Well, it has started. Talk about how commissions will be “compressed” under the new Health Care Bill. Compressed is a really nice word for lowered. With the MLR (minimum loss ratio) as the reason, some have started to say that commissions will have to be lowered or at the very least, a per member amount will have to be used. Janet Trautwein (president of National Health Underwriters) has been quoted saying that the days of percentage based commissions are limited. Although to her defense, she has since stated that her remarks were taken out of context and were part of a much longer discussion about the future of commissions. Either way, the fact that discussions have started indicate that there is a misconception that insurance agents and brokers contribute to the high cost of healthcare. This could not be further from the truth. A professional agent or broker not only lowers the cost, but is the closest thing we have to an educator when it comes to purchasing health care. It has always amazed me that our educational system teaches many different facets of life but never addresses some of the most basic of life skills. We teach our children how to buy a stock or bond, even though very few individuals ever actually will exercise that knowledge. We teach our children to speak in a foreign language, but they are ignorant to terms such as co-insurance or out of pocket maximums. We explain an isosceles triangle in detail but don’t explain how insurance works. The insurance agent is the only one who meets with the consumer and explains the most efficient way to purchase coverage and hence, health care itself. To lower the commissions means we will see fewer professional agents in the field. These leads to more ignorance in the purchase of insurance which then leads to higher overall costs for healthcare. The best proof I have of this point is to look at consumers and see who has the best knowledge of how the system works today. The consumer who purchases an individual plan today is one of the best informed when it comes to how their contract works. They see the basics and understand the details of the plan mostly because they usually have purchased the plan from an agent who took the time to explain. The next best informed consumer is someone attached to a small group. Again, an agent works with each of the employees usually to insure they understand how the plan works. The person who works for a large corporation has little understanding of exactly how their coverage works because they receive a booklet that tries to teach but falls short. Most people will look at the booklet during the open enrollment period and either go with the least expensive, or the one they had last year, or one that looks like it has best benefits. They never understand the details and don’t want to take the time to learn. The absolute most unknowledgeable group would be the public servant or government employee. They have no idea of the best way to purchase coverage and have no idea of exactly how it works. Why, because they assume that their coverage is the best. A great indication of this is the fact that even our representatives think their coverage is better than most of their constituents. In reality, their plans are almost identical to the plans available to average consumer. The down side to their plans is the fact that the cost (paid for by taxpayers) is much higher than the average. They would be much better to have a personal advocate (an Agent) who could assist them in the purchase of their coverage. So it seems, the further removed that an individual is from working with a professional agent, the worse their purchase of health insurance becomes. Let’s keep the professional agent in the purchasing of health insurance. The cost of an agent is much less than the cost with out an agent. If you think the cost of health care is high now with agents, imagine the cost when the agent is not involved. The agent keeps the carriers from harming the client. When a carrier tries to eliminate the broker, a few have, they find that their products are not purchased as much. In Iowa, Coventry Health has decided that they don’t have to compensate an agent. I personally believe this to be a mistake. By using professional agents, they would find that they would increase their sales and have better clientele. Blue Cross of Nebraska tried the direct route a few years ago and found that when it comes to individual and small group clients, the professional sales agent is integral. Not only have sales increased, but the clients are better served. Will commissions change? Yes, I believe they will. I think everyone will have to adjust their practice to meet the upcoming changes and I really believe that the agent will have to be more informed, more active, and most likely do these things at a slightly less cost. That is the way things have always gone. Yesterday is gone and you need to prepare yourself for the future. Find out what your clients expect from you. Look to change your practice to accommodate as much as possible. We at OCI will continue to work with professional agents to allow them to have more clients and not increase their overhead. The professional agent of the future will need a strong backroom that allows them to develop strong relationships with additional clients. Don’t fear, OCI will be here.
About the Author: Chuck Olson
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