It took some time for me to come up with this post as I am sure some will disagree with me as to thoughts. If you do, please post your thoughts for others as I think it is very important to have discussion about this vital issue as we proceed. I feel that I am giving it an objective view but there may be facts that I am missing. As we go forward with the future of healthcare insurance, the only way that we improve is to have honest and open discussion on these types of issues.
I am going to start with the fact that I truly believe that commissions in our industry have to change. With or without MLR regulations, the days of increasing commissions are gone. As I look to what is happening throughout health care and health insurance, one thing is becoming clearer, the need for transparency. Every part of the industry needs to come clean and expose their little secrets and make sure that we all are doing our part to lower the overall cost. The final consumer cannot continue to see the type of increases attributable to health care. Now with that said, I don’t think the current trend of some carriers putting all of the weight on the shoulders of producers is right either. In some cases, commissions are being cut to the 40 – 60% range and the work load hasn’t changed for the producer. Their office costs are the same, the staff costs haven’t reduced, and the local grocery store surely hasn’t reduced their prices. The producer is being punished even as they are asked to take on more clients. As in all areas, there are some producers who have taken advantage of the current situation and I am sure there will be some in the future. I am not referring to them but rather to the majority of producers who are out there doing everything they can to assist their clients to the best of their ability. Unfortunately, over the years, because of how insurance has been sold, a problem has developed and now needs to be addressed. Because commissions have been tied to premium, as inflation in health care has skyrocketed, so have the commissions tied to those premiums. In many cases, because the premium on a group went up 35%, the commissions tied to those premiums also increase by 35%.
Now, don’t get me wrong, I am not against higher commissions, but to solve a problem, you have to be completely honest. Did my work as a broker increase by 35% because their premium did? I have had producers tell me that they had to go resell the policy and that was worth the difference. Not sure I can agree if it is worth an additional 35% to resell as opposed to just selling and servicing. Maybe just a difference in opinion. Let me also mention that I am referring here to individual and small group health (under 100). To me, this is something that the producer community should really stop and think about. Is there a better way to run our businesses and still get fair compensation? I think there is a better and ultimately fairer way. I would suggest that we transition into a Per Person Per Month (PPPM). By doing this, we take away the inflationary trend of healthcare and begin an efficient method of determining size of business we want to have. In the individual market, this would allow a producer to budget in a much more understandable manner than they are able to do today. I would know the size of block I would need to manage to produce an income I desired. For instance, if the average premium of a health policy is $230 a month, I might expect a $25.00 – $30.00 PPPM for the first year and $8 – $10 on renewals. This really isn’t much different than what commissions are today yet, if would be simpler to budget and there won’t be many ways to game the system. Simple, effective and also easier for the carrier to price. The carrier could use a CPI or something similar to raise PPPM rather than premiums which are all over the board.
In the small group world, the same principals would apply with the exception of the front load. All certs would be paid at a PPPM and again the producer would know exactly how many certs they need to have to produce a level of income they want. Yes, this is very simplistic but isn’t that really want we want? If I know that my desire is to make $120,000 per year, all I have to do is build my block of individual clients and group clients to a certain level. Am I missing something here? Is it really “fair” to have my income increase 35% just because healthcare inflation is running at that level? If we really want to change the future, we all have to give a little and be brutally honest with ourselves. Let’s have these discussions and find solutions before those who want a single payer system destroy free enterprise and take over. We all have our part to play in the future of this industry.