By Bill Rusteberg
TPAs and carriers find working with health insurance brokers a necessary evil although they will never say so out loud. To do so would be business suicide.
It’s a love-hate relationship no one talks about. And it goes both ways.
Health insurance brokers are not in the business of insurance per se, they are in the business of creating, maintaining and selling relationships to the highest bidder. Since selling health insurance is not a created sale but a replacement sale, brokers are also in the business of destroying relationships as the only means to gain new business.
Relationships are commodities of value to be protected in order to maintain continued riches. Broker-built walls insure against outside encroachment, a de facto Relationship Insurance Policy with little risk of loss. Risk management consists of around the clock watchful guard duty with a direct Hot Line to and from the Beefeaters guarding the castle against intruders.
“No, you are prohibited from entering my castle, speaking directly with my client. You shall remain in your HomeOffice dungeon never to venture out without my permission. You have to deal with me. I own the relationship and it’s going to stay that way!” is the broker’s message, spoken or not. “If you do, you’ll be leaving here minus your family jewels!”
Carriers and TPAs understand the importance of relationships too. They understand the importance of Relationship Insurance and have crafted self-preservation risk management policies to that end. Understanding they can’t breach broker-built walls without suffering loss, their insurance policy includes a Mistletoe provision.
The Mistletoe Provision is a courtship risk management strategy designed to win over hearts and souls leading to the ultimate goal of lifelong dependency. Unlike the property & casualty world, it is unique and foundational to health insurance brokerage.
Property and casualty brokers buy lunch; health insurance brokers don’t. When P&C brokers meet carriers for lunch the broker is expected to pay whereas when a health insurance broker meets for lunch the Mistletoe Provision kicks in which requires the carrier/TPA to pay.
“You need me more than I need you” says the health insurance broker. “You need me more than I need you” says the P&C carrier.
The BUCAs and independent TPAs don’t trust brokers but hide it well. That veil of secrecy becomes faded during social after hour gatherings among peers. I learned that years ago on the Thunderbird.
I had invested $4,000 in a week-end retreat on South Padre Island and invited every insurance company rep. I knew. I rented a block of condos and a refurbished minesweeper named the Thunderbird refitted for deep sea fishing.
Over the next two days I listened to the chatter. It was fascinating. They compared notes on brokers they collectively worked with……. One was a broker out of Corpus Christi. All the carrier reps. hated him as he was demanding and arrogant. It was about “Them” and “Us.” It was obvious there was an unbreachable common wall between my fishing partners that day and the brokers they courted.
On another more recent occasion I ran into an old acquaintance while on vacation. He has been a TPA sales representative for at least 30 years having worked at more than one TPA in his career. While enjoying Happy Hour poolside, I asked “Jeff, how in the world do you put up with High Maintenace Primadona brokers?”
Before he could answer his wife blurted “He hates them! He can’t stand them! He comes home after a trip bitching about them!” Jeff quickly ordered another round before it was due. “Make it a double?” repeated the bartender.
The most compelling tell was when I was in a room and everyone else forgot I was there. The occasion was a private, invitation only, breakout meeting during a national insurance symposium. I found myself in a conference room with about 20 TPA owners and representatives. Although the purpose of the meeting was something else, the conversation quickly turned to broker relationships.
“How to you breach a broker-built wall?” asked one. “Some brokers don’t pass our recommendations on to our mutual client! How do you guys handle that?” asked another.
Another said “One broker wanted six figures more and told us to find a way to pay it disguised in claims. He’s a big broker and we need the business. If we didn’t do that he threatened to move his block of business. What would you guys have done? How would you guys have handled it?”
Broker relationships was obviously a frustrating bone of contention among these TPAs.
It goes both ways.
Carrier built relationship walls, once erected, are essentially breech proof. It traps brokers into forced loyalty. Brokerage contracts have a 30-day termination provision, with or without cause. The unsaid threat is “If you move OUR business we will toss you naked over the wall, penniless, forever losing your residual commissions to the Castle Treasury.”
More plan sponsors are questioning the value of both parties these days. They are beginning to learn the truth out of necessity, and they don’t like what they see. With their financial backs to the wall, they perceive themselves as pawns towards a means to an end that doesn’t benefit them. And they are right.
With the rapid rise of AI and non-traditional methods of health care access and financing, TPAs, carriers, brokers, and consultants are at risk of continued relevancy. In nightmares that are sure to come both sides will find themselves on the Thunderbird chatting it up, commiserating in brotherhood of how things once were.
