took years to build these books and the renewal stream that came with them.
I guess we’ll find out what it’s like to have a book wiped out. There’s really no getting out early, even if you’re only maintaining a $5K monthly health renewal book, and doing other things, you’re still going to get hit hard when the S-word hits the fan.
All the time and effort to maintain the book and the money that came with it, puff, gone. That’s going to be true whether you’ve been doing this for 5 or 30 years.
Last year Aetna announced they would not pay commssions on groups of (believe this is right) 50+. Instead, they would bill a service fee for the broker based on a fee structure agreed upon by the employer and broker.
In essence, Aetna said they did not want broker generated business except from fee based consultants.
What you posted seems like UHC is saying the same thing.
If you want to stay in the health insurance business, including group, you need to develop a game plan that involves justifying and charging a fee for your work.