The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Tracking Commission Changes

Posted by Alan on November 19, 2010


The Medical Loss Ratio requirements contained in the Patient Protection and Affordable Care Act take effect on January 1, 2011. Even though the Department of Health and Human Services has yet to certify the recommendation concerning how carriers should calculate the percentage of premium they pay toward medical care and health quality measures, the carriers have to be managing their businesses to hit the MLR targets on January 1st.

And to hit their MLR targets most carriers offering individual coverage — and many providing small group coverage — will need to adjust their commission schedules. As noted previously here, reducing broker commissions is compelled by the math of the MLR requirements. The PPACA requires carriers to spend 20 percent of the premiums they receive from individual and small group clients on medical care and health improvement efforts (the MLR target is 85 percent for larger groups). A carrier with a mature block of business need 7-to-9 percent to keep the lights on, the staff paid, and other administrative costs. They look for a margin of roughly 4-to-5 percent (they may not always get it, but that’s what they’ll likely aim for). The remaining 6-to-9 percent can be devoted to broker commissions. In some states this is roughly what insurers are paying their producers now; in other states, especially in the individual market, this represents a substantial pay cut.

None of this is pleasant, but math often isn’t. What remains to be seen is whether carriers will move to different kinds of payments (paying a fixed fee for each member insured, for example, rather than a percentage of the premium). While changes to individual commissions are likely to be significant in some states, adjustments to small group payments is likely to be more modest. Some insurers may, for example, simply reduce the percentage of premium paid to brokers to offset coming rate increases (consequently, keeping brokers whole from a revenue stream standpoint). Others may make no changes at all to their small group commission schedules yet.

Whatever they’re going to do, carriers will be notifying brokers of any compensation changes about … now. The insurers will want to apply the new commission schedules to policies sold with January 1st effective dates. Given the nature of the sales pipeline, that means the “Dear Broker” letters should be hitting mail boxes any day now – if they haven’t already.

While I’ve heard rumors of changes I haven’t seen details yet. As this blog has a large readership in the broker community I’m hoping you’ll take a few minutes to share what’s happening. Please leave a comment indicating:

  1. Your state
  2. What product segment the commission change applies to (individual, small group or large group)
  3. What the old commission schedule was
  4. What the new commission schedule is
  5. Any other comments you might have (I’ll reserve the right to edit for civility and language)

Hang in there. Things could change as the National Association of Insurance Commissioners, HHS and carriers address the stark reality: brokers are needed for America’s health care system to function. So this is just a chapter in a long story – an unpleasant chapter, perhaps, but in the end, just a chapter.

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103 Responses to “Tracking Commission Changes”

  1. jonbroker said

    Oxford sent out notice today that effective 10-1-11 commissions for 2-50 life groups is going from 4% to 3.5%.

    • David L Kralstein said

      Empire will anounce later today that they will only pay $5 per contract. I’m not a happy camper.

  2. jonbroker said

    It appears that commission cuts have temporarily subsided. Has anyone else noticed that?

  3. jonbroker said

    In NY, Empire just sent out correspondence that the PCPM rate is $21 per subscriber. After looking at my book this will decrease revenue by about 50%.

    • NoLongerSellingEmpireBCBS said

      I just read Empire’s new comp plan and it sucks. Basically, they’re telling the agents not to bring them groups in the 2 to 9 band which has historically been bad risk for them. It’s classic cherry picking on Empire’s part. Case in point: They’re loading the new comp plan with new business and retention bonus compensation for groups in the 10 plus segment and totaly discouraging the 2 to 9 business in order to reduce their medical loss ratios. The smoking gun: They pay a paltry $7 commission a their overpriced HMO. It’s so obvious. Reducing compensation to the agents is just another calculated excercise to reduce adverse selection as well as increase profits for Wellpoint. My advice to Empire: Better start ramping up your group benefits administrator and member service area to handle the influx of orphan contract holders who have been abondoned by their agents.

  4. Michaele Olsen said

    I am sending out 15 letters this week to my micro-group clients telling them we will no longer be assisting them. Regence BCBS in Washington State has decided to pay us nothing on this block. For groups of 3 or 4 we get $5 pepm, 5 to 10 is $15 and 11 to 50 is $25. I am going to lose on average about $1,223 for groups of 3 or larger. I am losing about 53% of the revenue from this segment! Brutal! Total loss is around $53,000 per year. Luckily we have several large self funded groups. I am agonizing over whether to charge these clients outside of the commission the carrier is collecting for us. There is no way I can re-coup the total amount. What really ticks me off is reading how the carriers still expect big profits and are telling shareholders not to worry..

  5. jonbroker said

    Empire BCBS announced today that PCPM will begin July 1, 2011. Not sure how much PCPM though.

  6. Ann H. said

    This happened a week or so ago, but I forgot to write about it here. Blue Cross Blue Shield of AZ announced commission cuts effective 3/1/2011.

    INDIVIDUAL –
    1-9 accounts on the books – 8.5% FY, 4% renewal
    10-49 accounts – 9% FY, 5% renewal
    59-99 accounts – 9.5% FY, 5% renewal
    100-499 accounts – 10% FY, 5% renewal
    500+ accounts -10.5% FY, 5.5% renewal

    Previously it was:
    0-99 accounts – 10% level
    100-199 accounts – 10.5% level
    200-299 accounts – 11% level
    300-399 accounts – 11.5% level
    400-499 accounts – 12% level
    500+ accounts – 12.5% level

    Also, the premium upon which they base commission is drastically cut. The CEP (Commission eligible premium)is the PREFERRED rate at the time of INITIAL enrollment. It doesn’t include rate-ups, tobacco surcharges. It won’t include premium rate increases in the future. Although the commission percentage change only affects new business written after 3/1/2011, the CEP (Commission Eligible Premium) applies to all business no matter when written.

    GROUP –

    Previously, BCBSAZ paid 5.5% level on group insurance. Now they have moved to a PEPM (Per employee per month) compensation for all new business and business that renews on or after 3/1/2011.

    No matter how many contracts you have on the books, mini groups and large groups produce the same commission. This is all PEPM.
    2-3 lives – $6 FY and renewal
    51-99 lives – $21 FY, $20 renewal

    For other size groups, it differs according to the size of the broker’s book. Brokers with under 250 contracts on the books will receive:
    4-25 lives – $27 FY, $24 renewal
    26-50 lives – $23 FY, $21 renewal

    Brokers with 250 to 500 contracts earn
    4-25 lives – $29 FY, $26 renewal
    26-50 lives – $25 FY, $23 renewal

    Brokers with 501+ contracts earn
    4-25 lives – $31 FY, $28 renewal
    26-50 lives – $27 FY, $25 renewal

  7. jonbroker said

    NY – Found out today that Empire BCBS in NY is moving to a flat PEPM Q3 of this year.

    • Jerry said

      Jonbroker:

      I am curious as to the source of your post. Like you, I work in the NY market and have not seen or heard the information on your post. I realize you might want to protect the confidentiality of your source but I guess I am interested in the details of the payment system you mention and when you think this information will be made public.

      • jonbroker said

        Jerry:

        I was told by someone that works at Empire. If you have an Empire Rep, you should call and see if you can find out anything additional. If you do, let me know. We should start complaining now…especially since HCR is so uncertain w/ talks of repeal and cutting off funding.

        • Jerry said

          I am willing to work with you on an organized approach to stopping this before it starts. I don’t really know at this point if I have a rep or not. I have two rep names that I have been assigned to but they don’t realy know me and I don’t really know them.

        • jonbroker said

          You should call either one of them. I bet they might shed some light.

      • CJ said

        Has anyone crunched the numbers on their book of business commisions going from a flat premium percentate to a PCPM (Per Contract Per Month)basis. What did it do to their income? Empire BCBS (Wellpoint affiliate) just officially announced they’re switching to PCPM effective 7/1/2011. They’ve traditionally paid a flat 4 % on their groups with 2 to 50 employees. I’ve got a good chunk or business with them. Please respond so I know whether to apply for a part time job at Home Depot or not. Next time around they’ll be paying brokers in peanuts.

        • CJ,

          Perhaps it’s time to consider telling the companies to begin submitting insurance department filings “net of commissions” and start charging your clients, those for whom you advocate, a fee.

          I think that it’s time for all agents/brokers to begin thinking about who it is that we really represent (our clients), and work to change the insurance buying public’s perception that we are merely an extension of the companies. You can be certain that the company executives, right to the top, would not consider for a second having their incomes slashed by 50%. So why do we agents?

          The companies do not represent the insurance consuming public, they represent themselves, their boards of directors, and their shareholders, period. It is the agent/broker community who represents the consumer. As such, it is the consumer who should be paying the agent/broker community for our hard work as advocates for those consumers. When the companies pay commissions to agents, and the agents claim to advocate for the consumer, it has the ring of “conflict of interest” and our being duplicitous. Let’s change that perception.

        • Ann H. said

          Hi CJ –

          In AZ about 3 or 4 years ago, United Healthcare moved from a commission percentage of about 5% for small group to a PEPM of about $23, except 2-4 employee groups that were $6 PEPM. We were pretty upset at the time, but after crunching the numbers I found that I lost on some cases and gained on others, but overall it had the effect of a very small increase in my monthly commission. In renewal years, as the premium increased, but the PEPM stayed the same, my income was less than if I had the 5%. Although UHC increased the PEPM in future years for New Business, they tended to keep it the same for renewal business.

          That was pre-MLR rules, however. The net effect of ALL commission changes at this time is that the income you receive will be less!

  8. Frank J Smith said

    I posted this comment at NAHU yesterday and had my hand slapped today. It was not my intention to cause NAHU any legal problems. “Aetna’s move to take brokers commissions out of their MLR’s by not paying any [51+ health plans] needs a united responce by the brokerage community or it will become the norm no matter what happens to Obamacare. Why not boycott Aetna new business for ALL size grops and replace any inforce case you have on the books. We know they dont have an inhouse sales force to make up the loss of business. If they are successful with 0% commissions the other carriers will follow and we will all be out of business. We might as well fight for our future.” From the responces I’ve recieved Aetna may not yet be doing this in all states. Even if you are not currently effected don’t wait for the hammer to fall on you by then it will be to late. They are a national carrier and we need to give them a national responce.

    • Frank,

      Regarding your getting your “hand slapped”, please read the IMPORTANT thread, posted by Brenda Weigel @ NAHU. There are many responses to this thread, none good. The reasons have nntohing to do with the content, and everything to do with the manner in which Brenda delivered the message (pure arrogance toward those who pay her and Janet Trautwein’s salaries and bonuses, US! The Agent/Broker Community). To date, neither Janet nor Brenda have “gotten the message”. The NAHU staff needs to be reminded of just who it is that pays them, and for whom they work.

      Your post to NAHU was fine. NAHU has done a very poor job of explaining what is and isn’t appropriate. Please check out the Health Insurance Agents Forum on LinkedIn, @ http://www.linkedin.com/groups?mostPopular=&gid=3719047, for further explanation and a more current status of our group’s positions.

      Thanks,

      Spencer A. Lehmann, RHU

      • Frank J Smith said

        Spencer, Thank you for your support. I am beginning to feel NAHU is becoming a self serving organization like unoins and the government. We dont have time to fight amongst ourselves. We need to be one organized and we need to fight back against Obamacare and any carriers that feel they can take advantage of us. Frank

        • Frank,

          I agree that we need to be one, organized and need to untie to make clear our important role in the advocacy of the client.

          I don’t agree that NAHU has become a self-serving organization. NAHU was originally established as an Educational Association. The need to shift to a “Legislative focus” became clear in the late 80s and early 90s with the advent of HillaryCare. And we did shift. I was serving on the NAHU Board during those times and it was eventful, to say the least. Because of NAHU 501C 6 Tax Status they must be especially careful to not “breach” the line and risk losing that tax status. They do well as a lobbying, in your face testifying before Congressional Committees, being called upon for expert testimony, and other such visible association efforts. They cannot be found to be involved in making a market, price fixing or unionizing type of actions, or will lose an expensive tax status relief, and no longer be as of much value to us.

          Therefore, we established HIAF, and there are other associations, to bring our “fight” to the front of the line. It makes sense to belong to more than one professional association, most professionals do.

          You bet I support you, Frank. I support all of our colleagues who live their lives as professional Agents/Brokers whose lives are dedicated to helping the Insurance Consuming Client. And from whom my best friends have come. I do not support any who choose to abuse the public, or who are looking for a “free ride” or a “free lunch”. I have no patience for peddlers or for “Cry babies”. We’ve all had to survive tough times. We can do so as professionals, or as “whiners”. I wish the whiners would just go away and find someplace else to waste others time. Those who are ready to get in the ditch and start shoveling, will always be tops with me. Ya gotta love the smell of fresh dirt! :)

          Spence

        • Ann H. said

          Spencer, I don’t tell you often enough how much I appreciate you! You’re retired, for heaven’s sake. You should be playing golf and traveling for leisure! Here you are, still laboring daily for our industry, and for the consumers you served so faithfully. When you add the factor that our industry is in turmoil and it’s not “fun”, the respect level rises for your endeavors to better our lot. Thank you, Spencer. You are truly a class act!

          Ann H

        • Ann H,

          Coming from you, I consider that to be high praise indeed! I have tremendous respect for you and, candidly, always read your posts.

          I really love this business, and I really care about our colleagues. Some of them are my best friends! I simply cannot imagine not doing my best to help. Knowing that I get to work with people like you, Ann, makes this work so far more enjoyable.

          Thank you, Classy lady!

          Spence

  9. Ann H. said

    Aetna is blinking again. I received a letter in the mail that reverses SOME of their prior decisions. You may note a post from me below, where I reported that Aetna reversed some of their decisions on the GROUP business in AZ. This new letter addresses INDIVIDUAL/FAMILY commissions. Alan, you were certainly correct in stating that change will keep changing…

    The letter I received today states:

    “We have received a great deal of feedback on recent changes to our broker commission structure. Based on your feedback, and after a review of the competitive marketplace, we have decided to change our commission structure for existing business. As you know, we recently announced changes to the broker compensation structure for Aetna Advantage plans for Individuals, Families and the Self Employed for 2011. These changes are part of our efforts to meet the 80 percent Minimum Loss Ratio requirement for the individual health insurance market outlined in the Patient Protection and Affordable Care Act (PPACA).

    Modification to New Compensation Structure – We have decided to modify our recently announced compensation structure for EXISTING business. As a result:

    POLICIES WITH EFFECTIVE DATES PRIOR TO SEPTEMBER 1, 2010: Will NOT be moving to new compensation structure. This is a change from our previous announcement which indicated that this business would transfer to the new structure at the end of the rate guarantee period.

    POLICIES WITH EFFECTIVE DATES BETWEEN SEPTEMBER 1, 2010 AND DECEMBER 15, 2010: Consistent with our communication of July 30, 2010, these newer policies will move to the 2011 commission schedule beginning with the February commission payment for premiums received in January 2011.

    Please note that all other previously communicated changes remain in effect for new business effective on or after January 1, 2011.

    Looking forward – We appreciate your feedback and partnership as we take the steps necessary to meet the requirements of PPACA. If you have any questions regarding the above modifications, please feel free to contact our National Broker Services unit at 1-888-54-AETNA or your Aetna Sales Representative.”

  10. JoeC said

    FYI – BCBS Texas – Individual business -
    New Jan 1 – 1st yr 8% – renewals 5%

  11. Ann H. said

    I just received an e-mail from Aetna, with the following text:

    Dear Valued Broker:

    Recently, we announced compensation changes to our Arizona Small Group and Middle Market business segments effective as of January 2011 . Specifically, the changes that were announced for our Middle Market business have caused some confusion around their applicability to our Small Group business segment (2-99 lives).

    As a result, we wanted to confirm and clarify the compensation amounts for our Small Group business in Arizona. Our Small Group 2-50 lives commission changed from 6% to 5.65%, but our Small Group commission for 51-99 lives remains unchanged at a flat 5% of paid premium.

    To learn more, details on our compensation structure can be found on Producer World under Compensation Services. You can also click here to view the 2011 Arizona Small Group Commission schedule, which is applicable to Small Group business cases sold to groups with 2-99 lives.

    We recognize the important role that you play as an independent and trusted resource for customers who are making health insurance decisions. We appreciate the support that you provide in educating and counseling customers, and we will continue to collaborate with you to provide this valuable service to our mutual customers. This includes providing you with tools and resources that help you better serve your current and future clients.

    Please feel free to contact your Account Executive or our Broker Services team at 1-877-249-2472, prompt 6, if you have any questions or have any trouble accessing this information on Producer World.

  12. JoeC said

    For everyones Information – I just got a call from the Aetna rep.
    for Texas Individual business.
    They have reversed themselves. Everything written before, I think it is Sept, WILL stay on the old commission rates. Everything written since, will be changed to the new rates.
    I think they heard a giant sucking sound on their book of business, and it was only sucking out all of the healthy clients.

    • Joe,

      Interesting comment.

      I remember, many years ago (like in 1980) a company called National Old Line, out of Little Rock, Arkansas, decided to cancel an entire block of business under a certain policy form number, and cut off all commissions to the LTCi agents, including renewals. This was before we tightened up our contractual arrangements with the LTCi companies. Not sure what to do, we approached another company with whom we were doing business, Great Republic Life. The policies were very similar. WE told them that we wanted to “Roll the book”, GI, but that we wouldn’t take any clients who were on, or ready to go on, claim. Could it be done? GRL asked us what we were willing to give up, re commissions. We were on a 60% First year, and 20% renewal. We reduced our commissions on that block to 40% first year, and a 10% renewal, and agreed to leave any clients who appeared to be near claim, or on claim.

      Ah, the pleasure in leaving NOL with millions in upcoming claims, while helping our clients, and ourselves, to a fresh new block of business with GRL. We walked every single claim through to satisfaction, and claim payment finality. We learned:

      1. That we could negotiate with companies, as long as we cold give them a certain surety of a good book.

      2. We could screw those companies that had decided to screw us.

      3. Were we ready to sacrifice a bit, so were companies who wanted to acquire a new book of business.

      All turned out winners, except those who had decided to leave us, and our clients, in the lurch. Specifically, National Old Line. They went down, as was appropriate.

      Life, can be good.

  13. Alan,

    While “Off-topic”, I couldn’t help but notice that the “Post counter” has recorded 73 Posts thus far on this Topic.

    I don’t know if that’s a record on here, but it sure demonstrates that a lot of attention is being paid to this Topic! And, the vast majority, all but a very few, have been posted with civility and respect for others opinions. You deserve to feel very proud for the tenor that you “set” here.

    Mazel tov!

    Spence – :)

  14. Peter said

    Dear Reality Check,

    Thanks for your feedback. It sounds like you’re much more adept in these matters and have probably been in the business longer than me.

    So…just to understand correctly, within that 15 minutes you have time to explain PPACA’s nondiscrimation requirements, tax credit and other current changes, health reform changes we’re looking at down the road, review the renewal, tell the client what needs to be done to renew or change carriers and answer client questions. That’s really impressive. I must be doing something wrong. I’ll have to reconsider the way I do business based on your input. After being in the business for 30+ years, I’m always open to new suggestions and learn something new every day. So…thank you for your suggestions.

    Being up at 2:30 AM? Maybe I have a slightly higher workload than you…so that might be it. It’s a tough time of year with so many groups renewing January 1.

    BTW, my clients and prospects appreciate the attention to detail I provide them. Many of them have said something along the lines of “nobody’s ever spent the time to explain all this…now I understand.” Isn’t that great? But, I’m preaching to the choir, as I’m sure you’re in the same boat as me with providing all the details and get the same response from your clients and prospects. Good for you! After all, that’s what we’re paid to do, don’t you agree? A redundant question…as I’m sure you do.

    My New Year’s resolution for you? It’s hard knowing where to start…because I can thing of so many. So I’ll end this chapter by saying, all the best to you and yours during this holiday season, and may you truly be blessed with good health and fortune in the New Year.

    Take care.

  15. Jerry Cohen said

    Colleagues:

    I would most respectfully like to make a suggestion. I think we are all upset with what we know is a cetainty – the loss of commission dollars we all worked hard to create and earn every day. We are not the enemy – and we should not allow our emotions to cause us to fight among ourselves. I believe there is enough upset on the streets of the US with a multiple of things that have been enacted or attempted over the last few years by our government that we can use this potent force to our advantage – if we ALL organize ourselves for a common good purpose. What do you folks think?

    • Peter said

      Jerry,

      Overall, I agree with your suggestion. Our energy should be focused on what we, as a whole, can do to help our industry rather than “family” infighting.

      Yet when I see a post such as that from Reality Check, I feel compelled to write a rebuttal, wondering where he/she is “coming from” to have such a relatively negative impression of our industry that, apparently, he/she works in. Those of us who have, as you said, worked hard to create our businesses, and beyond that, know that the service we provide is valuable as expressed by our clients, may take issue with comments like that, and have the right to express our opinion, as does Reality Check.

      All that aside, though, you’re right. We should work with, rather than against, each other.

      Last thought…it’s almost crazy to be up at this hour on a Sunday morning posting comments…but as long as I’m up anyway doing renewals…what the heck. Thanks for your comments…have a nice rest-of-the-day.

      • Jerry Cohen said

        Peter and Everyone Else:

        being up early on a Sunday to tend to business is nothing but commendable – pat yourself on the back. What you are doing puts food in your mouth and a roof over your head and whatever else you are workig hard to provide. What is wrong with that? What is crazy is allowing ourselves to be pushed out of business or into financial hardship by an unholy alliance of bean counters; bureaucrats; and clerks who have the benefit of salaries and benefits either paid for by our tax dollars or our hard work placing business on the books. We need to organize quickly and professionally and get the control of our incomes back.

  16. Reality Check said

    What has the Nahu done to help preserve commissions or assist agents on any front. Dont’ get so embroiled in your own ambrosia. It’s common knowledge that selling health insurance is not rocket science and for most in the industry it’s a last option to make a living. All these wordy posts on this blog are inane drivel.

    No offense Alan, your book is on my list to buy, right behind Fabozzi’s The handbook on mortgage-backed securities.

    • Reality Check:

      Life must have handed you a really rotten hand of cards to make you “talk” with such bitterness.

      I suggest that if you find the posts on this blog to be inane drivel, apparently not worth your time reading them, then don’t. Surely there must be a comic book or two with which you can occupy your time, Superman, or Batman, or just play with your Nintendo.

      Your insults to those of us who appreciate being able to post here weren’t necessary, but are indicative of a deeply troubled mind. Perhaps a Psychiatrist would be of help. A Reality Check may be helpful to you, Reality Check. I imagine that Alan will delete your comments followed by mine in response to you, which would suit me just fine.

      • Peter said

        Reality Check,

        Underwriters being “the single worst enemy” is an unfair generalization, as it is of a group of individuals in any industry, political affilation, citizens of a country, ethnic background, etc. that have a label placed upon them. There are always goods and not-so-goods in any group. Believe it or not, I’ve actually found some underwriters to be very helpful, and to those who might be reading this, thank you.

        As far as your edict to make posts “short and sweet,” it’s up to the person writing the post. Some find “short and sweet” works for them as it does for you. Others may find value in a more lengthy post. It’s your choice whether to read it.

        Have a nice day.

    • Peter said

      Reality Check,

      WOW! Those are quite some comments. After reading them several thoughts came to mind, but in deference to your comment about “wordy posts” on this blog, will try to keep it relatively short with the following couple reflections:

      1) If “selling health insurance is not rocket science” then why have countless clients over the years told me “I couldn’t have done this without you” or “I don’t know how you keep track of all this,” among many other similar comments with respect to helping them choose a group or individual health insurance plan, and for that matter, any other insurance product they’ve asked me to help with … in addition to “servicing” instead of just “selling” them a product. Concerning your comment about it being “common knowledge,” it must be your common knowledge, because as attested to by clients, it’s certainly not theirs. Talking insurance makes many customers’ eyes glaze over with all the terminology and requirements due to COBRA, OBRA, FMLA, HIPAA, PPACA, ins-and-outs of limitations, exclusions, looking up participating providers, paperwork submission, claims and eligibility battles with carriers, etc., so they are actually thankful to have someone like me in their corner to guide them through it all.

      2) Vis a vis selling health insurance being a “last option to a making a living”: of course, there are many options to earn a living … reindeer herdering, chucking oysters, being a Santa at a department store, etc., and they are all important in their own way, but do I want to? It may come as a surprise to you that most folks in our industry may actually enjoy doing what we do, with the added bonus of being compensated for it. And depending on the stage of life we’re in, it may be difficult to find another option. But I’m sure you thought through all the scenarios before posting the comment.

      I have to finish now…with, I’m sure, much relief to you by not continuing to ramble on with “inane drivel,” as I need to get back to “servicing” my clients by reviewing their options for January 1, even at this hour (ca. 2:30 AM on the west coast), before meeting with them this week.

      Certainly hope you’ll have an enjoyable Holiday season.

  17. The entire issue of Commission changes is haunting the Agent/Broker Community.

    Alan, I think you’ve written a provocative commentary. It begs thought. Nonetheless, the fact is that the Agent Community is being seriously harmed. As is the Public that rely on the Agent Community to keep them informed. [BTW, most refer to Brokers...Bull. It's AGENTS & brokers, a matter of licensing in most states]

    Why are those in the Agent/broker Community being hung out to dry? Because the Insurance companies can. It isn’t just due to the MLR issue, it’s what they’ve always wanted, to make the Agents’ role irrelevant. Not having to pay the Agents for their hard work in educating, advising, and insuring the Public means more $$$ in the Insurance Company Exec’s pockets. Period. And them, my friend, “is the facts”.

    NAHU, and B2B cannot stand up for the Agents because of the 501C 6 Tax Rules, used to abuse by the IRS and the Administration. So, dear friend, what is the Agent (broker) Community to do? How are they to survive? Many hundreds of thousands of Agents (brokers) will go under, this year and next, as will their families, their children, those who depend upon them. What, dear friend, are they to do?

    I agree that collecting data on those companies that have no problem seeing those who helped them to become rich, wither and die, is important. However, the shame is that those very companies will not be around to pick up the pieces when those agents and their families find themselves on the “Soup Lines” after their futures have been demolished, ruined, destroyed. They will not only have screwed the consumer, those who depended upon them for help when they bought their product; they will have also have betrayed those Agents and Brokers who sent business their way, in good faith.

    What, dear friend, will be their retribution, for having abused the Public Trust? And will the Obama Administration, and the Democrat Controlled Congress that passed this abomination of a HCR bill be held equally responsible, for the damage they have done to our country?

    Just wondering.

    • Jerry Cohen said

      Extremely well said. And by the way what good will the tax status of the NAHU be when there are no longer agents / brokers to pay dues?

  18. Writer said

    The independant brokers and small GAs in the individual market are going to take a haircut. Top carriers are going to cut them out in order to lower admin. costs and give the higher commissions to big GAs. This is especially true if the GA is backed by an investment bank with ties to the carrier.

  19. Jonbroker said

    Alan,
    Bravo. Your blog is outstanding and one of the only places online I’ve been able to find useful information regarding HCR. I was wondering what the average MLR is for carriers and small group blocks of business (pre-healthcare reform)? I was under the impression that it was not much greater than the 80% now being mandated. Any insight would be appreciated.

    • Alan’s blog has always been one of the best ever found on the “net”. Alan has guts.

      That can’t be said for most who offer an opportunity for the Agent Community to vent.

      That said, even Alan asks for respectful dialogue to be exhibited. As he should.

      I am not one who can always respect that request. After spending my entire life representing my clients in the profession of insurance, I’m far more likely to “explode” at those who would exploit our clients, and US. That doesn’t mean that Alan is better or worse than I; it simply means that I don’t care if they “kick me off the internet”, or not.

      I have worked under Alan (Leg Council, NAHU), and with Alan, (Member of Board of Trustees, NAHU). I have the highest respect for Alan that I have for anyone.

      We, the Agent Community, are being Scre*ed, without any pleasure. Yes, I am far more blunt (less Classy?) than Alan. It is no secret. We knew that from the first time I attended a BoT meeting, swearing to be quiet, and fairly flew across the table at some idiot (who shall remain nameless) who suggested that NAHU should not become a Legislative association. I come from WA State! Gimme a break! We know what disrespect is, yes? Nonetheless, this is Alan’s blog, and Alan does a fabulous job in providing us all with a venue to articulate our feelings.

      Thank you, Alan.

      Spence

    • Jerry Cohen said

      JB

      I have sen estimates that there are around 100,000 agets engaged in the sale of health insurance. Imagine, if even 10% of that group on the same day, with the same message; targeted a specific person or persons in the media with the message that the American public is getting hosed and that PPACA will insure the demise of the health insurance agent and when that happens people will get hit with non-compliance fines; coverage that does not match there needs, and general confusion. Read Mark’s smart comments on this.

  20. Peter said

    In Washington state, the local Blue Shield plan (Regence BlueShield) sent an email that hit the inbox tonight. Merry Christmas to me…NOT! Text of email shown below, starting with the date. Interestingly, the commission for individual plans will be PMPM instead of PEPM for group plans, so if a family has 2 members on an individual plan, that would be more compensation than a group plan family in a group of 5 to 9 employees, and almost as much as in a group of 10 to 50 employees. We currently receive level 8% for individual plans, 0% for “groups” of 1, 2% for groups of 2-4 employees and 5% for groups of 5-50 employees. All percentages are new and renewal. Guess we’ll be looking for large families that need an individual plan to offset the reduction in commission for group plans.

    12/08/2010 Commission change goes into effect February 2011

    We are entering a new era in our industry and remain committed to providing top-quality coverage while keeping costs under control. In support of minimum medical loss ratio (MLR) requirements we are continuing our efforts to reduce administrative costs. Those efforts include right-sizing our sales and marketing expenses, including commissions structures.

    Similar to what many carriers across the country have already done to respond to the changing market conditions, we are moving from a percent-of-premium to a per-employee-per-month (PEPM) or per-member-per-month (PMPM) commission structure. We have also modified our tiering to acknowledge the scalability of total operating expense by group size.

    Beginning Feb. 1, 2011, our commission structure will change as follows:

    Individual Plans
    Regence EvolveSM Medical Dental
    $12.00 PMPM $2.00 PMPM

    Group Plans
    Group Size Medical Dental
    1 to 2 subscribers $0.00 PEPM $0.00 PEPM

    3 to 4 subscribers $5.00 PEPM $1.50 PEPM

    5 to 9 subscribers $15.00 PEPM $3.50 PEPM

    10 to 50 subscribers $25.00 PEPM* $3.50 PEPM
    *$25.00 per employee per month is equivalent to the current 5% of premium commission level as calculated on average per employee premium in the community pool.

    For existing Regence groups, this change will be implemented on a rolling 12-month basis. For group renewals prior to Feb. 1, 2011, commission will continue to be paid under the current structure until the next renewal date. At that time, the changes noted above will take effect.

    • Michaele Olsen said

      I am in Washington State too and also got this letter. Boy did they kill us here! And we are ALREADY one of the lower commission states to begin with. I am set to lose 50% of my revenue on my small block now. If anyone wants to buy what’s left of my groups, please send me an email. I am getting out of the small group market. molsen@benefitswest.com.

      • john coulson said

        And so it begins. I am a single agent selling individual plans, this will cut my individual book by 60%. The next question will be wether or not Lifewise and Premera follow suit. Its a good thing we have diversified to other lines.

    • Peter,

      And all of you from WA State; thank you for the info. When still working (my partner, Terry Wood, still runs our company), our agency sent a lot of business to Regence. Now I am on Medicare, and signed up for a Regence BS Med-Advantage plan. Screw them. I’m still in my 45 day right to change, and change I will. To another company.

      Regence’ betrayal, as have many companies, of the Agent/Broker Community, surprises me not. That doesn’t mean that I need to covertly help them in that betrayal.

      Shame on Regence. Shame on any company that treats the Agent Community as they would dirt on their shoes.

      You all know my name, it appears before my post. Feel free to use it, and my comments, as you like.

      Spencer A. Lehmann, RHU

      • Peter said

        Spencer, I definitely remember you and can recall your face almost as if it was yesterday. Of course, we’re now all a bit older, with a smidge more grey hair…or in my case, recently LOTs more grey hair with health reform and Jan 1 renewals this year. Oh well…it is what it is.

        At one time, back in the ‘ole days, I worked with you and Terry on a WAHU Health Symposium (with Patti, Jeannie, etc., if you remember them by first name…don’t want to mention last names on blog). My responsibility was to secure speakers for the meeting. At the time, I worked just up the street from your office at Regence BS. Or was it still King County Medical BS at the time? So many name changes. 10 years ago I left Regence BS for…yes, Yoda, the “dark side.”

        What a hoot to stumble upon your name and posts on this blog. It definitely brought back memories of the feisty devil, in a good way :-), that you were, and apparently still are.

        I, and those in our office, have also placed a lot of business with Regence. We know what’s happening with commissions in the community-rated pool, per email from them last week, yet still need to find out what the numerous Regence association plans will do.

        All the best!

  21. Jay said

    My understanding is that the 80/20 MLR does not apply to new carriers or those carriers with 1000 policies or less in a given state. For them the MLR is around 50/50. If that is the case, I would expect to see more scheduled benefit/indemnity plans available from these carriers. Also, short term plans are not subject to the MLR at all, which if they’re a good fit should free up some premium dollars to put into supplements and associations.

    • As a matter of fact, the MLRs vary depending on the state.

      Washington State has an 80% MLR for True-group, and 60% for Individual coverage. Loss ratios, even within a state’s requirements, can be + or – depending on the filing. In other words, some Group coverage in WA may have an 80% loss ratio requirement, and other may have 78% or even 74%. I’m not sure why the variance, but do know that it exists.

      The NAIC, IMO, demonstrated a true lack of understanding in their knowledge of the Agents/Brokers role in educating and helping to design the best insurance plan for the client(s).

      HHS would appear to have that same lack of knowledge, given their painfully slow (though common bureaucratic government malady) response to the NAIC passing on to them what should have been (again, IMO) their responsibility to address.

  22. joec said

    Found out yesterday that Aetna , on individual business, is also going back and changing renewal % on ALL old business. Previous renewal rate 7%. new one 3%. This is going to realy hurt me. I’ve already had to let one employee go.
    I agree, the MLR is just an excuse. Aetna is burning agents.

    • Bob said

      In TX, they are doing 4% even on first year. I told our head agent that Aetna doesn’t want our business anymore.

    • IMFL said

      Myself, along with 21 other Houston, Texas agents met with Aetna yesterday; Regina Hunter, Senior VP of Sales for our Region, and Ralph Holmes, Local Market President. On the small group side 2-50, they are taking out completely our health commissions from the rates they charge clients. However, they will “collect” our fees for us. On the clients monthly premium statements there will be a line item that shows how much we make on each account. Mrs. Hunter used the excuse “we don’t want to put a value on the agents”. Quite frankly, that’s exactly what they did, said our value is worthless. We are the least expensive form of advertising for the health insurance carriers and this is how we are treated. One agent asked, “What other administrative cost’s has Aetna taken out of the equation” and neither Aetna representative could tell us anything. However, they made the comment that “Aetna has to determine a variable piece of the puzzle for quoting heatlh insurance and in 2009 they missed big time; that Aetna has the highest admin fee’s in our business.” I tell you what, there are too many other carriers playing the game differently and my agency will be taking it’s business elsewhere.

  23. naifa said

    BCBS of DE put a lot of agents in the poor house. Many agents specialized in individual health plans. They reduced the commissions by 66% starting January 1st. Here is the KICK IN THE A$$. The reduced the entire block. Even business written 2 or 3 years got reduced. Many agents saw their income reduced in half with just about 30 days notice.
    These plans were to be “grandfathered” in. I think BCBS just looked for an excuse to cut the overhead.
    Thing is they convinced us to sell their product when it was newly introduced in 2007. We took a little less commission in trade for long term.
    Should have stuck with Unitedhealthcare or Assurant… they did not “retro” the commissions.

    • Andrea said

      They are doing the same thing in Georgia. We have some clients that have been on the books since 2001 and before. They don’t care, and they want to get rid of agents completely. MLR is just an excuse. Humana and United are retroing back to Aug 15 and after effective dates, and Coventry isn’t saying (don’t know if they are in Delaware, but beware if they are). February for them apparently. They are thinking about retroing but haven’t committed as of yet. They have a manager that is old BCBSGa so it wouldn’t suprise me.

  24. Alfred Jordan said

    While the MLR appears to leave the health insurers helpless to loss ratios, it does not leave the broker / agent helpless. While the word Exchange is seen to be anathema largely due to the context in which they are framed in the PPACA, exchanges have other purposes than the purchase and / or distribution of insurance to the consumer. An exchange can be used for the redistribution of premium assets to facilitate compliance with the MLR.

    So an exchange framed in context could allow high MLR carriers to monetize their premium assets with low MLR carriers. The exchanges help the consumer with greater choice and the agent /broker with more income while rewarding the high MLR carrier. It also allows the low MLR carrier to retain some of its profits. Transactions between carriers could be as high as $250 billion dollars annually, but only through agent/ broker intermediaries.

    The reduction of commissions foisted upon the agent / brokers by insurers can be recaptured by participating in the exchanges between insurers. The PPACA could be a boon to agents / broker for the simple reason that they control access to insurer capital (premiums) and to the consumer. Health insurers using this form of arbitrage can reach the client base for which they designed themselves in the first place. The PPACA may just be the law that puts the broker/ agent, insurer and consumer in the proper order. The agent / brokers and consumers have all the power. The insurers are only a part of the toolset but are the third leg of the stool.

    • JoeC said

      Sorry, I have no idea what you said above. Could you please restate and tell us in more precise terms how the agent will benefit from all of this. tks,

  25. Brian H said

    In Illinois, BCBS has gone from a graded commission rate for 50 and under groups to PEPM as follows.
    Lives Comm.-Single Comm.-Family
    2-3 $12 $24
    4-15 $30 $60
    16-25 $25 $50
    26-50 $20 $40

    Their graded comm. schedule for 50+ has not changed…yet.

  26. Jerry Cohen said

    Please read the article posted at http://www.fiercehealthcare.com/story/wellpoint-ceo-braly-received-51-percent-compensation-boost-2009/2010-04-

    and then tell me health insurance professionals don’t have every reason in the world to strike. NO MORE BALONEY!

  27. Jerry Cohen said

    I operate in NY almost exclusively. Thus far there has been rumblings and grumblings but no concrete changes as of yet. It seems to me that there has been way too much complacency and acceptance of PPACA and the commission changes that have resulted. Does anyone know of any CEO at any of the companies listed in the emails above that has taken a dimes worth of pay cut? Not sure that any of them are as important to the insurance purchase as we are and yet we are shouldering the burden of MML. Where is the balance or parity? What would happen if all health agents throughout the United States mounted a sick out and refused to transact any business for a few days? In these times of increasing costs on gasoline; electricity; cell phone service; office supplies and the like, any reduction in income for any agent could be the difference between being in business and being unemployed.

    • Andrea said

      Amen on your post, I couldn’t agree with what you said more! I operate in Georgia (mostly individual, small group and senior market) and all of my carriers are reducing commissions, some as much as 50%. BUT, I’m sure the CEOs take care of themselves pretty well. I wonder if anyone in Washington (or the states DOIs) give a crap where the cuts are coming from with the MLR rulings. Between agent cuts there will be cuts in the customer service at the insurance companies as well. Agents and customer reps at insurance companies are the ONLY people the public deals with, so guess what? Good luck public getting your claims or billing issues resolved. As agents, we have already noticed the quality of our cust service degrading for a while now at most of the carriers we sell. We even had one company’s customer service department forbid us to call them anymore with questions. We don’t even call them that much, maybe once every 2 weeks(?). We now have to call our RSM every time we have a question, issue with a client, commission question, underwriting issue, anything. He isn’t in the office much as he is out visiting his agents, so he isn’t usually very quick in getting back to us, so forget helping our clients in a timely manner.

      These cuts, although foreseen by us, are hitting us hard. We are going to have to lay one employee off, probably at the beginning of the year, and drastically cut advertising. We do a lot of Medicare business which is very service (and compliance) intensive so I think we will have to revisit whether we even want to continue selling that next year at all. I worry because, you make one mistake (and when I say “mistake” it can be something really minor) with Medicare products and bam! – no more selling of Medicare products period. I am really questioning whether it is worth the liability with the pay cuts.

      I think when it is all said and done, many agents will be forced out of business, and consumers will be on their own choosing a plan. Once the exchanges are up and running, I am assuming they staffed with a call center, I am just pretty sure (especially if calling CMS is any indication) that they will NOT be the professionals we are all educated and licensed to be.

      • Jerry Cohen said

        Thank you for being SO right one the money Andrea. Health insurance professionals are being hosed and taken to the cleaners. Its time we stood up and said ENOUGH OF THE BALONEY!

        • Andrea said

          Got another letter today – this time from Aetna. They are going to 10/4/3, down from 20/10. That is for their “Platinum” brokers, 50+ enrolled applications. Gold: (25-49) is 8/4/3, Silver (12-24) is 6/4/3 and Bronze (1-11) is 4/4/3. Again, that is APPLICATIONS, not members. Our agency is in the Gold segment as they aren’t our first choice of carriers but their rates are good for the 50+ crowd. This is of course base rate, excluding rate up, which they do A LOT (sometimes 90%, yikes!). Plus they are retroing back the commissions on existing policy renewals depending on the initial effective date, similar to BCBSGa.

          The letter also says the new 2011 renewal commission structure is on a National level. They aren’t varying it state by state (?).

    • Jonbroker said

      I totally agree with your post, Jerry! I also operate in NY and was wondering if you’ve heard about any commission reductions in the small group market (aside from Aetna going to PEPM)? Do you expect other NY carriers to move toward the PEPM in 2011?

      • Jerry Cohen said

        Count on it around March / April

        • Jonbroker said

          Jerry,

          What kind of changes can we expect in March/April? Lower % or change to PEPM? Do you think in the next couple of years it will be down to zero?

        • Jerry Cohen said

          Jonbroker:

          Your question gets right to the heart of the matter. We aleady know what Aetna is thinking. Empire has ben quiet except to announce late Friday via eamil that there local office on Long Island was no longer open for brokers to drop off applications. Everything needs to be submited by mail. Without a lot of philosophizing right now I would say that the intent of the people that created PPACA was to eventually get to single payor. If you eliminate agents which seems to be one of the consequences of PPACA then how fo private insurance companies market their products? I believe that shortly we are going to see health coverage looking more like a Med Supp an A plan – A B plan up to a maximum of 4 plans. Basic / Regular / Enhanced / Top of the Line. There has been a lot written on this although the writers refer to the plans in terms of metal – Gold – Platinum etc. Rather than encouraging insurers to create product or venture in to the market PPACA has done everything possible to discourage competition or companies to enter the marketplace. Commissions are gone unless we work quickly!

        • Jonbroker said

          What can we do?

  28. Jay said

    Does anyone know of smaller carriers in Texas that are not reducing commissions as much as the big carriers. I’ve heard that World is only dropping 2 or 3 points, but don’t have it in writing.

  29. Daniel Fishman said

    In CA individual:
    Anthem went from 20/10 to a 4 tier level where the best is 14/6. They also made a major change in now paying only on original premium as opposed to ongoing premiums.

    Cigna went from 20/10 to 12/5 paid on ongoing premiums. They also have a nice production bonus program.

    Pacificare/UHC went from 20/10 to a flat 4% starting 10/1!

    Still waiting to hear on the other carriers…

    • Bob said

      That must be CA PHS/UHC. In Texas, small group, the commissions are staying the same – 5%.

      I can confirm Daniel’s Cigna numbers are nationwide on individual.

  30. Ann H. said

    Arizona
    Cigna Individual/Family plans went to 12% first year 5% renewal. In AZ it previously was 10% level. Looks like in-force business will remain at 10% level. No commission will be paid on any case where any family member is Guaranteed Issue (not even commission paid on the healthy family members).

    Arizona
    Aetna group went to 5.65% level for 2-50 employees. Previously it was 6% level. I understand 51+ is consulting fee only, as the gentleman stated before. My largest group with Aetna is 44 enrolled, so I’m safe there. Whew! I feel for the others.

  31. Leah-Anne Janway said

    In Oklahoma one carrier is also putting production requirements for 2011; for Consumer Market Plans (individual) minimum porductin requirement is 10 new contracts per calendar year. FAILURE to meet the new minimum production will then make the producer ineligible to sell their individual product lines for a minimum of 2 years.
    For GROUP producers must sell 25 new group employee contracts during each 12-month period, beginning Feb 1 through Jan 31 of each year. Failure to meet minimum production requirements make producers ineligible to sell the group products for a minimum of 2 years.
    It seems we’re keeping the current commission levels on in force, but the NEW business looks to be 8% 1st yr and 5% renewal on individual non medicare supp and for medicare supplement product 15% 1st year 10% 2-6th yr then 7% thereafter. Group Health 2-150 in size will pay 5%.

  32. JoeC said

    Texas Cigna Individual
    12% 1st
    5% renewal
    good bonus program for more production

    • MarkS said

      Reportedly the Cigna Bonuses:

      10-14 new members pays $500
      15-19 new members pays $1000
      20-24 new members pays $1500
      25-29 new members pays $2000
      30-39 new members pays $2500
      40-49 new members pays $4000
      50-74 new members pays $5500
      75-99 new members pays $7500
      100-149 new members $10,000
      150-199 new members $15,000
      200-249 new members $20,000
      250-299 new members $30,000
      300+ new members $40,000
      Add’l $10,000 for each 50 more new members

  33. John C Parker, RHU, LTCP said

    Wanted to share the following from a Nov 29, 2010 eMail.

    Notice of a New Oxford Medical Base Commissions for Connecticut Groups with up to 50 Eligible Employees

    Oxford is changing the base commission schedule for groups with up to 50 eligible employees in Connecticut . The following commission schedule is effective for all new Oxford medical groups with up to 50 eligible employees in Connecticut with effective dates on or after January 1, 2011, and existing groups in the same area on their first renewal on or after January 1, 2011.

    Case Size

    Percent of Paid Premium

    1 to 2 enrolled employees 1% of paid premium

    3 or more enrolled employees 5% of paid premium

    How to Calculate Oxford Monthly Commissions

    The monthly commission payment is calculated by multiplying paid premium for the month by the appropriate commission percentage indicated in the commission table. For example, if the paid premium for a new group with 19 enrolled employees in a month is $10,000, the commissions for that month will be 5% times $10,000, or $500.

    UnitedHealthcare Medical Renewals

    This commission schedule is effective only for UnitedHealthcare medical groups with up to 50 eligible employees* in Connecticut that have not converted to an Oxford product. The number of enrolled medical employees in the case determines the commission rate paid per employee.

    Medical Case Size

    Payment Per Enrolled Employee per Month

    1 to 3 enrolled employees $8

    4 or more enrolled employees $28

    How to Calculate UnitedHealthcare Monthly Commissions

    The monthly commission payment is calculated by multiplying the actual number of enrolled medical employees in the case during any month by the appropriate commission rate from the commission table. For example, a case that renews in March with an enrollment of 10 enrolled employees will be paid $28 per enrolled employee per month, which equals $280 for that month. If the actual enrollment in June is 15 employees, the commissions for June will be 15 multiplied by $28, which equals $420.

    The payment tier used for new groups on all products is established using the enrolled medical employee count at the time of initial enrollment as determined by us. This commission rate will be used for this group for the entire plan year regardless of any changes to the enrolled medical employee count that occur during the year. The tier for renewing cases will be established using the enrolled medical employee count at a time determined by us, usually reflecting the billed employee count for the first month of the new contract period. The new commission rate will be used for this group for the entire renewal period regardless of any changes to the enrolled employee count that occur during the renewal period. Changes in the number of sub-groups in multiple-site or multi-segment affiliated groups may trigger a recalculation of the commission rate prior to the next renewal.

    Classification as a group of “up to 50 eligible employees” is determined by us considering a number of factors. Please see Case Size Designations in the 2011 Producer Performance Guide for details. These commission schedules apply only to medical groups designated by UnitedHealthcare as having up to 50 eligible employees for the area indicated. Commissions vary by area. Please contact your UnitedHealthcare sales office for base commission schedules in other areas. Some medical products may have a specified commission schedule that replace and supersede this schedule. All UnitedHealthcare commissions and bonus programs are subject to the Agent/ Agency Agreement and the policies contained in the Producer Performance Guide. Please refer to that information for complete guidelines related to our producer compensation programs.

  34. JoeC said

    Texas Aetna Individual -
    10% first year on top level (over 50 policies)
    4% second year, 3% 3rd year and thereafter. Just got the word from rep.

  35. Angie said

    Georgia – Humana individual is going from 17/8 to 10/5, starting with policies written 8/15/10 forward.

  36. Johnny said

    Carefirst BCBS in Maryland announced in October that all groups < 50 insured will see commissions reduced 15% starting 1-1-2011. For the 51+ groups there's a 3.5% commission cap (5% was par in 2010).

    It's a surprise for the <50 marketplace because Maryland Small Group Reform (MSGR) has been paying brokers off of a PEPM for the past 8 – 10 years. In 2010 it was approx $25 PEPM for medical and Rx.

    Coventry is also mimicking the commission schedule mentioned from Humana in previous comments. They'll have 3 tiers of brokers with the top tier broker actually seeing an increase in commission (from $25 PEPM to approx $29 PEPM), second tier stays at $25 PEPM, and third tier goes to $5 PEPM.

  37. Nick Paloukos said

    I have a family member who is a marketing agent with Blue Shield in Idaho. He says Blue Cross of Idaho is lowering their IFP commission from a flat rate of (roughly) $15/member to 5%. He had no word on Blue Shield of Idaho yet.

    Pacificare CA has already lowered their IFP commission to 4% (1st year and renewal).

  38. IFP commission rates for BCBS Illinois for 2011 will be 10%/15% First Yr (goes to 15% after 25 or more paid policies). That’s down from 15%/20% in 2010. Renewal rates will be 4%, down from 5%. Med-Sup commission rates unchanged.

  39. George Geldin said

    In CA, I understand Aetna is reducing their small group commissions from a flat 7% to a flat 6.7%. I’m not sure yet how this affects in force business.

    • Kris Schulte said

      Aetna is making the change to your complete book of business. All exisiting busines will be effected. Even bigger concern is they can do this anytime they want with 30 day notice.

  40. Barry Mohler said

    Pennsylvania

    Our agents are presently working on small group renewals for January & February with no commission change to date.

  41. Susan Maley Rash said

    Anthem Virginia — January 2011 2010
    2-24 4.8% renewal, 7% first year 5.0, renewal 7% first year
    15-50 4.0% renewal, 5% first year 4.1% renewal, 5% first year
    51-99 3.1% renewal, 4% first year 3.3%, 4%
    100+ add on — average in Market 2% to 3%

    Anthem has been gradually decreasing commissions over the last several years due to pricing trends – ie; to offset 10-12% renewal increase trends so that end result of a lower commission on a higher number is still a modest COLA increase.

    They have announced that some time in 2011 they will transition to PCPM methodology.

  42. Bill said

    Thanks for your comments Alan. I probably misunderstood about small group because I was so stunned about the large group change so thanks for your thoughts on that. Have you heard of other carriers going to the “fee based” system in the large group market?

    • Ann H. said

      I would be a little stunned too, Bill. The 100+ market I may understand, but in the 50+ market this is indeed stunning. I can’t imagine Aetna will survive long in the 50-99 market with that kind of outlook, especially rolled out so soon. They should have waited 6 – 12 months to roll out that huge of a change, and they should have waited to see what other carriers are doing. I think they will be sorry.

      • Mark said

        I find that commissions are transparent and welcome Aetna’s 50+ strategy. We are likely to see the rest following shortly. This is similar to ASO business whereas compensation is negotiated between the broker and customer.

        Lets be realistic and do the math before we get crazy about this subject:

        Renewal trend on my California business has average trend about 13% over the past 5 years (conservative). On a $300 PEPM that would equate to almost a $500 PEPM in 5 years. Presuming a 5% commission, my take home moves from $15 PEPM to $25 PEPM. This equates to over a 60% raise in my salary in a mere 5 years.

        This would also be valid for the small group block which went down a couple of a tenths of a percentile. Do the math and you likely will see that trend erroded your comp change and you still get a healthy raise.

        Frankly, I wish that small group moved over to a service fee arrangement sooner. There are some of my customers in the 30-45 life arena that are in need of some assistance. This would make that market poised for that broker with lower operating expenses. There are cases in my block that are too profitable and can be pushed down 2-3%. The carriers in my experiences do not provide comp reductions in 50 minus in exchange for rate action.

        Brokers that define value as marketing a case each year and answering a phone are likely to lose in this new marketplace. Brokers already operating in transparent models will likely excel and better prepared to combat the larger problem, the exchanges.

  43. Bill said

    I just spoke with my 50+ Aetna Rep on Friday and I looks like Aetna is completely getting out of the business of paying commissions in the 50+ market. They are rolling this out nationwide effective 2/1/11. My Rep said it is going to trickle down to the small group market very soon. Essentially is is up top the Broker and the client to come to an “agreement” on the “service fee” to be paid. Aetna will bill this fee seperately on the monthly invoice and pay the Broker. There are no limits as to how low this service fee can be and different brokers can charge different service fees when bidding on the same business. Therefore, Aetna will not have to deal with any commissions in their MLR calculations.

    This is a true game changer!

    Note as of 11/21/10: Bill is, I believe, from New Jeresy. While Aetna appears to be taking this “fee-based” approach for larger groups, in the small group segment I have heard they will continue to pay commissions in the traditional manner. Whether New Jersey is an exception or Bill’s rep was mistaken, I don’t know.

    • Scott said

      This doesn’t sound correct. If it is as you describe it, wouldn’t that be rebating?

    • Jo Coop said

      I am a broker in Oklahoma and we recieved the same Aetna letter. No commissions on Fees that Aetna will “pass through” for 51+. Just like it says above, broker needs to negotiate their own rate as of renewals starting 2/1 on 51+ business.

      However, our small group book is also effected starting with 1/1 renewals. Rate is going from 10% downgraded to $26 PEPM… Good news is renewals already done for 10/1, 11/1, & 12/1 stay until next year’s renewal.

      Still calculating the impact!

  44. Tom Avery said

    Aetna in CA just announced that commissions for Small Group will go from 7% to 6.7%.

  45. Greg said

    I’m in South Florida and recieved notice from AvMed yesterday that their commission on Individual would remain at 20% in 2011. They only offer their individual product in Miami-Dade and Broward counties and have been doing so for about 2 years. Since their renewal commissions are at 5% the 20% number for the first year should bring them into an 8 – 12% range for commissions. It appears that they may be trying to buy as much business as possible even it if means no profit and even a potiential loss for 2011.

    I’m still a firm believer that end state in 2014 when everything is guarantee issue, reduced commissions will have little affect. Take and average agent with a 75% approval rate, just this fact alone you can reduce their commission by 25% once guaranteed issue is here and they will make the same amount of money. Add to this the time factor of dealing with underwriting or writing multiple applications and you can probably cut the commission by another few percent with little or no effect since the agent would have more time to sell.

    • Kris said

      What makes you think that they will pay the same commission schedule once GI takes effect? I would be willing to wager the commissions will be reduced again.

      • Alan said

        Kris, I agree. Carriers probably will change these commission schedules — and sooner than 2014. Carriers have all placed a bet on commissions in the dark. Now they’re seeing what bets their competitors took. There’ll be some adjustments coming, either through commission structure changes or bonuses. Future legislation could also change things. If some or all of broker commissions are removed from the MLR calculation there’ll be another round of changes. But these are the commission schedules in place now and so they’re the ones we have to deal with now.

  46. I am an independent health insurance broker in Texas. I deal mainly with individual policies for people who own or work for companies that cannot afford to provide health insurance. I am appointed with several different companies. So far, I have only gotten one letter with any definate commission changes but I expect more sometime next week. What a wonderful way to celebrate Thanksgiving.

    It looks like I am going to have to expand my practice into more group and Medicare Supplement plans. I assume that if I can add 400 new Medigap clients by the end of 2014 I should be able to survive Obamacare. I anticipate a spike in income during the next 3 years as I get income from both my current renewals and new Medigap plans but a return to 2010 income levels when the renewals from my individual major medical book of business disappears in 2014.

    That assumes there are no changes in Obamacare to help agents and I am not tagged to participate in the Navigator plan. If I can add the Medigap plans and secure a Navigator contract my income could potentially continue to grow past 2014.

    Like you said, the book is not finished, yet.

    • Todd Matzat said

      Could you share what carrier’s letter you received and the commission change that it stated? Thank you.

  47. Ann H. said

    So far, I’ve only received the Humana Group commission schedule for 2011.

    My state is Arizona, and the commission schedule I received from Humana applies to group sizes 2-99. For 100+ it said commission was just “negotiated”, but my representative told me Humana is limiting all 100+ business to a select few agencies in the state, only because Humana is not a competitive leader in that segment anyway. Humana is a leader in group sizes 2-25, however.

    The NEW commission schedule categorizes groups into 3 “tiers”. Tier 1 is for brokers with 8 or less “ELIGIBLE LINES OF COVERAGE (ELC)”. Tier 2 is for brokers with 8-34 ELCs, and tier 3 is for brokers with 35+ ELC’s. What is an ELC? Well medical is one ELC (Eligible Line of Coverage), Dental is 1/2, and 1/4 ELC goes to all other ancillary products.

    For simplicity, I’ll just outline the First Year commission, because renewal commission lowers 1/4 of a percent across the board, with the exception of micro groups (2-3 enrolled subscribers), where renewal commission is 1/2 percent lower.

    2-3 enrolled subscribers – 2.5% in tier 1, 3.0% in tier 2, 3.5% in tier 3
    4-25 enrolled subscribers – 5.5% in tier 1, 6.0% in tier 2, 6.25% in tier 3
    26-50 enrolled subscribers – 5.25% in tier 1, 5.5% in tier 2, 5.75% in tier 3
    51-99 enrolled subscribers – 3.5% in tier 1, 3.75% in tier 2, 4.25% in tier 3

    They determine your tier based on the count as of 11/30/2010, and then every quarter in 2011 they re-evaluate your tier.

    What was my commission in 2010? I wasn’t sure, and had to look it up.
    For 2-3 size groups it was 3%
    for 4-25 it was 6.25%
    for 26-50 it was 6%
    for 51-99 it was 4%
    for 100+ it was negotiable

    I’m probably in tier 3 right now, but may get close to tier 2 based on some trends I see coming with renewals. So, all-in-all, I didn’t suffer much, especially since most of my groups are in the size 4-25 category.

    Humana did have a nice bonus schedule last year, and I don’t know if they’ll have it this year.

    I haven’t physically seen any other letter, but from rumor I’m hearing on the street, many carriers are focusing on brokers who have a larger block of business.

    I also have been in receipt of some bonus offers beginning in January 2011, which surprised me. But again, rumor I heard from other agents is that they are hearing there will be less base commission and more bonus in order to encourage a larger book of business per broker. For me, personally, I have never paid much attention to bonuses. I figure if I place the client with the insurer & plan that best meets the client’s needs, I’ll end up making money. And if that means I make a bonus or don’t make bonus, then so be it.

    I have a feeling “the other shoe will drop” with some of the other insurers, and other types of business like individual/family plans. But this is the first new commission schedule I’ve received so far, and this one was mild for a broker in my tier and with my average group size. Whew!

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