Darrell Beckett, VP Texas Marketing and Sales sent out an announcement July 28 to the brokerage community announcing upcoming “reductions to our Individual Product distribution costs.”
“As you are aware, compliance with the Patient Protection and Affordable Care Act is bringing significant changes for Blue Cross and Blue Shield of Texas and others in our industry……………Impacting BCBSTX and our Agents is the PPACA provision that requires 80 percent medical loss ration as of January 1, 2011………………………….the significance of the new MLR provision will also require reductions in our Individual Product distribution costs.”
Agent commissions for individual health policies in Texas can run as high as 20-25% of premium.
Editor’s Note: This is just the beginning of reduced brokerage commissions for health insurance agents. Carriers in other states are already selling policies net of commission, but paying the broker a fee outside the insurance contract. We have seen one carrier set that fee at $37 per employee per month as broker compensation.
This trend mimics airlines who issue tickets with all kinds of add-on costs. For example, on a recent trip to Costa Rica we noticed that the add-on fees doubled the price of the ticket from Houston to San Jose.
Many group employers are questioning the value of their broker and are going direct to the carrier. Many employers are amazed and angered to learn how much their health insurance broker earns. Two recent examples include a 600 life employer group who discovered that their broker was earning over $250,000 but only showed up once a year at renewal time. Another group, a Texas school district, found their broker was earning well over $100,000 per year. When asked what he did for his client, he replied “I take them to lunch every time Im in town.”
We expect many health insurance brokers will find employment elsewhere in the coming months. Those that survive will become fee based insurance advisors specializing in all aspects of employment insurance.