MLR Rebates

[Crabcake Johnny]

NOLHA would get the word out as much as we could. Stated again, with this kind of a move, none of their individual health producers would know their true commission until after they "settled" their ratios.

Who in their right mind would write a single deal with a carrier without knowing their true compensation.

 

[dgoldenz]

NOLHA would get the word out as much as we could. Stated again, with this kind of a move, none of their individual health producers would know their true commission until after they "settled" their ratios.

Who in their right mind would write a single deal with a carrier without knowing their true compensation.

Exactly...does a corporation claw back W2 income when they don't turn a profit because they paid the workers $1/hour too much?

 

[Crabcake Johnny]

As Somarco pointed out, what the carrier would claim is that first year commissions are paid based on the premium.

So if the premium was $400 per month but a rebate was given which in effect adjusted the premium to $350, then they'd legally be able to pay on the $350 and "claw back" the commission paid on the additional $50.

Ever hear of winning the battle but losing the war? If implemented, this carrier might win the battle. The war? No-so-much. And as stated quite a few times, it would mean that moving forward, none of their agents would have any clue as to what their true commission would be at the time of writing any case.

It would definitely make for some great articles.

 

[djs]

Honestly, I can't see why a carrier wouldn't do this. It affects the premium, premium affects your commission.

John - to take your statement further would imply that if the policy lapses, or a policy change is made that reduces the premium, the carrier can't chargeback the commission, which we all know is incorrect. But if they do, then I wouldn't know what my first year commission is, would I?

You are over-reacting to what is probably a fairly nominal amount of money. Maybe, since I'm mostly a P&C guy and changes are made all the time on policies, I'm a little less sensitive to this, but I can't see why a carrier would pay commission on money they didn't collect, or at least, had to reimburse. It makes no sense.

Dan

 

[Crabcake Johnny]

Many agents choose as-earned so they don't incur chargeback liability. If a plan stays on the books for 8 months and cancels, they keep 8 months.

However, a commission claw-back due to the MLR's would mean chargebacks for agents who chose as-earned commissions and would not sit well.

Remember, this would be a chargeback on every single deal written. Not just the rare chargeback possibly based on a policy rescision.

Solid agents have some control over their lapse ratio - which, again, does not result in chargebacks for agents taking as-earned commissions.

Lastly, we're also talking about a lot of agents who may not be writing anymore. It'll result in a negative balance. The money has been spent by the agent and it'll turn into a collections nightmare - and man, won't uplines have a blast with it if they're eventually charged.

As stated, this might be something they "can" do, but should they? Absolutely not.

However, I feel agents might have a lawsuit based on good faith - that is was not known at the time they wrote business that the potential existed for some of the commissions to be subject to a chargeback.

 

[djs]

A decent agent will make it pay for itself. Lets use your numbers from above, $400 a month premium, refunded back to make it $350, or a $600 refund check back to the insured, with a $60 chargeback to the agent (times how ever many clients he had on that plan).

If I was the agent, that check hits the mail, I'm calling the person, getting him to tell me how great I am that I got him a $600 refund and seeing if I can get some good referrals. Really, its well worth the $60 in the long run.

Not everyone will play, but agents can use it to their advantage rather than sweating it out.

Besides, if they don't clawback that $60, they have to cut somewhere else. Ultimately, they will reduce the agent commissions even lower to account for it, so, just plan for it. You don't have to like it, but it really is fair.

Yeah, I'm not a big fan of MLR, it encourages bad behavior. I think over time, you'll see some decent changes to it (such as a 3 year averaging, at least). I think health companies like the idea of overcharging and then sending checks out, since once a year, people will like them (sort of like the IRS if you get a refund).

I'll take your absolutely not and raise you a 'Where do they get the money from if they don't take it back from where they paid it?' type of question....

Dan

 

[Crabcake Johnny]

3 deals a week for say a year - $60, using your example, would be almost $10,000.

This, again, is money the agent likely does not have and will result in a lot of liability.

If it's known to agents moving forward, that's one thing. They can set money aside for such a liability. But implementing a clawback to unsuspecting agents? It would be a bad move.

 

[djs]

Following your math,
3 deals a week, 50 weeks a year, 4800 AP 10% commission = 72000 in commission

clawback
3 deals a week, 50 weeks a year, 600 AP 10% commission = $9000 in commission paid back.

Yes, this is an ouch!!!! Unfortunately, the dollar amount doesn't change the right thing to do. I've paid back some pretty large chargebacks in my day, they always hurt. Basically, I've learned its part of the business. Either pay it and move forward or dwell on how unfair it is and go nowhere.

Dan

 

[Crabcake Johnny]

It would be a first in the industry. Commissions are paid based on premiums upon policy approval.

This would change that. Commissions would be "We have no clue" until the carrier settles out.

Who would write with a carrier under such circumstances?

 

[Ann H]

The original cuts in commission were presented to us as "necessary due to new MLR rules". If they don't meet those MLR rules, it's not our fault. I imagine that some carriers will clawback and pay dearly for it, because other carriers will not clawback. It's bad PR for the carrier. Some carriers may say it's a return of premium and therefore chargeable against commission. Other carriers may say it's a rebate due to overspending administration expenses, but the original premium paid by the consumer is the commissionable premium. In a lawsuit, I think the last concept would stand, because (correct me if I'm wrong), I read that MLR rebates must be considered administrative expenses for the following year. Either way, the carriers that clawback will fare poorly with agents. Agents have taken several slaps in the face and there's a limit...