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Health insurance brokers manipulate commissions and bonuses

January 4, 2021

Topics: Quote of the Day

By Katy Talento, Sc.M., and Ge Bai, Ph.D.
MedPage Today, January 2, 2021

Health insurance brokers market themselves to employers as a buyer’s agent, promising to use their expertise to find employers the best deal. A new study, however, reported a positive association between health insurance broker commissions and premiums paid by employers offering fully insured group health plans to their workers.

What’s more, brokers are also paid various types of bonuses by insurance carriers, based on the amount of total business the broker has placed with the carrier, the amount of new business delivered to the carriers, or other types of metrics based on profit delivered to the carriers.

If you’re an employer looking for fully insured health insurance plans, your broker has every incentive to sell you a higher-priced plan compared to a lower-priced plan, a plan structured to produce more profit for the carrier rather than savings to you, a plan sold by the carrier that has a better bonus structure compared to a better plan for you offered by another carrier.

Larger employers often hire one of a handful of major insurance carriers to administer a self-funded plan, in which the employer pays all of the medical claims incurred by its workers. The carrier is merely a claims processor, writing checks to hospitals and doctors out of the employer’s own bank account. What incentive does that carrier have to make sure the employer isn’t being overcharged, billed erroneously, fraudulently, or billed for inappropriate and unnecessary care at more expensive sites of care? None. They just mail the check. It’s not their money on the line.

So fully insured employers buy plans sold by agents who have no incentive to keep costs down or recommend the most suitable plan; self-funded employers have carriers that have no incentive to keep costs down or quality high. That economic jujitsu is stealing prosperity and growth from American businesses, and stealing the American dream from the working class.

https://www.medpagetoday.com…

Ge Bai, Angela Park, et al, Medical Care Research and Review: The Commissions Paid to Brokers for Fully Insured Health Insurance Plans, December 16, 2020:
https://journals.sagepub.com…


Comment:

By Don McCanne, M.D.

When the Affordable Care Act was drafted, one of the goals was to protect and perpetuate employer-sponsored health plans, the part of the health insurance market that was said to be functioning well. No doubt the health insurance brokers that sell these plans were in agreement with this assessment.

The insurance brokers are strictly administrative intermediaries who provide no health care services whatsoever, but they add significantly to the costs of health plans offered by employers though broker commissions and bonuses. The brokers can increase these payments from the insurers by manipulating the insurance products sold to the employers, often increasing the brokers’ own profits without providing any added value to the employer or the insured employees. These brokers are yet one more reason why health care costs are so high in the United States in a system rife with mediocrity and wasteful administrative excesses.

The brokers no doubt contend that they are providing a valuable service to the employers by not leaving them stuck with a one-size-fits-all plan but instead customizing the plan to fit the wishes of the employer. But what customization is offered? Higher deductibles and other cost sharing that erect financial barriers to health care? Narrow provider networks that may exclude professionals and hospitals that the employees may prefer or even need? Limiting services covered by the plan? Using tiering or stepped therapy that create more barriers to care? Regardless, they will certainly select plans that will provide higher commissions and bonuses without bothering to explain those features to the employers buying the plans.

So then the employer has a choice of private plans, fulfilling President-elect Biden’s assurances that private health plans will always be available.

Wait. Shouldn’t these plans be compared to the dreaded one-size-fits-all plan? What would a single payer improved Medicare for All plan offer? All essential services would be covered, throughout life. Hundreds of billions of dollars in administrative waste would be eliminated (including the fees of superfluous brokers). The financial barriers of cost sharing would be essentially eliminated. Individuals would have the freedom to choose their own health care professionals and institutions. Equitable, progressive tax policies would be used to fund the system, making care affordable for each of us.

Market advocates claim that choices in insurance plans reduce costs while improving quality, yet the opposite is true since markets do not work in health care, except at the extreme margin. What we really want is the comprehensive, effective, equitable, affordable one-size-fits-all plan that really does take care of all of us without threatening our financial security. We certainly don’t need to pay the brokers to advise us that we should go ahead and accept improved Medicare for All. By now, we can figure that out on our own.

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About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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