Insurance Brokers Express Worries About Compensation Rates for Exchange-Based Sales in Latest Issue of AIS's Health Plan Week

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Two long-time insurance agents discuss the impact potentially reduced compensation rates will have on insurance business models in the Aug. 26 issue of Health Plan Week.

Six weeks before open enrollment begins for public exchanges, health insurance agents and brokers say they still do not have vital information on coverage options, premiums and commission payments, or even if commissions will exist in 2014. The Aug. 26 issue of Atlantic Information Services, Inc.’s (AIS) Health Plan Week features a case study on the Georgia insurance market, where two long-time agents worry about the impact this lack of information, and the potentially reduced compensation rates, will have on business models.

The Affordable Care Act (ACA) does not mandate that brokers be paid a commission for selling insurance, but does stipulate that any commission paid by a carrier be equal for products sold inside and outside of the exchanges. Rick Bailey, president of brokerage Rick Bailey & Company, Inc., based in Woodstock, Ga., says historically insurers have paid between 10% and 12% for first-year commissions in the individual market on a percentage-of-premium method. Commissions generated by renewals are all over the map, but run around 5% to 8%, he says.

But for 2014, the numbers being discussed in broker circles are much lower. “I’ve heard first year will be down to 5% and as low as 2% to 3%,” Bailey says. Insurers have been cutting commissions in order to comply with the health reform law-mandated medical loss ratio requirements that went into effect in January 2011. The ACA requires insurers to spend at least 80% of individual and small-group premiums and 85% of large-group premiums on medical costs or quality improvement activities, with the excess refunded to members. Agents and brokers are directly impacted since their commissions fall into the 15% to 20% of premium revenue insurers can spend on administrative expenses.

A second market veteran, Russ Childers, an insurance agent based in Americus, Ga., and former president of the Georgia Association of Health Underwriters, tells HPW “the compensation could be zero. I mean, they could decide not to compensate agents.”

“We’re not really sure if we’re going to be paid on a percentage-of-premium basis or a per-person per-month basis,” Bailey says. “If it gets too low, then how do you as an agent, from a business perspective as well as an overhead perspective, how do you make that work and still be able to stay in business?”

Visit http://aishealth.com/archive/nhpw082613-02 to read the article in its entirety, which includes an analysis of the other challenges brokers face and potential new business opportunities they may pursue.

About Health Plan Week
Published since 1991, the 8-page weekly newsletter Health Plan Week provides timely, objective business, financial and regulatory news of the health insurance industry. Coverage includes new benefit designs and underwriting practices, new products and marketing strategies, mergers and alliances, financial performance and results, Medicare and Medicaid opportunities, disease management, and the flood of reform-driven regulatory initiatives including medical loss ratios, exchanges, ACOs and myriad benefit design changes that are mandated.

About Atlantic Information Services
Atlantic Information Services, Inc. (AIS) is a publishing and information company that has been serving the health care industry for more than 25 years. It develops highly targeted news, data and strategic information for managers in hospitals, health plans, medical group practices, pharmaceutical companies and other health care organizations. AIS products include print and electronic newsletters, websites, looseleafs, books, strategic reports, databases, webinars and conferences. Learn more at http://www.AISHealth.com.

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