The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Health Care Reform And The Value of Brokers

Posted by Alan on May 8, 2009


There are a lot of stakeholders in the health care reform debate. Patients. Doctors, hospitals and other providers. Insurers. Employers. And  so on. One often overlooked group with a great deal at stake in the current reform effort are health insurance brokers, especially those whose practices focus in the individual and small employer market segments. Today they provide some of the services expected of an exchange, helping to translate benefit plans into understandable options. Professional brokers go further, helping health care coverage shoppers find the plans that best fit their unique needs and then assisting them in gaining the benefits they’ve paid for.

The bad news is the media all but ignores the role of agents in the system. They focus on how confusing health care coverage can be (and it certainly can be opaque) and how consumers are at a disadvantage when dealing with their insurers (and they are) without once mentioning the counselors and advocates available to them: professional brokers. (Note added 5/9/09: An Associated Press article published today proves the point: it looked at the positions of the “10 groups with the mostinfluence, or most at stake, in the health debate…” Health insurance brokers were not mentioned.)

The good news is that lawmakers involved in drafting health care reform legislation are aware of brokers and what we do. They’ve sought out the National Association of Health Underwriters (the primary professional organization representing health insurance brokers) for testimony and input.

A seat at the table is great, but eventually brokers needs to justify their value to the system to those who live and work beyond the Beltway. If the media and public are unaware of what brokers do lawmakers can ignore agents with impunity. Which is why NAHU is launching a grassroots campaign to educate decision makers and opinion leaders to show why brokers “can’t be replaced by a government-run call center.”  Core to this intitiative is a white paper focused on the value of licensed producers. Titled “Americans Deserve Access to Professionally Licensed and Trained Health Insurance Agents, Brokers and Consultants,” the report describes the various services producers provide to consumers and how they compare to alternatives such as government call centers.

The challenge facing brokers is that we are, at the end of the day, overhead. We don’t heal the sick. We don’t deliver medication. But that doesn’t mean professional producers aren’t valuable. Whether health care in America is managed by private enterprises or government agencies, there’s more to health care than stethoscopes and MRIs.

The NAHU white paper does an excellent job of laying out the important role producers play in helping Americans get the most out of their health care coverage. For instance, it cites a study by the Center for Studying Health System Change that noted “In contrast to the notion that brokers merely make insurance more costly, these findings suggest brokers can provide important benefits to small employers, plans and policy makers.”

This sentiment is echoed by the Congressional Budget Office, cited in the NAHU report, which concluded that, especially in the individual and small group market segments, producers “handle the responsibilities that larger firms generally delegate to their human resources departments — such as finding plans and negotiating premiums, providing information about the selected plans, and processing enrollees.” In fact, the CBO recommends that “because many small firms and individuals may find brokers’ services valuable, policymakers might consider allowing such services to be used in conjunction with [a buy-in option to FEHBP].”

Too often those policymakers look at health care too narrowly. The technology sector shows how misguided this can be. In his book Marketing High Technology, venture capitalist William Davidow describes the difference between a “device” and a “product.”  A device, in an IT context, is a piece of code or some hardware. It’s what is invented in the laboratory. Products, however, goes beyond that. “A product is the totality of what a customer buys,” writes Mr. Davidow. “It is the … service from which the customer gets direct utility plus a number of other factors, services , or perceptions, which makes the product useful …” (emphasis added).

Medical care is obviously the core service (the equivalent of the “device”) when it comes to health care. Staying healthy or getting well is the ultimate goal. But the health care system is about far more than what happens in the doctors office or a hospital. It’s the development of new medications and devices, it’s healthy living education, and it’s the expertise provided by professional health insurance agents, brokers and consultants.

Health care reform is coming. That’s a good thing. In shaping what that reform accomplishes, lawmakers would do well to look at the system holistically — as a product, not just a device. That includes, as the NAHU white paper shows, acknowledging and preserving the value brokers provide to their clients.

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17 Responses to “Health Care Reform And The Value of Brokers”

  1. Nicole said

    I am very confused about this health care reform bill, I have been trying to follow it and the more knowlege I gain from reading the blogs and listen to the news the more scary life is for me! I am a single mom of 2, I worked so hard to obtain my Insurace licenses study diligently,so that I would be able to confidently shop the product that would best fit my clients needs,I work mostly with seniors, I dont just sell them a product I make a friend,most of the seniors that I have just love to have someone that cares to spend a hour or two just talking to them, and tending to what ever needs they may have if it just going to get them a glass of water because they are thirsty and their shoulders are too weak to lift the weight of there bodies or going out side too the mail box which has been packed with juke mail for days because they just dont have the strength to even control their remote control wheel chair these are some of the simple things that brokers do and are not paid for but are rewarded by how good it makes you feel when you leave to know that you took care of someones that needed you,by making them helping them or making them laugh until they are holding their belly, All I know is that I was told that laughter is good for the soul, laughter perserves the skin, keeps the body acid levels down blood presure down, joy and laughter gives people a reason to look forward to another day, Joy is to an adult what chrismas is to a child, and that is what I try to bring with me to every appointment. This experience has not only been beneficial to my client in helping them get all they need out of a product and more maybe reducing the amount they pay out of pocket but it has also made me a better person, paying for original medi $96 driving from vallejo to oakland 25 dollars (including toll) making someone smile priceless, medicare.gov can’t do for a friend what We do as Brokers! So with all that being said (laughing out loud) how would this new bill…change our lives and the life of our Friends (Clients)?

  2. Pat Knowd said

    I am an independent agent working with a mix of individual, family and small group health insurance clients in California.
    I full understand the need for reform but the issue of containing costs and “bending the cost curve” has not been addressed. The focus seems to be how congress can jam through the public option. How does this benefit the average citizen? Well if you look at the state of MA foir example, they currently have the highest cost per capita of health insurance. In fairness, they also have the lowest uninsured rate as well.
    Free markets and competition always are more efficient than government so how is it that 48% of Amercian thinks opposite?

  3. Abby said

    Thanks for writing this. I have been searching everywhere for information on the heathcare reform and what it has to do with healthcare brokers (my dad works for a healthcare brokerage). This gave me some good knowledge about it.

    Thanks again!

  4. Heather said

    Thank you for having a perspective on the role of agents in the upcoming reform. I work for a Broker that works exclusively with groups under 50 nationally. We have about 1% of the small business market share, which equates to about 25,000 accounts. I have heard ceaselessly from my clients, small mom and pop shops in the Midwest, about their 50-60% increases some years and how they don’t make a dime… They keep the lights on and pay the insurance. And then again, some don’t. I’m glad to see change coming because it is grossly needed. With that, I hope that the members become consumers and pay attention to what they are spending or we’ll be having this conversation in another decade once we wear the wheels off our new toy. Finally and most importantly, I hope that there is a niche for our expertise in these changing times, as I sadly have no used car sales experience.

  5. June 06, 2009
    The White House
    1600 Pennsylvania Avenue NW
    Washington, DC 20500

    Greetings President Obama,
    My name is Jeanette Taylor and I am an independent health insurance broker. I am concerned about the state health insurance exchange system being proposed by Senator Kennedy and others for people to buy health insurance. I read in Senator’s Kennedy’s proposal that commissions would be drafted by the exchange to pay for administrative costs. I don’t understand why the government would set up a health insurance exchange that will also pull a percentage for the premium when we have licensed health insurance brokers already in the field staying abreast on all the issues about coverage and benefits in each of the plans.

    The government needs to capitalize on the incredible benefits that the independent health insurance broker can offer to the citizens of this country. Independent health insurance brokers remain neutral in the process of helping our clients find the best plan available. I am appointed with all of the major medical insurance companies in my area so that I can give my clients the peace of mind knowing that they have the best options before them.

    I urge you, for the benefit of the citizens of this country, to tap into the most valuable resource available to the success of your health insurance initiatives: independent health insurance brokers. I ask for your vocal support for the role of an independent health insurance broker in the marketplace. My website has a calculator that anyone can use to see all of the major medical options that are available. I work within my community to help people find affordable health insurance. My job is to educate, inform and protect the welfare of my clients. I look forward to exciting changes in health care reform and to being on the front lines with my client’s best interest at heart.

    Thank you,

    Jeanette Taylor
    Independent Health Insurance Broker
    http://www.jtaylorhealth.com
    281-213-9267 home
    281-386-8891 cell

  6. Working as a health insurance broker can be risky for one’s financial stability especially in today’s economy. Brokers work on commission only which is based on an insurance policy that relies on so many factors before it is approved. As an independent broker, I diligently study all of the Major Medical Options plus Guaranteed Options available so that I can comparison shop for my clients. I want to give my clients the peace of mind knowing that they have the best options before them. Each insurance company has many options in order to meet the various needs of the public so consumers need a health insurance broker to help guide them through the arduous task of picking the plan that will best fit their needs. I am very excited for health care reform. I look forward to positive changes in health care (affordability and more coverage) and to being on the front lines as a neutral party who has my client’s interest best at heart.

  7. The government needs to find effective ways to manage and cut the cost of insurance, visits, prescriptions, etc. Those are important facts and reasons so many people cannot afford to take care of themselves. Having the government run the healthcare system would put even more people out of jobs and cause more harm than good.

  8. mark said

    In a Government run Healthcare System, Brokers would not be needed. That would make them, have to go back to their former job, selling used cars.

  9. Thank you for commenting on the value of health insurance brokers. Plans are quite different across the board and true independent ad visors can assist health insurance shoppers. We are an important cog in the system and if you eliminate us, well then you eliminate our tax revenue as well.

  10. Todd said

    Hello-
    I have my own agency in NY and we specialize in employee benefits for small businesses. I have over 500 small business clients in the NY metro area. Obviously, I am extremely concerned about what is going on. Every day we work to educate clients on more cost-effective plan designs and we save them money by acting as the HR department for their firm.

    I was very happy to come accross your blog this morning. THANK YOU!

  11. Mark said

    It seems that the debate has become a health insurance debate and not a healthcare debate. Unless we get a grip on the unit cost of each visit, procedure, treatment etc; we will accomplish nothing for the long term. The insurance industry is still being blamed for the ills of healthcare.

    The insurance industry operates within the confines of laws which are enforced by each state regulatory agency. The seemingly endless discussion about premiums without an equal and vociferous discussion about the cost of healthcare will yield little but a temporary respite.

  12. Keith said

    In many states health insurance companies pay as much as 35%-40% first year commission to brokers selling individual policies. (a dirty little secret) This seems a bit extreme, and often unjustified.

    • Alan said

      Keith: In California first year commissions are usually 20% of the premium and drop to 10% on renewal. I’ve never seen commissions of 35%-to-40%. That does strike me as high and I’d be surprised if it takes place in “many states” as claimed. I’m surprised a carrier in those markets hasn’t sought a competitive advantage by paying something lower. What states are you referring to? I’d like to follow up on this.

      • Keith said

        In the states of Ohio and Michigan for example, a couple carriers pay the MGAs a 35 point contract with additional bonuses possible on top of that. Granted, they may “scrub” and submit the applications and may offer leads or advances, but often they use those funds to complete with other MGAs to recruit agents paying them in excess of 25%. While the company may frown upon the practice, it tells me that perhaps premium could be reduced by reducing agent compensation and insure more people.

  13. Alison said

    Once again, thanks for your time and knowledge. You are stored in my “favorites” now. I have dubbed you one of my better sources of an accurate view. Thank you for all the time you take and for your views.

    Alison Smith

  14. Dennis Jarvis said

    There’s one thing I don’t understand. President Obama has essentially promised to offer the same coverage he has (translated as pretty rich coverage). Those plans have priced themselves out of markets years ago. Politically, they can’t deliver a high deductible plan (most popular and cost effective on individual market)to their constituents. How would the “public plan” work since they’re caught between a polical rock (no high deductibles)and a financial hard place (rich plans not financially viable). My understanding is that they want the “public plan” to be self-contained. Any insight would be appreciated.

    • Dave Wood said

      President Obama has dug himself an impossible hole. He said in his two year campaign for the white house that he differed from Hillary and John Edwards because he did not favor an individual mandate. He favored only a mandate that Americans should insure their children, not themselves. He went on and on about this notion that we need,” affordable quality health care for all”

      Dennis has hit the nail on the head because 90% of Obama’s reform will add more Americans to the insured roles, but do little to slow down the cost spiral. Dennis is right that Obama CANNOT deliver quality affordable health insurance since the two main drivers of our high costs ie. the health status of the American people, and secondly the wasteful, inefficient, and unfair structure of our so called system, will change little with Obama’s plan.

      In fact Obama will add more spending, not less, and most of it will be on the American taxpayers back, not the employers, not the states, not the individuals.

      Until we get a structure, a system that has REAL ACCOUNTABILITY, with a limited focused role of running a health care system, more like a police dept, with an elected board and leader, we will NEVER slow down the obesity, slow down the bad habits, the over use of worthless treatments like angioplasty or antidepressants.

      Read Mondays LA TIMES in the health section where the writer claims 80% of all antidepressants are prescibed improperly, mostly by family doctors who have little knowledge of mental illness. The article also claims that 50% of Americans who are clinically depressed DO NOT get the antidepressants they truly need, for what ever reason.

      We now have the WORST of both worlds in our health care system. We have little true competition since Wellpoint Blue Cross Blue SHield has a commanding market share in most markets, and we have inept government running huge chunks of our system where it takes an act of Congress to appropriate more money to increase the rates a doctor gets for an office visit. ARE WE INSANE?????

      Obama is proving to be a real wimp. He wont even talk about single payer, not even as an experiment in a state like Vermont. Instead we will get massive new spending to insure more folks, and do little to actually improve their health status. Check out my idea on how to REALLY transform our system into a more efficient and locally ran gig. Read at spaprogram dot org

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