The Insurance Agent Dilemma – Key to the Single Payer Solution.

Posted on | May 2, 2017 | 1 Comment

Mike Magee

Since the election of Donald Trump we’ve been reminded – twice – that opposition to the ACA or Obamacare is real and alive. And yet, it is equally clear that Americans in majority numbers now believe that health care is a right and they are in no mood to give back access or protections associated with the ACA such as those prohibiting discrimination for pre-existing conditions.

Most Americans, including health professionals, see opposition to the ACA as centered in Republican ideology or a personal vindetta against former President Obama. But this is a serious misread based on an incomplete understanding of where the true fault lines lie.

The basic villain is complexity – bred, nurtured and maintained since 1947 when we took an historic right turn from our neighbors to the north and built a wide open free enterprise system that empowered private insurers. Canada, in contrast, chose single payer simplicity. (Providers submitted bills for services. Government paid the bills. And the patient was left alone.) If you wanted extras, you could buy a private supplemental plan.

Nowadays, when people think of health insurers, we think of UnitedHealth Group, Aetna, Anthem, Cigna and the other giants. But to understand the latest seven years of guerrillla warfare, we need to appreciate how our self-created health care complexity has determined how health insurance is sold and serviced, and by whom, in small and large communities across America.

By 1960, roughly 70% of Americans received health insurance through their employers. For those who worked for large employers (more than 50 employees), the health insurance options were presented by the Human Resources department usually with the assitance of a local or regional health insurance broker or agent. For smaller employers, if they did provide health insurance as a benefit, a local agent largely substituted as H.R. person on behalf of the employer. Over the next fifty years, the ranks of individuals selling and managing health insurance plans for businesses and individuals swelled to some 500,000. The introduction of the ACA was a major disruptor to their careers.

A few basic facts:

1. Insurance agents or brokers look to individualize service and choice of plans for their clients, sell and renew plans, update clients on changes, and answer a wide range of service issues related to claims and billing disputes. Some agents estimate that over three quarters of their time is devoted to servicing clients after making the initial sale.

2. Some agents are “captives” in that they act as employed agents for only one insurance company. But the vast majority are independent, presenting a range of options to small and large businesses, and to individuals and families. They are self-employed and receive 1099s from the insurers.

3. Agents and brokers are licensed within their states where they practice. They are paid a commission on the sale of a plan by the insurance company. This is usually a percentage ranging from 1% to 5% on individual plans and 5% to 7% on small group plans. In some cases, rather than a percentage, they are paid a fee, per member per month. They may also be eligible for contingency commissions. For example, an insurer may provide extra rewards for selling types of plans with lower utilization rates and less for “Cadillac” plans that have high associated claims costs.

4. Insurance agents are represented by the National Association of Health Underwriters. They advocate and lobby for their members and provide curriculum to achieve professional designation as registered health underwriters (RHU), health insurance associates (HIA), registered employee benefits consultants(REBC and certified employee benefits specialists (CEBS).

5. In 2011, the new ACA federally mandated medical-loss ratio went into effect. This required that 80% to 85% of health insurer expenditures go to direct patient care. Health agents commissions were not considered patient expenditures but rather an administrative expense. This triggered a tightening and in some cases restructuring of agents commission rates nationwide. In addition, the introduction of health exchanges and Medicaid expansions, while adding potential new business, required a steep learning curve with confused clients and new software to master. This added even more complexity to the local agents jobs.

6. Many local agents saw the introduction of HealthCare.gov as an unwelcome government intrusion and potential competitor. Detractors say the law also spent $120 million mobilizing community organization “navigators” who lacked the licensing and experience of agents. As one Oklahoma agent said, “It would be very costly for a governmental agency in some far off location to match the service and value agents bring to their clients, and it would not be able to replace the personal relationships agents develop with their clients.” Another commented, “Remember, if you buy health insurance online, there may be no advisor to explain benefits, no advocate if problems arise and no counselor to help you make the right coverage choices.”

7. The decision whether or not to allow health insurance agents to collect commissions for selling health exchange plans was left to each individual state. Those commissions were paid by the insurers not the exchanges. In states like Connecticut that wanted the ACA to succeed, there was an early signal that commissions were allowed and involvement of local agents was encouraged. The commission in Connecticut was 2% to 4% or $10 to $20 per member per month. In states opposed to the ACA, signals were mixed or absent.

8. Local agents have been for, against and everything in-between when it comes to the ACA. This is what you get when you attempt to rationalize private enterprise inequity by employing private enterprise complexity.

On the one side you have Salt Lake City agent Ernie Sweat who says, “For an agent, there’s no reason to be afraid of the exchange. I’m putting one or two companies every month with the exchange…I ask those agents who say they’ll have nothing to do with it, are you really providing your fiduciary duty to your people if there’s a product that’s perfect for them but you’ve decided not to sell it?”

Oklahoma agent Melissa Parchman sounded hopeful when she said, “Having the Government as a partner is out of the comfort zone but a lot can be done to help our citizens when we come together.”

New Mexico agent Kevin Pelletier wrote, “In a nutshell, they know that if they call me, I either have the answer or know where to find it. If brokers are factored out in the health care reform process, where will these employers go for help?”

But California’s Kevin Knass doesn’t see a rosy future. His advice: “I wouldn’t recommend a career of representing health insurance companies to anyone. Agents are destined to be replaced, not by choice but by design, with online enrollment portals and call center staffers who know very little about how health insurance actually works.” And yet others, at least in 2013, saw this as a growth business.

There’s no right or wrong here, except for the original 1947 choice to go private enterprise multi-payer when Canada realized that clarity and simplicity and universality were all essential for long term success.

All Canadians had coverage, birth to death. A single payer meant a single set of rules and procedures that all could understand and manage. Territories manage budgets and priorities. Doctors and nurses and hospitals focused on patient care.

The ACA took a giant step toward universality. But it neither clarified nor simplified. Perhaps health insurance agents can help us finish the job.

Comments

One Response to “The Insurance Agent Dilemma – Key to the Single Payer Solution.”

Perry M Boggia
May 9th, 2017 @ 4:09 am

Solution Vote for Sanders and his single payer solution. Oh,that’s right – Hillary rigged the primary against him.