The commission structure for individual and family plans has been on a steady decline since the Affordable Care Act began to be implemented in 2011. As the commissions to agents have decreased, the request from clients for assistance has increased. Now a major carrier has announced a reduction in commissions for small group plans. There seems to be a coordinated effort by the health insurance companies to push independent agent out of business.
ACA and MLR used to slash agent commissions
The first big hit health agents took on their revenue occurred in 2011 when carriers slashed commission rates by 50% on individual and family plans (IFP). The explanation for this draconian cut was that this was part of the health insurers attempt to comply with the new Medical Loss Ratios mandated by the ACA. Of course, many were quick to add that the reduction was only for IFP and not the small group market. The commissions paid to agents, deemed as a marketing expense, seemed to be a soft target where the agents were powerless to protest against and no politician would question.
How low can they go?
With open enrollment for the new ACA health plans agents saw more cuts and commission restructuring. Some carriers, like Anthem Blue Cross, went from a percentage of the premium to a flat fee per member per month which is cut further for renewals in the second year and beyond. Health Net reduced their commission rates in the middle of open enrollment down to 2% for some plans with little explanation. Cigna, offering plans outside the exchange, declared they wouldn’t pay commissions at all on certain plans.
Commission cuts come to small group
As agents hoped the slashing of commission rates would be limited to the IFP enrollments, many received a letter from Kaiser Permanente informing them that commissions on small group sales were to be cut. It is a ironic message from the carriers about how much they love agents only to then turn around and take a chain saw to their livelihood by decimating the commission structure. There seems to be a concerted effort to make the independent health agent disappear like the dinosaurs.
Broken promises of Covered California
Many of us went to bat for the little guy and enrolled numerous individuals and families into Medi-Cal only to receive many broken promises from Covered California that we would be paid a $58 enrollment fee for our service. This was in addition to the failure of Covered California to properly send agent designations so they could be paid for enrollments into private plans through the exchange from the carriers. (While I can’t speak for other agents, I’m still waiting for six months of commissions for a small group SHOP enrollment I did at the beginning of the year.) Some carriers on the exchange have refused to appoint agents. That means an honest agent enrolling a family into a plan he or she doesnt represent receives no compensation.
Do the carriers want the independent agents to disappear?
Never is there any mention from the Covered California or the carriers that agents don’t charge the client for their services. Many people are still under the misguided perception that agents charge for assisting with enrollment. The health plans pay the agents a commission on each enrolled member. But neither Covered California nor the carriers have much interest in seeing the independent agent succeed.
For every enrollment handle by a Certified Enrollment Counselor, Navigator or Covered California telephone staff represents one less commission the carriers have to pay.
Maybe only mega GA’s will survive
And if the carriers have to deal with agents, they would rather work with large General Agents of corporations like eHealth. These large companies act as just another call center for Covered California or the carriers. They are order takers, not service providers. Independent agents will actually advocate on behalf of their clients for billing issues or claim disputes. eHealth will just refer the frustrated consumer back to the carrier’s Byzantine maze of phone directories to reach yet another voice mail center. The carriers would rather cut on check to eHealth than have to deal with numerous little agents. Plus eHealth can quickly downsize, fire a bunch of agents, and live on 2% commission. Real field agents cant live on a low commission rate.
Subject matter experts
With the onset of the ACA, agents have not only had to be certified to represent ACA health plans and deal with numerous exchange website problems, we’ve also been asked to be experts in immigration, naturalization, Modified Adjusted Gross Income and federal taxes. No federal, state or health insurance company provides as much comprehensive assistance as the health agent. Yet, we are supposed to work under a dwindling commission structure and provide more knowledge, experience and guidance to the client.
Navigators to enroll fewer, make more money
Covered California and the carriers want the enrollments we bring to the table, but they don’t want to pay us for the work. Truly, a call center representative makes money working for Covered California than an independent agent. The managers of the new Navigator program will make more money than an independent agent and be responsible for fewer enrollments than many independent agents.
Less agents, less commission payments by the carriers
My hat is off to the numerous independent agents I have spoken and communicated with that continue to enroll families into ACA plans. They have spent countless hours on hold with Covered California, the carriers and maneuvering through the constant website problems to assist their clients. They can’t possible doing it solely for the money. The big question is when will the commissions get so thin that they have to walk away from representing health insurance. When the independents leave, consumers will be left the agent jack in the box and bureaucratic telephone people who dont actually know anything about health insurance, income or taxes, but can take an order and not care if they get it right or wrong. But the most importantly is that the carriers wont have pay the temporary order takers a commissionKa-ching!