Finally-some good news for employers who provide medical
insurance and other employee benefits to their workers. Buried in the House
Appropriations Act of 2021 is a requirement that insurance agents and brokers
disclose compensation and inducements from insurance companies to employers
whose contracts they represent.
As a former insurance broker who specialized in employee benefits, this is long overdue and I always disclosed my compensation to clients in an annual report at the time of contract renegotiation. One of the reasons I left that industry was my behavior, which did not include gouging my clients and assiduously representing their interests was considered “naïve”. One of the more financially successful brokers in the Seattle area was in fact a broker who sold products to clients which the employees would have to pay for, but were no substitute for actual medical insurance, yet highly lucrative. None of these voluntary sickness and accident plans would protect employees in the event of a major illness. I hated to see employees having to pay more and more of their hard-earned money for medical plans with no improvements in care.
Worse yet, prior to the approval of the
Affordable Care Act in 2010, employers could discriminate against employees
based on their health and some sought to do just that, not accepting a client
if there were employees with medical needs above their stop loss target. In
other words, insurance companies or in this case, reinsurance companies want to
avoid any potential loss. I suspect in the world of reinsurance this practice is still ongoing though probably more subtle. Reinsurance is used in self-insured health plans, which are exempted from laws that fully
insured plans are subject to because it is not considered insurance under
ERISA
Moving at the glacial pace of the insurance industry, people
have finally caught on to the conflict of interest these well-paid client
representatives have between direct corporate incentives with their employers
and indirect incentives to sell certain products from the insurance industry.
Of course, the two largest brokerage firms, each worth a billion, Marsh
McClennan and Willis Towers Watson are keeping mum on this. Afterall, their
clients may ask for discounts when they see how much money they have been raking in, especially for health care plans.
In my 2013 book, Unraveling US Healthcare-A Personal Guide I
wrote about the insurance industry fee rip offs, from excess reserves, to high
administration costs, and of course what employers pay to their agents or
brokers is plan overhead.
However, in the last decade more people in the insurance industry became turned off by the perverse incentives to make insurance companies and their representatives wealthy but at the customer’s expense. A better way to do business with someone negotiating your employee benefit plans, including medical insurance, is on a fee basis, not commission. The fee is paid by the employer, the client directly to the broker’s firm. It is not always possible to get products without commissions in them, especially for life and disability plans, as these depend on the state product filing requirements, but it is completely feasible for corporate medical plans for employers with fifty or more employees.
Marshall Allen, a
healthcare advocate and Pro Publica reporter has just written a book which
guides employers and every day consumers through the pitfalls of insurance
contracts and ways to save money, Never Pay the First Bill And Other Ways To
Fight The Health Care System And Win came out last month.
1.
Know what your broker or agent representative is
getting paid from your firm. Ask your representative directly for this
information and if they stall or refuse to give it to you, find another
representative.
2.
If your
company pays Marsh McLennan $50,000 a year in commission, determine how this
compares for your size firm and total plan contributions annually. If you are
paying your representative more than 3% of the gross contributions for your
medical plan, you are probably overpaying.
3.
Understand that the services you are getting
which are bundled with the brokerage firm could possibly be less expensive by
unbundling them and finding a consultant or third-party administrator for some
of the services.
4.
There are brokers who will represent clients for
flat fees, which could really save a client money. If you can find someone to
negotiate your contracts for $15,000 instead of $50,000-why not!
5.
There is an organization which certifies
consultants who follow best practices, avoiding agreements which generate
conflicts of interest called the Health Rosetta, a clever play of words on the
Rosetta Stone.
7. Know what you are buying, a health and accident plan is NOT major medical insurance and should not be represented as such.
8. Participate in employer groups which share experience and strategies for saving money without sacrificing care.
9. Read information from health care advocacy groups like LeapFrogGroup.org and the Lown Institute.org.
10. Review your claims statements for fraud as your insurance company is probably not doing a good job of fraud prevention, especially for smaller claims, which are going to be anything less than $50,000 or more.
The insurance industry is still a very flawed mechanism to deliver health care, but it remains the main vehicle to finance and direct treatment for about half the US population. The US is wedded to the insurance industry for now, so hopefully this piece provided some utility value for my readers.
References
Allen, M. (2021, January 9). Health Benefits Brokers
Will Have to Disclose What They Receive From the Insurance Industry. Salon.com.
Retrieved July 25, 2021, from
https://www.salon.com/2021/01/09/health-benefits-brokers-will-have-to-disclose-what-they-receive-from-the-insurance-industry_partner/
Allen, M. (n.d.). Never Pay The First Bill And
Other Ways To FIght The Health Care System And Win. Portfolio/Penguin.
Retrieved July 25, 2021, from
https://www.nyjournalofbooks.com/book-review/never-pay-first-bill
States, 1. C. (2021). Consolidated Appropriations
Act 2021. Federal Register of the United States. Retrieved July 25, 2021,
from https://www.congress.gov/bill/116th-congress/house-bill/133
The Health Rosetta. (n.d.). Retrieved July 25, 2021, from Health Rosetta.org:
https://healthrosetta.org/
US Department of Labor. (1974). Employee Retirement
Income Security Act of 1974. Retrieved July 25, 2021, from
https://www.dol.gov/general/topic/health-plans/erisa
Winter, R. E. (2013). Insurance101. In R. E. Winter,
Unraveling US Healthcare-A Personal Guide (pp. 171-176). Rowman and
Littlefield. Retrieved July 25, 2021, from https://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972
