HUGE? NAIC Task Force Votes in Favor of Brokers

[Yagents]

This explains how it could improve things, if HHS or Congress moves forward with the recommendation, commish could be counted towards the 80% portion of the MLR.

Against objections, insurance commissioners vote to back brokers | The Connecticut Mirror

"and allowing their compensation to be considered part of the health care quality improvement costs."

 

[Ann H]

I believe competitive pressures will bring commissions up from their present levels, possibly never to pre-MLR levels, but some.

Agreed. If one carrier spurs sales by increasing agent commission, other carriers will feel market pressure to do the same. All it takes is one carrier to break the cycle and other carriers must compete.

There will definitely be market pressure to change commission structure because of mistakes carriers just made. The newest commission strategy is really unsound from a marketing/retention point of view.

First reason - greatly reduced 2nd-year commission encourages churning. Most long-term agents cringe at that, and they don't churn-and-burn. But we all know our industry has many who do. Even for agents whose retention is high, a disturbing commission schedule is reason enough to look elsewhere.

Second reason - paying commission on INITIAL premium only, and not rate increases encourages churning.

Third reason - paying PMPM encourages agents to place business at another carrier when the premium is high. Or, to say it another way, if your client wants minimal coverage or is very young do PMPM, but if the premium is high take the percentage. On group business, when they pay PEPM (per employee per month) it encourages placement of groups with high family content to be placed elsewhere.

All of those things are not good for retention. Historically, one carrier will divert from the path and make a better offer. They will succeed with new sales. Other carriers will suffer retention losses (especially on the healthy business) and will also see drops new business. This begins the hike back up the mountain. Now.... will it reach pre-MLR ranges? Probably not. In Arizona (as YAgents mentioned) our commission has always been lower than yours nationwide. We never had 20/10 commission from major carriers. Some AZ carriers paid 20/5, and most paid level 10. Our dip & recovery isn't quite as dramatic. But either way, I see a rebound, but not to pre-MLR levels.

If we're not wiped out in 2014 with GI and exchanges, and if commission being taken out of MLR doesn't backfire, then the good news is that this will clear out the sales warehouses, and the agents with less stability. It would be a good time to expand.
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Oh, and one more tidbit... Historically when this happens, carriers push more responsibility onto the agent. So, it's possible that a rebound in agent commission will be balanced with less agent-services from the carrier side. Especially if there is no limit to the commission excluded from MLR, then look for carriers to install more FMO and GA hierarchy so that agent services are outsourced. We may find ourselves laden with other agent responsibilities that were previously carrier provided.

 

[djs]

Ann - I love your spirit, but I see this playing out a bit different than you do. Carriers will not raise commissions for the average agent. They don't have to and won't do it.

On the other hand, they may offer bonuses. You submit 200 apps a month on a rolling 12 month average, you get a bonus. You have retention above a certain percentage, a bonus. You have a profitible book with the carrier (if this is legal), a bonus for you.

They will play to the bigger brokers who send them the most business. They will let the little guys play, but not at the high stakes table, till they prove they are worthy.

Its funny, but human nature dictates a bonus structure is better at enhancing performance more than higher pay. Don't believe this? Why do you think stores run sales? Mark it up 100%, then run a sale for 50% off. Same price, but people think they get a bargain because its half off.

Dan

 

[Ann H]

Ann - I love your spirit, but I see this playing out a bit different than you do. Carriers will not raise commissions for the average agent. They don't have to and won't do it.

On the other hand, they may offer bonuses. You submit 200 apps a month on a rolling 12 month average, you get a bonus. You have retention above a certain percentage, a bonus. You have a profitible book with the carrier (if this is legal), a bonus for you.

They will play to the bigger brokers who send them the most business. They will let the little guys play, but not at the high stakes table, till they prove they are worthy.

Its funny, but human nature dictates a bonus structure is better at enhancing performance more than higher pay. Don't believe this? Why do you think stores run sales? Mark it up 100%, then run a sale for 50% off. Same price, but people think they get a bargain because its half off.

Dan

I love your spirit, too, and I agree with you 100%. I actually agree with your prediction about the bonus instead of increased percentage. I also agree that it will drive out the smaller player and those who can't adapt. It will change the playing field for sure. I'm actually happy about the prospect of retention bonuses and bonuses for a good solid block of business. It's time to run the phone sales warehouses out and replace them with solid insurance advisors who don't churn and burn. I worry a little about the transition from this structure to that one, though... It's kind of funny that the governments idea of an "exchange" is the phone sales warehouse model, though.

 

[Yagents]

Breaking news: DENIED !!! No soup for U !

HHS Unveils Medical Loss Ratio Rule - Kaiser Health News

The Department of Health and Human Services today released its final medical loss ratio rule. According to an HHS press release, the rule will ensure that health insurance companies spend at least 80 percent of consumers' health insurance premiums on medical care rather than on income, overhead and marketing expenses

 

[Dave020]

Can't get that link to work for some reason but found it here as well:

HHS Unveils Medical Loss Ratio Rule - Kaiser Health News

 

[leevena]

I hate to say this, but not matter what the decision about commissions and MLR, life as we have known in the past is really over. The market forces that are causing carriers to reduce broker commissions are not going to change.

1. To begin with, in a short period of time there will be only 1 or 2 carriers left in each market, offering a limited number of plans. Think about your markets...Humana is essentially a medicare carrier, CIGNA wants 500+, which leaves each market with a Blues, Aetna and United. 2. plan designs are becoming more and more alike 3. Carriers are migrating to direct/e-commerce

Carriers will eventually get around to offering all non-commission products, but allow you to bill/collect from the group your compensation. A broker will now need to justifiy their services each and everymonth to the employer. And don't forget, that employer will know that they can go direct and reduce their commision cost. And, since medical is the most complicated/cost intensive benefit to market, all the others (group life, di, dental, etc.) will quickly become non-commisionable.

And, don't think for one moment that the carriers will come to your rescue. They won't because they want the market to move this way. They all believe that the current system of distrubting benefits via a commissionable brokerage system is broken.

But there are still options available to someone who wants to be a broker in the benefits world. The key is that you will need to offer something more than just "pick a plan" to your clients. There will need to be a real exchange of services/value between us and the groups.

 

[AllenChicago]

Families that earn over $80,000 a year will not be eligible for Federal Subsidies in 2014. If they are healthy, these families will be better off buying their health insurance in the open market. In fact, it will be mandatory that they have health insurance, unless the Supreme Court overturns the purchase mandate.

There will still be a market for those of us who want to sell health, but the commissions? Who knows how that will play out. The few carriers left should WANT to sell as much as they can outside of the Exchange..policies that are fully underwritten, just like they are now.
-ac

 

[Yagents]

NAHU has now come out stating they are focusing on congress passing legislation HR1206

Allen, the way I understand it, off exchange policies are also not allowed to underwrite, and must offer the same benefits and price. The off exchange marketplace will only exist for those above subsidy levels because of better user experience, no disclosures to the 8 zillion gov't agencies, and fuller menu of options.

 

[pahealthquotes]

NAHU has now come out stating they are focusing on congress passing legislation HR1206

Allen, the way I understand it, off exchange policies are also not allowed to underwrite, and must offer the same benefits and price. The off exchange marketplace will only exist for those above subsidy levels because of better user experience, no disclosures to the 8 zillion gov't agencies, and fuller menu of options.

its our only shot becuase HHS completely ignored the NAIC's recommendation. What a joke..