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Showing You The Money

By Dr. Evan Saulino

It’s one of those things that make you shake your head and wonder if the folks in Vermont are on to something.

H.R. 1206 – dubbed the “Brokers Bailout Act” by some consumer protection groups – was introduced by Representative Mike Roberts (R-MI) and referred to the House Committee on Energy and Commerce. 

This bill would allow insurance companies to exclude payments to insurance brokers or agents from administrative overhead costs –the “medical-loss ratio” set by the Affordable Care Act mandating 80-85% of your insurance premium be spent on actual medical care.

Agents are claiming broker fees facilitate coverage  - and therefore medical care. The argument would seem to go that broker fees are a key step on the way to obtaining medical care, and therefore should not be considered an administrative cost.  

Several consumer advocacy organizations have launched a letter-writing campaign to oppose the legislation.

Not ones to wait-and-see, the health insurance agents employed a double pincer move, lobbying at the National Association of Insurance Commissioners (NAIC) meeting in Austin this week.   They were advocating to require that their services be used by any American who wants to buy health insurance through Health Insurance Exchanges, and for the “Broker Bailout” in the H.R. 1206 legislation (mentioned above).

Now, I don’t want to disparage any type of work…insurance brokers have been hit hard like the rest of us.  They can help people wade through the confusing myriad of insurance choices, in the small business market particularly. (Which again reminds me of the simplicity of the Green Mountain state’s proposed solution…)  But although brokers have “rebranded” themselves as “Producers” in some states, I’m not exactly sure what they produce.

If enacted, the insurance brokers’ proposals will funnel billions of federal tax dollars towards padding agents’ incomes and will fund administrative overhead spending – money not spent on direct medical care.

It’s really, really unlikely that paying insurance agents with our insurance premium and tax dollars is going to cure a single case of cancer, prevent a single heart attack, treat a single infection, or result in better access, affordability, or effectiveness of medical care for any Americans…   

Taking a step back, how much do insurance companies pay agents anyway?  This is a harder question to answer than one might think.

It turns out a lot depends on the market, the size of the customer-base, and the type of insurance product sold. It’s also difficult to get insurance companies to provide information about how much they pay agents - many view it as a “trade secret”.  My state has just recently mandated the collection of this information in our “all-claims” database.

Estimates of broker payments range between 3-7% of your premium - or more.  Here’s a 2011 Kaiser Permanente broker compensation website offering 7% to agents who sign up customers in the small business market for example.

So the insurance agent gets about 7% of your premium every year.  That doesn’t seem like a lot on the surface of things.  But it’s an extra $900 each year from the average American family who buys a health insurance policy.

What exactly is produced for you in exchange for that money?

Now, for comparison, let’s consider how much insurance companies typically pay for primary care medical services.

Primary care is the health care most Americans get most of the time.

It’s the health professional you see if you have an illness like a cold/flu/pneumonia/ear infection/UTI.

It’s where your doctor diagnoses more rare illnesses and refers you to the subspecialist appropriate for your problem.   

It’s your health and cancer screening, your vaccines and wellness visits.

It’s your prenatal pregnancy, family planning, and well-child care.

It’s complicated chronic disease care and management for diabetes, high blood pressure, congestive heart failure, asthma and hundreds of other medical conditions.

It’s treatment and counseling for depression/anxiety/bipolar and other mental health disorders.

It’s a place you can have a discussion about the type of care you want at the end of your life.

It’s all of these things and much more.

It turns out insurance companies typically spend about 6% of your premium dollar for primary care services – 1% less than the broker makes!

Overwhelming research nationally and internationally shows us areas with better primary-care have better health and lower health care costs, even after demographic differences (such as age distribution and income levels) are taken into account.

Recognizing this, in Rhode Island, they are finding ways to spend their money more wisely and produce better quality care at lower cost overall.  A recent Health Affairs article details what insurers in Rhode Island averaged for primary care services (5.9%) and tells about the state’s effort to rebuild primary care from the insurance side by investing more upfront.  

It comes down to this: In other states and at the federal level, we’ve got to question when insurance companies and commissioners – many of whom have links to or were employed by insurance companies – say there’s no money for expanding coverage or for investing in primary care and prevention, or when they say they can’t possibly keep insurance company administrative costs to 20% of your premium, or when insurers say they can’t possibly do anything about the latest rate increase, or when brokers say you just have to keep paying them their 7% even if you can’t find the value in it

Don’t accept it. You know better.  Tell them to “show you the money”.

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