HUGE? NAIC Task Force Votes in Favor of Brokers

[STIBROKER]

Of course I may feel the same if she becomes a client . . .

man I know your feeling....we all have them....but we take care of their needs because you know that not having a agent just gives the company's better odds to stamp denial on claims on claims and BS the policy holder into paying it.....gezzz....having to advise clients how to appeal claims suck....but needs to be done......

 

[Yagents]

I need someone to explain the numbers to me, and how this bill will help agents commissions go back up to close to pre PPACA levels. Assume 15% pre, and 10% post PPACA:

$1.00 in premium, MLR requires 80% on IFP =
80 cents to medical care
10 cents to agents
10 cents to profits/overhead

If commish pulled out of MLR:

Our 10 cents is not included in the $1 premium, nor in the 80 cents of medical costs. It's suspended or removed out of the equation in a separate bucket. I see 2 things:

1. Once removed, unless these companies need to start competing for agents business by building their book before 2014 with allowable riders, our commish won't return to the higher levels.

and
2. Our 10 cents removed from the MLR, gives insurance companies 10 more cents of pure profit. Buy their stock.

Where have I gone wrong in my thought process? They should have lowered the MLR to 75% and give us the extra 5%...much easier.

 

[CHUMPS FROM OXFORD]

I don't think you have gone wrong. I'm not expecting an increase in compensation.

 

[somarco]

Scott, got the app submitted early today. Spent way too much time over trivial stuff but might get some referrals to make it worthwhile.

Bill, carriers are already losing business. They need agents, like it or not. The agents that have left work to our favor. It allowed the carriers to purge their broker connections in a relatively painless way.

If, using your example, the 10 cents is moved off the MLR calculation it does not necessarily go as profit to the carrier but can be used to provide some spiffy incentives to producing agents.

Or they can go buy some corporate jets before Obummer nixes the tax break to balance the budget.

 

[djs]

I need someone to explain the numbers to me, and how this bill will help agents commissions go back up to close to pre PPACA levels. Assume 15% pre, and 10% post PPACA:

$1.00 in premium, MLR requires 80% on IFP =
80 cents to medical care
10 cents to agents
10 cents to profits/overhead

If commish pulled out of MLR:

Our 10 cents is not included in the $1 premium, nor in the 80 cents of medical costs. It's suspended or removed out of the equation in a separate bucket. I see 2 things:

1. Once removed, unless these companies need to start competing for agents business by building their book before 2014 with allowable riders, our commish won't return to the higher levels.

and
2. Our 10 cents removed from the MLR, gives insurance companies 10 more cents of pure profit. Buy their stock.

Where have I gone wrong in my thought process? They should have lowered the MLR to 75% and give us the extra 5%...much easier.

Hard to say what they mean by pulling it out, but my guess is, the way it would work is:

$1.00 in premium, MLR requires 80% on IFP =
20 cents to agents
This then leaves 80 cents for the MLR ratio
16 cents to profits/overhead
64 cents to medical care

You now see why this will never pass.
Of course, it also won't return commission to previous levels. Get over that thought process.

Dan

 

[stuy119]

Why are you guys unable to perform math? Here's how it works:

$500 in premium
15% to the agent (for giggles) = $75
$425 in insurance cost
80% MLR = $340 spent on medical costs, $85 to the carrier

OR

$500 in premium
10% to the agent = $50
$450 in insurance cost
80% MLR = $360 on medical costs, $90 to the carrier

Reduced comp still means a larger profit for the carrier, but 5% increments mean more to us than to the carrier. It's like a realtor selling a house - knocking $10K off the price of the house seems like a lot to you who is buying/selling, but the reality is that it's almost nothing to their commission, so they're almost always willing to do it to get a deal done.

What I'm most interested in is seeing HOW the MLR is distributed. Will it be across their entire BoB, will it be state-to-state, will it be each family, each region, etc? That could be disastrous for some carriers if it's per family, as I would imagine there are a ton of families who would be receiving refunds.

Same goes for the 85% MLR on group plans. Will the 85% be statewide, per group, per person on the group? Will the refund go to the business, or to the individual? Will it be split in the same way that premium payments are? Will the refunded dollars then be required to be taxed as a 1099 to EE's and as income to the business?

It will be a giant clusterf&*k, but moreso on the group side - which is likely a goal of the legislation, to end group coverage.

 

[djs]

My recommendation is don't spend these higher commission checks till you actually get them!!!!

Dan

 

[somarco]

Agent comp is usually grossed up from net premium rather than netted out from gross premium.

Net premium = $100. With 15% agent comp the final rate is $117.64.

If you worked it the other way around and started with $115 the carrier would net $97.75 after 15% to the agent.

 

[Ann H]

Most likely there will be a push from the Consumer Protection groups to have commissions completely removed from the equation. Example:
$400 premium
+ $40 commission (assuming 10%)
$440 monthly cost to the consumer

The client's invoice would clearly show the commission as an add-on fee. I'm not saying the final legislation will end up this way, I'm just saying to look for consumer protection groups to push for this if they find themselves needing to negotiate.

In this case, the $400 premium is the amount that is subject to the 80% MLR rule, giving $80 for the insurance company to use for non-medical expenses. There may be a requirement to lower the premium by the amount of commission that is now excluded from the equation (for instance, if the premium previously was $440 with commission included, it would now have to be $400+$40=$440 total cost).

Also, most likely there will be a push to limit commissions, and to state a ceiling, such as 5%, 10% or perhaps a "Per Member Per Month" allowance. There may also be talk about not allowing the insurance company to use any of their 20% profit on additional incentives to agents in the way of bonuses or additional commission.

 

[Jofainc]

First, I would like to be the payroll handler for the author of this piece and "terminate his paycheck!".

Then I would recommend he ask the right questions of business owner and individual customers to determine if they believe having expert assistance is worth the cost (all I read suggests a resounding yes).

I suspect we know who is pulling this writer's strings.

Is this big, you bet - but only if you like helping clients make sense of our confusing industry.

John