A key player in the Utah Health Exchange and health care reform in general are health insurance producers, otherwise known as brokers. Right now they are trying hard to understand the complexities of the current state of their business. The health insurance industry has stayed fairly constant over the years, with very few major changes. They now are facing the largest modification to their industry in history.
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| Todd Steinicke, Davis Pacific Insurance, Speaking at an ACA | Event |
I recently had the opportunity to sit down with a local health insurance agent here in Utah to get his view on all things reform. He wished to stay anonymous. He has been in the business for 13 years, working for a company that has been around for 30 years. He opened up regarding his feelings on the federal health reform as well as Utah's strategy and the health insurance exchange.
I asked how he felt about these changes in health care reform and had much to say. He had major concerns about his commission structure. He pointed out that at the federal level, as of January 1, 2011 insurance companies are now required to spend between 80-85% of their operating costs on actual care, leaving the other 15-20% available for administrative costs(referred to as the Medical Loss Ratio or MLR). He states that insurance brokers are arguing this is doing only one thing-reducing their commissions. The purpose of MLR is to ensure that insurers are spending more money on care and instead of that happening, they are just cutting brokers commissions.
He said most brokers he knows agree regarding the commission reduction, saying that because of all the changes, commissions are being “squeezed.” He thinks insurance carriers are used to operating a certain way and aren't ready to change their business administrative cost strategy. The easiest way for them to be in line is to reduce insurance brokers commissions. In his experience, due to this new business model, many insurance providers are now going to a flat-rate commission rather than the standard percentage.
Over the last decade there has been a consistent rise in health insurance premiums with insurance providers and brokers being the beneficiaries. According to a Kaiser Family Foundation study done in 2008 to look at the trend in health care premiums, the increase has been anywhere from 90% to 150% in the last decade in the United States. In 2009 alone, national annual premiums averaged a 5.5% increase. Read the report here. In Utah specifically, from 1999-2009, there was a 113% increase in employer-sponsored insurance premiums according to the National Bureau of Economics and only a 44% increase in wages.
He also had much to say regarding the Utah Health Exchange. He mentioned that the exchange is also utilizing the flat-rate commission structure for paying brokers who bring clients into the exchange. Brokers are currently being paid $37 per month per covered employee participating in the exchange. One aspect of the exchanges model, using a defined contribution, he said has three problems with it.
1) It is hard getting enough employees involved for participation levels.
Currently a business wanting to join the exchange must have at least 75% of their employees on-board. The defined contribution can be any amount from zero and up. When employers don't contribute a dollar amount it is tough to get enough people on-board so the other employees who want coverage can actually get it.
2)In the current Utah Health Exchange model employees are often making bad choices on their health plans.
The exchange currently does not require employees or employers to use a broker. (Although the consumer will not pay more if they do.)This, in his personal experience, led to one of his clients to choose a Health Savings Account plan when he thought he was getting a traditional health insurance plan. The broker offered several times to come to the place of business and advise the employees, but they never wanted the help. When claim time came, the employee became so infuriated that it was not going to be covered he complained to the Better Business Bureau that his insurance company had not given him the correct information.
3)Prices on premiums went up. Some of the premiums he saw go up 35%.
He said in his experience consumers won't generally pay more than 5-10% per more for added services.
Unfortunately, he did not have much good to say regarding the exchange. He said, “I look at the exchange as something we have to do, not want to.” But, he also mentioned he is becoming less against it as changes are being made to address some of these issues.
This is just one brokers opinions regarding the recent changes in health care. But, it is information to take note of. Health care reform is changing people's lives, including those who are in the industry trying to make a living. The Exchange Learning Network is here so anyone who has a voice can be heard. It is also designed to ask tough questions and hopefully get tough answers with an end result of our state creating comprehensive health care reform that is affordable to all citizens.
Are you a broker with comments, complaints or praises? If so, continue coming back to the Exchange Learning Network and get involved.
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