“Your insurance committee is way out in left field! Why would anyone want lower benefits at a higher price!” offered the consultant.
Recently a large South Texas school district hired a new insurance consultant to review the district’s cafeteria plan products with recommendations. Part of the process involved the district’s insurance committee.
The cafeteria plan products are paid entirely by plan participants. Employees can choose to participate in some, all or none of the plan offerings. It is a completely voluntary program. It’s employee money.
Commissions on various voluntary products can be lucrative. For example, group voluntary disability coverage can pay a brokers as much as 25% commission. Cancer plans can pay up to 80% first year commissions and more. In this case, the district’s +2,500 employees can earn a broker upwards of $250,000 and more.
First year commissions are higher on most products and leads brokers into the promised land should a group change from current policies to new ones.
In this case the district’s insurance committee voted to recommend no change in voluntary products. However, they did not contend with the district’s new insurance adviser who worked against them.
At a recent school board meeting, the item came up for consideration. In his presentation, the insurance adviser recommended a change in insurance products while, after prodding from a board member, acknowledging the insurance committee’s desire to make no changes in products. “Your insurance committee is way out in left field! Why would anyone want lower benefits at a higher price!” offered the consultant.
The board voted to accept the consultant’s offer even though the plan’s consumers who pay the entire cost of coverage did not want a change.
Some would argue this is a classic case of churning. Or some may believe the district’s insurance committee really is stupid. We will let the reader decide.