As a broker or agent, you are constantly aware that commissions are being cut by insurance companies and other sales organizations due to the new minimum loss ratio standards as set forth in the PPACA legislation.
According to the Bureau of National Affairs, the PPACA requires fully insured large group plans covering 100 or more employees, as well as Medicare plans, to spend at least 85 percent of premiums on medical claims or quality improvement activities, and small group or individual health insurance plans must spend at least 80 percent, effectively capping profits and administrative expenses. "Grandfathered" plans initiated before PPACA was enacted are included in the requirement, while self-insured employer plans are not.
It's just going to be plain tough to make more money unless you sell a lot more product to make up for the loss in income. Also, you likely have seen that since the market is moving toward state insurance exchanges, the new health care environment is to be drastically impacted with your role changing to a "Navigator"—whatever that means. So what's an insurance salesman to do to keep the mortgage paid, pay for the kids' college tuition and put food on the table?
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Independent health insurance agents and brokers play a major role in helping small employers and individuals search for health insurance coverage. It has been estimated that at least half of small employers who provide health insurance for their employees do so through insurance brokers, and in some markets the number reaches 90 percent according to the Center for Studying Health System Change. When this much business is going to be affected by changes coming up in the near future, brokers must adapt to those reductions in commissions.
In the 2011 Health Insurance Market Study, the result of a collaborative effort between Agent's Sales Journal, Agent Media and the National Association of Health Insurers (NAHU), agents were asked about their opinions on the new Affordable Care Act, commissions, the main challenges they are facing, what they see for the future of the health insurance market and more. The results were very insightful:
- While individual major medical remains the best-selling product, only 12% of respondents said they expect sales of this product to increase substantially in the next 12 months and 32% said they expect it to increase somewhat.
- Only 7% of agents support the Affordable Care Act in its current form; 45% said they would support it in a different form; and 28% think that no reform is needed.
- Most agents are facing substantially decreased commissions, in large part because of the new medical loss ratio mandate.
- Agents faced these challenges in 2010: clients believe they can't afford health insurance; rate increases; clients aren't qualified (too many health problems); underwriting process is too difficult; prospecting; clients are hesitant to buy because of uncertainty over health care reform.
- 72% of agents said that referrals remain the key to success, naming them the best resource for new individual health insurance prospects.
- Agents expect HSA sales to hold steady in 2011.
The key factor developing now and over the next short period is how agents and brokers will survive the decrease in income due to the MLR and decreased commissions. Knowing how to circumnavigate these choppy waters will provide the best way to keep afloat and avoid sinking like a rock. If you have not already seen a decline in commission income, get ready. It's coming soon. Now you need the tools that produce more money in your paycheck, and you can start selling them now.
Voluntary benefits provide additional options to your clients, and your commissions can definitely be increased as add-on products to major medical and health insurance plans are sold. Check out other insured plans for services like AD&D, Dental, Vision, Critical Illness, Life, Short Term Disability, Long Term Care and more. Other great add-ons are discount plans for ancillary health services that plug in well with high-deductible health plans, pre-tax vehicles like HSAs, FSAs, HRAs, and fill gaps left uncovered by insurance.
And here is why you should: Regulatory and economic issues are forcing many employers to make changes in their benefits plans. One of the changes employers expect to make in the near future is to add voluntary benefits. [See Employers expect to add voluntary benefits] Almost half of employers (49%) surveyed in July by Colonial Life at the Society for Human Resource Management expo in Las Vegas say they expect to add voluntary, employee-paid insurance benefits to their plans within the next year.
Wow! Half of all employers want voluntary plans. There's your retirement plan right there. So, get to it!
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