How To Earn A Decent Commission

            Since the 1980’s, seasoned health insurance agents have developed ingenious methods to milk their clients for undisclosed fees and commissions.

Political subdivisions were targeted early on – health insurance agent ‘s operating costs in dealing with political subdivisions were, and continue to be,  high. Hunting trips, campaign contributions, scholarship funds, golf bets on the 19th hole for cash, renovating board members homes and offices, trips to Monterrey, Mexico in a rented motor home, trips to Vegas for ringside seats, prostitutes, expensive dinners, fishing trips to Costa Rica, Rolex watches,  are just a few of the every increasing costs of doing business with some school districts, counties and cities it seems.

Just how does a health insurance agent get paid? Let’s examine this in detail.

First, disclosed fees/commissions may just be the tip of the iceberg.  Usually a health insurance agent will represent that he or she gets paid by the insurance company, not their client. And, “I only get paid $1.75 per employee per month and 10-15% of the stop loss premium. The TPA and insurance company pay me, not you!”

On a group of 7,500 employees for example, that could amount to well over $350,000. Not bad pay.

But why settle for pennies on the dollar when opportunity rings?

A wise and seasoned health insurance agent would not be content with such a low pay scale knowing that there are numerous money pots within a health plan to be raided without the knowledge of their clients. What they don’t know won’t hurt them is a universal reasoning by some in the industry.

For example, if the average prescription per member in a given group is 1.2 per month, and there are 11,000 members in a group (employees, children, spouses), that would equate to about  158,400 prescriptions during a year. Working with a pharmacy benefit manager i(PBM) in conjunction with a third party administrator, an insurance agent can broker a $5-$10 fee per prescription. The fees thus generated show up as a claim, and not a fee or fixed cost. If the PBM contract is with the TPA and not the employer, these fees will never be disclosed. At just $5 per script, an agent can earn, on a case of this size, $792,000 above and beyone the “disclosed” fees/commissions.

But is $350,000 plus $792,000 enough to cover expenses and live the good life? Not for some. More income is needed, and easy pay is at hand.

An innovated health insurance agent will broker a 5% “commission” on PPO discounts too. For example, if billed charges on the above imaginary group are $75,000,000 during a year, and the paid or allowed charges through the PPO contract are $40,000,000, the agent can stand to earn another +1,500,000 in undisclosed fees.  These fees are disguised as a claim cost.

But is $350,000 plus $792,000 plus +$1,500,000 enough these days?  Probably not for some health insruance agents whose style of living demand large amounts of cash income. After all, they are competing with other agents for business. The agent with the most money draws attention to 4 out of 7 voting members of board.  Counting votes has never been easier than that.

How about milking ancillary product lines within a self-funded health plan? Disease management fees can be inflated. PPO access fees can be inflated too. Bonus overrides with the stop loss carrier can increase the disclosed commission of 10-15% to as high as 25-27%.

Unfortunately, we believe his is done quite frequently in the health insurance business. Milking a cow has never been easier.

Whatever happened to “transparency” and “accountability?”

Editor’s Note: Molly Mulebriar and Homer G. Flansworth cautions readers of this blog that through their experience they find many reputable carriers in the market, such as Blue Cross, Humana, United HealthCare, Cigna and others. They warn that to paint all insurance companies with the same broad brush is not a good thing to do.