Getting Around the MLR?

[RJT Consulting]

I have a national carrier that proposed a new contract for me. It's allows me to act in the capacity of a consultant vs broker for select groups. It's a contract between myself, the carrier and the employer that allows the employer and myself to set what my compensation is going to be on a monthly basis. The carrier simply agree's to include this compensation in their monthly billing. By doing so, the carrier is indicating that my compensation is no longer bound by the MLR. The billing will not spell out the monthly fee rather it's just part of the overall admin fee that is listed. So, instead of saying $500 consulting fee it will say $816 administrative costs. There will be a caveat at the bottom of the billing that states the monthly bill does include consultant compensation.

This contract is not mandatory. It also allows me to be exempt from any future carrier compensation changes and I can set it as a dollar amount or as a percentage of premiums. I apologize if this has been discussed but this approach was new to me given it's the carrier who is initiating this. Thoughts?

 

[STIBROKER]

what ever it takes to get paid.....I would do it......

 

[leevena]

On the surface, this appears to be ok. We do this all the time for our business (self-funding).

The MLR essentially requires the carrier to retain no more than 15/20% (depending on size) of the premium for their expenses. That said, it appears that the carrier would be willing to "bill and collect" your consulting (for lack of a better term) fee. The contract should clearly state that the carrier is performing as a "billing/collecting" entity, otherwise you may run the risk of it being considered commission, and thus falling back under MLR.

This will certainly change the relationship between you and the employer though. Employers generally viewed the commission load as a necessary cost, something they had no control over. Often times they did not even know what the amount was that was being paid to the broker. With this approach the employer will be made aware of that amount, and the fact that it is now up to them if they want to incur the cost. For a broker that puts time and resources into their clients, this should not be a big concern. But for brokers who sell and show up for renewal in 8 months, it may be an issue.

 

[djs]

Be careful. I don't think this is well thought out. On the surface, it sounds good, but the devil is in the legal details, which probably vary a lot by state on this.

Currently, with the carrier paying you, your fiduciary responsibility is with the carrier. If the employer pays you, even indirectly, your fiduciary responsibility shifts to the employer, not the carrier. If its billed through the carrier, this gets a bit muddy.

Why can this matter? If something goes wrong, you are being paid as a consultant, not as an agent. The employer would probably have a MUCH stronger case against you. Take a simple thing, the carrier raises their rates. The right thing to do for the employer is to change carriers. Hmm, this already has a conflict of interest going on, because your primary duty is to the employer now, not the carrier.

Also, you would need to see if your E&O would allow this. Could be a bit of a sticking point.

Dan

 

[STIBROKER]

Aetna's Bertolini touts agent commission 'transparency' | Insurance & Financial Advisor I IFAwebnews.com

Aetna is shifting to "a direct service fee broker compensation strategy" for business with more than 50 employees, most of whom already negotiate compensation directly with their brokers, according to the insurer.
The company said it already sees brokers and customers negotiating different amounts than what brokers earned in the past.

 

[stuy119]

As far as perception goes, I think this is good for agents. When comp is negotiated outside of the premiums and premiums will (most likely) continue to rise, we won't be considered the devil (or at least not as red).

 

[djs]

You are dreaming. People will go out of their way to avoid paying the broker fee.

The good thing in this is that as an agent, you will have to do a better job of selling your value, or you will get cut out of the picture. Outside of this, the employer will simply call the carrier, as what this line item is, find out there is a way to cut it down significantly, and suddenly you lose your commission.

 

[HealthGuy]

DJS is DEAD ON. No reason to post on this thread anymore. Seriously, no further analysis is needed. No company is going to pay us broker fees. Period.

 

[CHUMPS FROM OXFORD]

Get out of the health insurance everyone. NOW!

 

[STIBROKER]

Get out of the health insurance everyone. NOW!

trying to dive down internet lead competition....pure genus....I can foresee a day when it goes back to 2 agents per lead.....and your right....you sell health insurance and can not pay rent....get out.....