Commission Cuts Effective January 2010?

[treeves]

I read that the new Medical Loss Ratio change takes effect January 1, 2011.

Large group plans must spend at least 85 cents of every premium dollar paid to them on actual medical care as opposed to administrative costs, while individual and small group plans must spend 80 cents.

I believe that agent commissions will be affected then as well. My understanding of the bill right after it passed, was that agents commissions would be the first affected, but the difference could be made up in volume since insurance would be mandatory for all Americans.

However, the Exchanges will not be set up until 2014. So, what happens from 2011-2014? Is the mandatory insurance provision also effective January 1, 2011?

Should I look for the nearest food line?

 

[Justin Bilyj]

yes, leave the selling to us..

 

[Crabcake Johnny]

Agreed. Many agents will cash out...which is perfectly fine for me. We don't need 2,000 posts on this topic. Commissions are going down and it's going to be a volume business.

 

[treeves]

My point was, I knew commissions would be affected. But, is mandatory insurance effective January 1, 2011 as well? Because, most likely, we will see a reduction of 60% in commissions. If insurance isn't mandatory at that time, then where will the volume come from?

 

[Full Throttle]

Not mandatory until 2014.

 

[Crabcake Johnny]

Can you reference where commissions will drop by 60%? You are applying grade school math to this situation. For example, say a carrier paying 20% has a current MRL of 70%. According to your math that's 30% to spare, 20% in commission with an extra 10% for the carrier.

Wrong. Currently a carrier with a 70% MLR pays around 40% out in 1st year commissions - YOU may get 20% but the MGA gets much more. So if the current MLR is 70% how can a carrier pay out 40% in first year comp? Because it's not a grammar school match equation.

 

[CHUMPS FROM OXFORD]

I had no idea the MGA gets so much. Hopefully, when there are cuts...they will get the majority of the cuts.

 

[Crabcake Johnny]

Depends on the carrier. Aetna? Not even close. But carriers like Assurant, Golden Rule (Platinum), World.....But even at a 30% commish the math doesn't play out: 70% MLR + 30% commish = $0 for the company to run on. Again, you can't apply 2 + 2 = 4 with MLRs.

 

[nolaagent]

Agent compensation will have to change. There's no way carriers can pay the current comp to agents (15% - 30% of premium) and maintain an 80% MLR. They will need to move away from percent of premium model and likely go towards a flat fee per month per member .

 

[TXINSURANCE]

I think percentage is here to stay pre 2014. Post 2014 anyones guess.

Yes expect 50 to 75% drop on not only new policies but policies you already have on the books.

Don't be surprised if you see this 10/1 not 1/1/11

I am praying the mlr rules loosen up. If not. Well. Single digit commissions for sure.