The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Why Health Insurance Brokers Will Survive Reform

Posted by Alan on September 20, 2010

Economists call it “disintermediation.” Normal people call it “eliminating the middleman.” Whatever term used, there’s widespread concern among brokers that health care reform will push them out of business. As David Gonzalez wrote in his comment on a previous post, "It’s time to pack up now, at least until further notice. The days of the broker, much like travel agents, are now gone.” This belief, which other commentators share, rests on the assumption that the exchanges created by the Patient Protection and Affordable Care Act, the medical loss ratio minimums carriers must maintain as of 2011, the potential commoditizing of health plans and an array of other provisions in the new law will make brokers unnecessary and/or unaffordable. There’s a lot of open issues concerning health care reform, so those predicting doom for producers may be right. But I don’t think so.

As I wrote in my previous post, anyone making predictions about what will happen due to passage of the PPACA is making, at best, an educated guess. That post described my two Law on Laws, which, taken together, in essence holds that laws as passed by lawmakers are not the final word on a law. Yes, there will be exchanges, but there are also likely to be robust markets outside of these markets. And there could (and should) be room for brokers to help consumers inside exchanges. Will there be? We just don’t know yet.

Within this context of uncertainty, what we can address is whether health insurance is enough like basic travel arrangements to result in doing away with medical insurance producers. Are health insurance brokers about to become as extinct as travel agents supposedly are?

For the record, according to the American Society of Travel Agents there were more than 86,000 full time travel agents in the United States in 2008 with another 30,000 independent contractors (most likely part-timers). There were no doubt many more prior to the rise of Expedia, Travelocity and the like, but this is still a significant number. True, they no longer are spending as much time on simple travel needs as before, but are presumably helping consumers with more complicated arrangements.

However, not every product or service is as vulnerable to disintermediation as the sale of airline tickets and hotel rooms. A bit over a year ago I put forward in this blog Katz’ Theory of Disintermediation, an attempt to identify the factors that determine whether the Internet will eliminate the sales force in an industry. The theory holds that it is the interrelationship of six factors that provides the answer:

  1. Complexity (how well is the product or service understood – or able to be understood – by consumers?)
  2. Purchase Frequency (how often do consumers shop for the product or service?)
  3. Significance (how personal and critical is the product or service to consumers?)
  4. Cost (how expensive is the product or service?)
  5. Installation Requirements (how much on-site service is required to install or use the product or service?)
  6. Abstraction (how easily can a description of the product or service be digitized and posted online?)

Let’s see how this plays out with travel and health insurance. For travel we’re looking at a basic business trip from point A to point B with a hotel stay in between. Throw in a rental car if you like. For health insurance we’ll consider a straight-forward individual plan – no HSAs or other complications. We’ll score Basic Travel and Health Insurance on a scale of 1-to-10 with 1 being low concerning a factor (e.g., not complex at all) and 10 being high (e.g., really complicated).  The higher the score the less likely a sales force is to be disintermediated. (There’s nothing precise about my scoring. Please feel free to substitute your own. Or get really sophisticated and weight the various factors. What I’m trying to show the relative likelihood of travel agents and health insurance agents being disintermediated. Your calculations may vary).

Complexity: There’s no question what a seat on an airplane entails or what to expect in a hotel room. Some may have more or less features than others, but the basics are the same. Health insurance is a different matter. Many consumers don’t know the difference between HMOs or PPOs, co-insurance or deductibles. And don’t even mention formularies. Score: Basic Travel 2 / Health Insurance 8

Purchase Frequency: Many people travel several times a year. Few folks shop for health insurance more than once a year or three times a decade. Score: Basic Travel 3 / Health Insurance 8

Significance: When it’s your one vacation a year, your travel plans are pretty significant (and you’re more likely to employ a travel agent). But picking the right airline for a quick business trip from Chicago to New York and back isn’t all that important – the differences between one airline and another aren’t that substantial. Choose the wrong health plan, however, and the repercussions on a family’s health and financial security can be profound. Score: Basic Travel 3 / Health Insurance 9

Cost: Most travel is a few hundred dollars – not a rounding error, but not likely to send a families finances into a death spiral. In 2008 the average health insurance premium for family coverage was $13,770 in the United States. This cost has no doubt increased in the past two years. Score: Basic Travel 2 / Health Insurance 7.

Installation Requirements: Not really a factor for travel. You show up at the airport, go through security-line hell, sit in a too-small seat in a stuffy metal tube and the next thing you know you’re five miles high going 600 miles per hour. Installing health insurance can be a bit more involved (if less scenic). Consumers may need educating on what their plan does and does not cover. They may need to learn how to find an in-network doctor (and why), how to file a claim (which may be to a different place for medical care and prescriptions). Score: Basic Travel: 1 / Health Insurance: 6

Abstraction: Describing an airline seat or hotel room online is pretty simple. Same with describing a health insurance plan. (The terminology may be complex, but the information is easily presented). It’s not like there are tires to kick. Score: Basic Travel 1 / Health Insurance 1 

Totals: Basic Travel: 13. Health Insurance: 39

Based on this exercise (one admittedly reeking with false precision) one would predict that those selling basic travel are far more likely to be disintermediated than those selling medical insurance.

True, none of this means lawmakers and regulators won’t purposefully or inadvertently put health insurance brokers out of business, but they’d have to work at it. And I’m hopeful wiser heads (in legislatures and agencies as well as in the real world where employers and consumers live) will prevail and prevent that from happening.

I hope this will be the case because I strongly believe professional producers add substantial value to the health plans they sell. And it would be a real loss to consumers to lose that value.


26 Responses to “Why Health Insurance Brokers Will Survive Reform”

  1. Ann H. said

    How wonderful to read the responses of my colleagues. I’m truly privileged to associate with such articulate and intelligent people. We may not all agree, but the disagreement is minor. We are each expressing ourselves in strong terminology because the situation is an extremely critical one. We each see the same problem, we are just trying to “predict” if that problem will end our careers or not. To those who see the situation in an entirely different view than I do, I wish to say I mean no offense, and I wish you the very best. If you do leave this business, I want you to find contentment and success in your next business. If you stay, I hope we can help each other along the way, and this kind of information sharing is a help. My replies were written to give HOPE to brokers who may wish to stay, not to simply express opinion.

    I too voted for Obama. See, I can be wrong, and admit it. I too plan to vote a straight Republican ticket at this election, to counterbalance the extreme left imbalance in Washington. I hate ping-pong voting though. Obama was elected by Independents who were sick of a balance too far to the right. I’m an Independent, and I’m bothered by voting a straight party ticket just to ping-pong this to the other side. But the free-for-all spending in Washington is too unbalanced. I would feel this way if I were NOT a health insurance agent, too. This isn’t about my career, but about govt irresponsibility.

    I wonder how many Americans feel the same way. Polls say approval/disapproval of healthcare reform wobbles around 50/50. But here in Arizona the sentiment is anger. Is the sentiment in the West so different than the North East? If just Arizonans voted, all liberals and moderates would be ousted (but then AZ can have wild-west reactions – just look at our immigration stance recently!). My point is that I think this election may be more volcanic than most “predicted”. It seems that Democrats are embarrassed by PPACA, Independents are mad as hell and are veering extreme right at this election, and Republicans are coming out in force. If the Republicans don’t split the ticket with Tea Party candidates vs other Republicans, this election may sweep out many Democratic seats.

    So, healthcare reform may be reformed soon. It may even be repealed. Granted, it’s hard to undo since it’s so intricately woven. Alan wrote a great post about the difficulties of undoing even the 1099 filing requirement. It can be a public-relations tight rope to undo. But really, undoing it in some fashion is inevitable, isn’t it? PPACA is a monstrous nightmare. The costs to the FEDERAL govt were estimated at billions, but what about costs to states, insurers, employers and taxpayers? Can you really add 30 million uninsured, pad extra benefits, lift all lifetime & most annual maximums, yet not increase costs?

    I think (watch out, there’s opinion and prediction coming…) that reform or repeal of PPACA is inevitable either in one fell swoop or death with a million paper cuts by this congress and future ones. However, I also think (more opinion & prediction…) that we will face this day again very soon, because another inevitability is that our system must be reformed. If Washington doesn’t reform it, each state will do so (and is already doing so). Utah established exchanges before PPACA was conceived, and they are conservative. Other states have them or were implementing them. If states see PPACA repealed with no solid replacement from Washington, they will initiate reforms themselves, including exchanges since that idea is now well known.

    I sound like a Pessimist, don’t I? Actually, my point is that big changes are coming. If you view this as the end of your career, it probably is. As you probably guessed, I view this as a moment to redefine history. Not since Hillary have we had a chance to upset Washington and force better choices. If the new Congress repeals and replaces, they must replace it with something, and we need to make sure that “something” is good. Same issue on a state-by-state level. This kind of wrangling is inevitable, and our careers are at stake no matter what. Pessimism may see the glass half empty, Optimism may see it half full, but Realism sees 1/2 empty and 1/2 full in the same glass. No matter how you view it, if you love your career and/or if you wish to stay in this career, you need to push the halfway mark up, up, up the glass. Pessimists are actually optimists with a different outcome. They won’t push the halfway mark up the glass, but they’ll move to another glass.

    I said at the beginning that I wrote these responses to bring HOPE to those who wish to stay in this business. If it sounds like DENIAL to you, then staying and adapting is probably not the right choice for you. No doubt we are facing career altering changes one way or the other. I don’t mean to deny your right to view the sky as falling. It is falling, if you expect your career to stay the same as before. I personally think (opinion) that Alan is correct in saying we “need to ADAPT and CHANGE”, or the sky will fall on us. You may think this is funny, but I think Curt and others are also right in saying it’s the end. It is the end. If you expect your career to remain as it has before. But one way or the other, change is coming your way. You can change careers. You can change by keeping your career the same but making less money. You can change by adapting and grabbing opportunities ahead. I can only think of one way that drastic change in our careers is not coming, which is if PPACA is repealed and its replacement is a sound program that reforms the true drivers of healthcare costs at the root level, while retaining the current insurance system. Other than that, our careers are changing dramatically. Heck, even with that, we would see premiums drop and our careers change anyway. It’s changing.

    So, here comes HOPE (at least in my form of expressing it). I have been in the business 30 years, and survived HIPAA, COBRA, Section 89’s repeal, Hillary, Kennedy, decreases in group commissions from 10% to 5-6%, competition from website driven competitors including direct-sell carriers, drastic reductions in the number of carriers, extreme changes in medicare supplement marketing, HMO’s, PPO’s, HSA’s, local laws and federal laws. My opinion is if you wish to stay you can do it and prosper, but look at your career as one that adapts. You might even purchase accounts from those leaving the business at this time, such as Rick from PA mentioned in an earlier reply. My opinion, and my HOPE expressed to the others, is that if you view this change as catastrophic to your career and your lifestyle, then you need to listen to those who have “sounded the alarm” that the end is coming. Because if you cannot conceivably survive the change that is necessary, then the end is really coming for your career. I don’t mean to be blunt, and I certainly don’t mean offense by saying this. But if you cannot adapt and stay, you need to look for another career. Well, heck, that’s just my opinion and prediction.

  2. While I know that “Agents/Brokers” must “move on”, many, especially those who are older (50s, 60s) will not have that opportunity.

    They are far too old, far too invested in their businesses and clients, and will not be given a “Second chance”.

    I’m reminded of a time when Dennis Braddock, then a Washington State Legislature House of Representatives member put in place a $10.00 (that is ten dollars) per hour “re-education” allowance for “Loggers” after passing “Spotted Owl” legislation to help the loggers “readjust”. Right. And with that whopping salary they were able to make the payments on their $100,000 logging trucks and feed their families.

    Dennis Braddock was a liberal idiot. He put many families on Welfare. I bought my first box of “Spotted Owl Helper” (think of “Hamburger Helper”).

    IMO, there is no excuse for harming the public, the electorate, as has Mr. Obama and his henchmen in Congress, beginning with the all too arrogant Nancy Pelosi, as they have. It would be only fitting if they were forced to live under the laws they pass instead of letting them live under a system no one else is privileged to do. They have not a clue as to the damage to the public they bring.

  3. Curt Cella said

    Noting your comments below and your comment directed to me re Hitler/Concentration Camps – Right on. I said this the other day when Alan and I traded comments – we had likely spent more time composing our thoughts on health care reform than Obama & Co and just about every other democrat with half a brain (Or is that redundant?) had spent this summer and now fall discussing the Health Reform and its “benefits” to the public at large.

    It’s actually getting to be quite funny: ‘It’s the landmark legislation whose name we (democrats) dare not speak of….’

    As that Vice President of Idiocy might say ‘It’s a big &&#%#^* deal Mr. President….’ but for all the wrong reasons.

    But don’t fret Spencer – I have it on good authority from every confident insurance agent you can find (here). This will all blow over and it’ll be back to business as usual (If you live and work in Texas.)

    • Curt,

      I don’t live or work in Texas (though there are many places in Texas I really like, as I do Austin, of “Austin City Limits” and I love the Texas drawl – a friend’s mother came for a visit to Seattle from Houston with the greeting “Shalom, y’all”).

      That said, I have many friends in Texas and elsewhere who have been really harmed by this legislation. I know that you’re being facetious, but it does truly disturb me that while I have been fortunate and was able to retire at a young age (60), many of my friends are now coming to a “reality” that they may never be able to retire. I think that is a disgusting “unforeseen consequence” of the passage of Obama’s HCR, though the term “unforeseen consequence” is, unto itself to me, a disgusting term. How could it possibly be an unforeseen consequence? Was no one minding the store? Why did they not perform “Due Diligence”? Did no one add 2 + 2 and get 4? How could any, who are clearly as bright as those who passed this junk, supposedly that “stupid”? Answer, I think that they aren’t. I think that they just didn’t give a D*mn. They got their name in lights, only now they don’t want it recognized, as if it is, they will not be reelected.

      IMO, the word that best describes this anomaly is “Hypocrisy”.

      Curt, I wish you the very best of luck, and that is meant from the heart.

  4. The question of ObamaCare just came up on the WSJ site (Question, Why aren’t any Dem candidates who voted for this [heinous] bill, bragging about it?). My response:

    “I find it especially interesting that Obama is now planning to campaign for Dems using the passage of HIS HCR bill as the basis for his campaigning.

    Obama, and his WH Staff, have no recognition whatever of the feeling of the “Main Street” electorate. None at all.

    Our “President”, said in highly suggestive qualification, has no basis for the opinions or cares of the “American on the street”. He is oblivious. As are his “Kool-aide drinking” followers.

    Sadly, those Ds who followed his lead re HCR, deserve no better than they will get, as they pushed his BS to the limit, exhibiting their arrogance toward all those they are a supposed to represent.

    Today, sadly, we are not living in a Representative Government, let alone a Democratic Government, we are living in a Socialist thinking driven government, and it stinks.

    Hopefully, this November will demonstrate the depth of the voters discontent.

    I am an “independent”, ala John Avlon, but this November will vote a straight Republican ticket. I want to see these jerks kicked out. Screw their Social Perspectives, I’ll fight that behind closed doors, just as Obama has done all he has done, “behind closed doors.” ?

    I realize that brokers/agents must change to conform to the new “reality”. We have often been challenged to change. That said, this is a very different world, it is one filled with Socialistic Philosophy, in word, law, and practice. And it is ridiculous. Too many of our colleagues are being asked to not only shift their methods of doing business (not at all a bad idea), but are also being asked to change their “Discipline”, from Health Care, to LTC, or Disability, or Life, or some other “Insurance Discipline”, and to forget suggesting the best in Health Care, as that is now deemed to be the proprietary area of insurance “controlled” by the Feds, specifically, Barack Obama & Company.

    The new of late has been filled with the revelations of fiscal irresponsibility as perpetuated by the Obama Administration; $500 billion from Medicare, $16Billion from Small Business, and more umpteen billions from wherever, that will never take place, as any future Congress will not be foolish enough to pass law which will guarantee that they will not be reelected.

    In the meantime, small business is being screwed, as are the electorate, union members, and a myriad of other Americans, all in the name of HCR, not desired by over 85% of the public. What kind of nonsense is this?

    I have been a “John Avlon independent” ever since reading his book, “Wingnuts”. However, this year, unlike any other year, I will vote a straight GOP ticket in order to do my best to kick all of these “Lemmings” out of office. I don’t like many of their “Social Responsibility” POV, but I’d rather fight those issues behind the closed doors that Obama & Company have used for the past 19 months, than equivocate.

    I truly hate, and I mean “Hate”, to see my colleagues “go under” at the very time that they should be enjoying the fruits of their hard work, only to please a megalomaniacal yet articulate President who shouldn’t be.

  5. Alan, I agree that we just do not know at this time what the role of agents will be or how they will be compensated. The one thing I do know is that, regardless of what Obama and his sycophants say, health insurance, by its nature will be complicated and hard to understand. If Obama’s mandate stands, some people will buy it on line just to shut up the IRS. Others will want to make an informed decision. That’s where agents and brokers come in. Whether we are paid through the exchanges under the Navigator program or we become fee for service advisers, like attorneys, we will have a future of some sort.

    I have added a link to this article in by blog for struggling life & health agents. With all the bad press lately, they need something encouraging.

  6. Scott said

    Seems like there is a lot of time being spent by people discussing how easy it will be to buy the insurance when the exchange comes. The issue for small group is not the ease of buying. When a small business owner chooses me or gives me a BOR letter to become his broker, it is never because someone didn’t sell them a plan already or it was too difficult to buy the insurance plan from the old broker. They work with me or switch to me, because the SERVICE of the old broker was not good. Let me repeat, the SERVICE wasn’t good, not that the sale of the product was too difficult with the old broker. They always ask, how will you make my job easier and how is your service. SERVICE.

    Again, the first question by a business owner is NEVER, how easy will the buying process be. They know they can buy a plan or a product. That is the easy part, even today. Small businesses are busy. They don’t have someone to service their employees. They don’t have someone who knows how to handle state continuance, they don’t know how to handle claims issues for their employees, who are working on their claims when they should be working. They talk about how good their benefits are to their employees and how good the service is of their broker and how easy the broker will make it on their family when an issue arrises. That’s how they attract and retain employees.

    When someone goes to the pharmacy and they just waited 30 minutes on line and when they get to the counter, the pharmacists says that they aren’t in the system, that’s when our service starts. Our office conference calls the insurance company and the pharmacy to get it straightened out while the client is there. Wrong CPT codes being submitted to insurance companies, claims processed as out of network instead of in-network. Explaining the plans to their employees, because they can’t and the employees expect someone to explain it to them. I could go on for hours.

    Who finds out why the group was terminated and all the employees just got termination letters at home? Brokers’s offices and staff that service their clients, that’s who. That is why the NAIC is saying how valuable agents and brokers are to regulators. They aren’t saying how valuable we are because we are really good at selling health insurance. They know what it would look like if we weren’t here. They live it everyday. We live it everyday. We have to undo 90% of what the call centers at insurance companies tell our clients’ employees. They have no idea what they are doing generally.

    It’s silly to compare travel agents to Brokers. Whomever does that, has NO idea what we do. Even Alan’s comparison between the two talked about the buying process. A vacation is generally over in one week and hopefully not too much can go wrong in a week. Health plans last 365 days a year, 24 hours a day and lots can and does go wrong and we are the grease that keeps the wheels turning. We know how to fix the problems that arise. Agents and Brokers, please stop talking about how hard or easy it will be to buy health insurance once the exchanges come, because that is not what we do, and that is not what we get paid to do. If it was, we would get a one time fee for the sale and then we would disapear and move on to the next person. We get paid to service the group and to provide this service ongoing. If we don’t, we get replaced, by someone who will. That is what we do. I am not worried.

    • Curt Cella said

      Scott – you have a nice sales pitch for the value-add of a health insurance agent – and who could argue with your commentary? I’m afraid however that you are missing the point: This is not about how valuable our services are but what value is placed on them by 50 different state legislative bodies. Your average legislator isn’t buying your commentary. That is clearly evident with the advent of the Exchange. Will the person who bought a plan via the Exchange be mightily inconvenienced when it comes to post sale services? Absolutely. Will legislators view that as a small price to pay for the perceived reduction in health coverage costs? Absolutely.

      One need only look at the crying and kvetching that goes on about health care in England and Canada. “Oh it stinks…it’s nowhere near as good as what you have in the U.S. – we travel to the get services….yada yada yada…” Yeah but you know what Scott? THAT’S THE DEAL. Is it logical to have a system like that? Is it better to have a system that offers no creature comforts or conveniences like the U.S. system? Uhh no – but that certainly doesn’t change REALITY.

      I’m afraid the readers of this blog – and Scott is unfortunately the poster child for this – feel as though if they scream loud enough about how valuable our ‘services’ are, large blocs of state legislators will finally ‘get it’ and fix what was broken on the national level with the Affordable Care Act. You’re seeking logic where none exists. This is exactly like me telling myself that if I look in the mirror and tell myself enough times that I look like Brad Pitt the next time I walk out of my house I’m going to snag an Angelina Jolie look-a-like. Were it only so…

      As I have noted before: The NAIC has been neutered by the fragmentation that came with the State Exchanges. A lobbyist in Washington has one body to convince: Congress. I hope the NAIC has that times 50 – with 50 state legislatures, they’re gonna need it. Praise the Lord and pass the ammunition boys…

      • Scott said

        Curt – I think you are wrong. That being said, if need be, I will scream as loud and as long as I can to stand up for what I think is the right thing to do. That is what we do in the U.S.A., and I think we are right here. Better than Curt sitting around in the concentration camp, with his head down, and then sadly walking towards the gas chambers because he thinks there is nothing anyone can do……

        • Curt Cella said

          Scott – as a Jew and a college graduate with a degree in history – I at first found your unfortunate analogy re concentration camps to be offensive, overwrought, and inaccurate. Nazi extermination camps were not the scene of meek Jews (and by the way tens of 1000’s of German resistors of the state and other supposed opponents of the Reich) knowingly walking to their deaths: Their walk to the gas chambers was proceeded by deliberate mistreatment, disease, starvation, and overwork, or were executed outright as being unfit for labor. In other camps they were offloaded directly from railcars into supposed ‘delousing facilities’ – Other than camp guards and Sonderkommandos who knew what was about to happen; these poor folks never ‘meekly’ walked into a gas chamber as you incorrectly infer.

          Please note I said ‘at first’ – your unfortunate analogy prompts me to use historical fact as a basis of my commentary here: There were in fact any number of Jews who correctly ascertained that a hellstorm was coming and fled Germany and Europe altogether. Scott – Imagine the courage it must have taken to leave your own country. To leave everything you know in life – your career, your extended family, in some cases selling highly prized possessions for far less than their value to fund your departure. For some agents who do not think that sitting around and commenting on blogs that ‘things are going to be okay because well…gosh darn it! – I said so and the community of agents here agrees with me!’ is quite going to cut it I would refer to the many times in history where things were going bad in a big way and people willingly chose to ignore with their minds what they could clearly see with their eyes. For a bigger example here again we need only look at England and France in the run up to WWII – and frankly also Stalin -all of whom simply couldn’t or wouldn’t comprehend what was clearly right in front of them in the form of Hitler and the Nazis.

          On the flip side we have the German people and the high command of the German Army: The war was actually lost in June 1941 not 1945. Why is that? June 1941 marked the launch of Operation Barbarossa – the invasion of Russia by Germany. The launch of a two front war and the attack of Russia was literally the beginning of the end for Germany in the war. Many German citizens and the German High Command knew they were screwed as early as the fall/winter of 1941/1942.

          Here again Scott we are talking about years – so when agents like David Gonzalez and myself sound the alarm about what lay ahead in 2014 it is with the understanding and frustration that we can see something brewing out there on the horizon that has the potential to decimate what we’ve worked hard to build. You and Alan and others here point to efforts by the NAIC that will (supposedly) work in our favor. You also allude to as yet unseen legislative efforts that will ensure us a place in the process post-2014. I’m not seeing it. I’m seeing a far left effort in the form of a California Exchange that will have devastating effects on private industry health insurance sales channels. As I’ve said before: I get that Alan has to tow the party line to retain favor with the audience here but simply postulating that things will work out in the end by offering up made up mathematical exercises complete with a Greek chorus of agents who add their written ‘yawn, been there, done that, everything will be okay’ refrain is simply burying your heads to what is quickly becoming reality.

          As I write this, the backlash is building regarding the insurance companies pullout from the child-only market. There is now legislation afoot that would bar an insurance company from the individual market for 5 years if they partake in this kind of action. Legislators at the national and state level are creating an environment (That they clearly want.) that positions the insurance industry as nothing but bad actors who are heartless, anti-social corporate &@#^@&.
          I can clearly see with my own eyes that one day the large insurance companies and government will come to their own version of the Versailles Treaty – what concerns me is that the agents will become the forgotten casualties of this war.

          My suggestion to our host would be to use history as a barometer of what is to come – not fantasy math – for as we all know: ‘Those who don’t know history are destined to repeat it.’ As for you Scott: I sense from the increasingly hysterical nature of your posts and the numerous thumbs up they received, that further discourse between us is pretty well useless, but I sure hope you turn that energy into something productive and contact your legislative reps and let them know your thoughts.

      • Rick said

        Curt, I would be interested in purchasing the group health side of your business. Please advise if you’re located in Pennsylvania and if interested.

    • Rick said

      Scott, your second paragraph is right on.

      People that do not realize a successful small business person does not have the time to get involved in group health insurance are those that were never in business, or failed at it.

      It is also an ecomomic decision. Will I, the small business owner, make more money devoting all my time to the trade I’m professional at, or take some time away from that and handle my own group health insurance?

      • Scott said

        Curt – I too am Jewish and my grandfather and his brother were only 2 siblings out of 10 that got out of Poland during the war. All others were killed. My grandfather came here and my uncle could not get into the US and had to go to South America, so spare me your song and dance. I’m not impressed. I am sorry CA is handling things the way that they are, I really am. I just hope you find another way and another audiance to direct your bitterness and anger.

        I’m sorry I don’t agree with. I am sorry that upsets you so much. Maybe you are right. Maybe you are not. I guess we’ll agree to disagree.

        I don’t agree with you. Curt, I think you are wrong. I know that really pisses you off, but I don’t think you are right. Should I say it again or have you already smashed your computer because I don’t buy what you are saying? I think insurance brokers will be ok. Except maybe you…..

        • Curt Cella said

          Well that’s the first time I’ve ever seen a literate discussion involving citing historical fact referred to ‘song and dance’ – I’m afraid the only one here who is angry and bitter (and from the sound of it increasingly off his rocker) is you Scott. Don’t worry about me – of the two of us I’m quite certain I have the business skills and core competencies to do just fine. And don’t bother worrying about my computer – unlike 99.99% of the insurance agents I’ve met I actually know how to turn one on and off. See ya loser.

        • Scott and Curt,

          As am I, Jewish, as is Alan.

          As regards “Concentration Camps”…I’ve seen a lot on the History Channel of late regarding that period of our history (WW II) and on more than one occasion asked my father who escaped Hitler in 1933, and had a photo of himself standing quite near Hitler in 1933, why he didn’t kill him when the opportunity presented itself. He answered that it was long before Hitler decided to use genocide to solve “The Jewish Question”.

          Being Jewish doesn’t absolve any of us from the responsibility for being “Individually Responsible”, as opposed to being in favor of “Societal Welfare-ism”, which I strongly oppose. I’ve discovered that several of my cousins (we are a large family) feel as do I, and are very angry with “Obama & Company”. We are all small businessmen, and employ, and insure, a small number of people.

          We are in favor of helping those who cannot help themselves; we are NOT in favor of carrying the baggage for those who are quite able to carry their own baggage.

          And that is precisely what Mr. Obama has asked us to do, and now, in law, is dictating to us what we must do.

          My hope is that all of these intellectual snobs will need to find new employment after November 2010.

          Interesting, isn’t it, that of all of those running for re-election this November, not a single Democrat has bragged about the historical HCR Law, not one. They must be quite ashamed of the way they treated the electorate.

        • Scott,

          With all due respect, those who are in their 50s and 60s are not going to survive. The odds are plain and simply against them. It’s one thing if you are in your early 40s, 30s is better, but who, of those in their 50s and 60s, will have the energy and vibrancy to “start over”, which is precisely what they will need to do to overcome the obstacles now placed in their path.

          The “Companies”, the “Carriers”, are not in the business to help the Agents/Brokers. They are in the business to help themselves, period. Which is why we did need serious “Insurance Company Reform”, not HCR. Perhaps, we also needed some serious Insurance Agent Reform, to motivate those Agents/Brokers who had trouble spelling the words Ethics, and Integrity. We absolutely did not need reform that literally threw the baby out with the bathwater. How incredibly anti-consumer.

          How typically liberal Progressive Democratic Party of us.

          How foolish. How condemning and harmful to our economy and small business of us. Worse, how absolutely un-American of us. Who now, will take care of those who have been permanently harmed by this foolish act, an act for which no Democrat running for reelection wants to take credit. Not one of them. How interesting that Barack Obama is now going to campaign to “hype up” HCR law, before the November elections.

          Give me a break (Gimme a break?).

        • Dave Gonzalez said

          Scott, it’s real simple. Continue to watch your book dwindle faster than you’ve ever seen it dwindle. Understand that all it takes for your book of business to dissipate is a nice competitive exchange with better pricing and products, a better SEO and PR effort on the government’s end to tell consumers all about health care reform (which is merely a mousetrap to distribute them directly to carriers).

          Better yet, how will you continue to make sustainable commissions moving forward when commissions are dropped by half? Better yet, entire markets are leaving. You can’t sell child only plans now. Anthem Blue Cross is still waiting in limbo to have their plans approved (go onto any quoting engine like eHealth and pull up a quote). I’m sure the agents out there who now only have a couple really expensively priced products that no one will buy like the HMO and PPO Share 7500 to sell are real happy.

          And, how about Healthnet’s letter to all stating the following:

          Hi all,

          Please note that our current portfolio of long-term plans for individuals and families will no longer be sold after 12/1/2010.

          Products that are affected:
          All Standard IFP HMO Products (including HMO 15 and 40)
          All Salud IFP HMO Products (including Salud HMO y Mas 10 and 25)
          All Standard IFP PPO Products (Including Optimum Advantage HSA,
          Netfirst, ValueNet, and BalanceNet)
          All Salud IFP PPO Products (including Salud 15, 25, and Mexi-Plan)
          All Farm Bureau Products (Including CFB Budget and CFB Sensible plans)

          Carriers are continuing to slash away at administrative AND distribution expenditures. That means us. The really sad part about this Scott is that while myself, Spencer, and Curt are trying to help open your eyes to the grave situation around you, you are acting on blind faith and uninformed data.

          You’ve spent entire years building up your book. It’s easy to say that moving forward, you’ll simply live off your commissions. But that dismisses the fact that you will have a book still left to live off of. With the internet search for health insurance being the de facto standard (recall when us older guys were getting wiped clean by companies like eHealth and internet brokers), it’s ironic that you’re turning a blind eye to what will indefinitely be the systematic destruction of our book of business to carriers (if they choose to remain in the market) or to the government.

          I have a family to feed and support. And, like every American, I want to live the American dream. But I won’t rely on blind faith to achieve that.

    • D. Farrell said


      With regards to “group” commissions post HCR, who cares? Commssions, by nature, are transactional…like selling automobiles or appliances. Our income, as benefit consultants, is based on our ongoing work throughout the year….NOT just point of sale. Service or Consulting Fees is our future. Should insurance companies or the feared exchanges deny commissions, so be it. True “consultants” will be paid by their clients for helping them make educated decisions. PEPM fees, paid by the employer, will be the norm for qualified benefit consultants.

      I do believe that anyone selling individual health plans is in big trouble under ACA.

      Just my opinion!

      Oh…. and how in the world anyone in the insurance industry could have voted for Obama is a whole other topic! WOW!

  7. John Otto said

    I have long contended that the purchase of health insurance is more like making travel plans for a 3 week vacation to a place you have never been before than the simple trip to and from a place like you described Alan.

    2 years ago my wife and I took such a trip to Europe. We went to Paris, Venice, Pisa, Rome and Zurich (yes the insurance business has been very good to me and my family). As I was not familiar with the different venues i employed the services of a travel agent to make the arrangements while we were in Europe. I only made the to and from airline reservations (I used miles for that). I told the travel agent what we wanted to do, how long we wanted to stay, and how much we wanted to spend. They put together a package, we tweeked it and then made the necessary arrangements. Hours and hours of research on the internet would have been necessary for me to do all the work that the travel agent did and I am sure they did it in much less time as they knew where to look.

    So I agree with your scoring even if it is somewhat biased. People are asking me all the time how PPACA will affect our business. Why are they asking if they can go and research it on their own. Some will but most will find the services of a knowledgeable professional time saving and comforting when their is a problem.

    We will have to adjust and become the creative folks that we have always been, It is time to re-invent myself for the umpteenth time.

  8. Jim Sugden said

    If you’ve been in this business for more than 5 minutes you know that the “powers that be” whether big insurance or government, have always tinkered with the system. Sometimes the tinkering even takes on the magnitude of significant reform (ERISA and HIPAA). The “powers” have occasionally tried to skinny down expenses by eliminating brokers. Each time one of two things has happened; either the change fails and carriers leave the field (Prudential, Met, Travelers)or brokers become more efficient and everyone makes more money (except those who lose hope and/or refuse to change).

    Alan knows the secret that the “powers” don’t understand. The rats are almost always smarter and more cunning than the maze builders.

  9. Curt Cella said

    I’m sorry Alan – in being a smart ass in my previous post I probably left you with the impression that I was focusing my comments regarding the travel industry to what transpired between the airlines and the travel agent industry. No. I was trying to say that the travel industry is so fragmented in product offerings – cruises, group travel, safaris – you name it – that when the airline ticket segment was obliterated travel agents were not led to slaughter just by virtue of the fact that so many of the above named trip/vacation venues noted above continued to have the ability to drive revenue for agents who were diligent in pursuing these opportunities. The travel industry has so so many components that a middleman to broker the travel client experience would still seem to be a necessary part of the sales channel.
    I believe what I and David Gonzalez were referring to was the obliteration of the airline ticket market for travel agents. Their participation today is merely as a courtesy to clients. A value-add as it were.
    I can see from Ann’s comments that my premise is valid and this is where the democratically controlled Congress was so brilliant in its execution of Health Reform: By establishing state exchanges instead of a national exchange they blew apart the feasibility of any real organized effort on the part of a national group for brokers to play a part in the process: Democratic states will create the most lethal (to the broker community) health exchanges while Republican states will create the most benign. This actually works in favor of Republican congressional members who will be able to crack down on any left leaning exchange efforts in their backyard and look like heroes to their constituency while Democrats in a state like CA will declare victory and then when cost containment doesn’t happen (And it won’t.) they will make the case for more stringent measures (i.e. nationalized medicine) because – dang it – the insurance industry is still riddled with ‘bad actors’ (You’ll get a taste for this when some enterprising state legislator points to the carriers who are leaving the child-only market as bad corporate citizens despite the fact that the carriers were forced into this by an idiotic piece of legislation that is exactly counter to the very foundation of what insurance is all about!)

    If this “battle” is still in play as you believe it is, the large national battlefield has now been replaced by 50 small(er) battlefields and like so many battles in the annals of time, much meager ground will be fought over – there will be winners and losers in each of these smaller skirmishes – but to the average foot soldier (insurance agents) there will never really be another clear glimpse of the big picture…just a daily slog through the mud trying to survive. In every war you’ll have the soldier (Ann) who thinks her side is going to win and others (Myself and David) who are convinced otherwise….and so shall it ever be.

  10. Ann H. said

    Thank-you, Alan. I agree with you. You know, in Arizona, 3 weeks ago Blue Cross Blue Shield released new healthcare reform compliant individual/family plans, and sent a complex mailing to clients about renewing their current grandfathered plans and/or transferring to the new suite of plans. In some cases the premium is LESS on the healthcare reform plans because of new non-smoker discounts and 1-year age bands instead of 5-year-age bands. I’ve written several new applications already because of that. And, I’ve received two Broker of Record letters from current BCBS customers who previously purchased their contract DIRECT from BCBS, but who now need me to explain this to them. Now, Alan, I’m an agent who very, very reluctantly accepts Broker of Record letters. My ethics say I only accept BOR letters if the client doesn’t have a broker, or the broker isn’t in the business anymore, or the broker has harmed the client. Otherwise, I don’t build the business through BOR letters. For me to pick up two Broker of Record letters in one week is big. Rather than losing business, healthcare reform and its complexities are helping me gain business. I send a newsletter to my group & individual/family clients about healthcare reform laws and timetables. Many clients forward them to their friends & family. I’ve GAINED business through it as people are looking for an anchor in the turbulent sea of healthcare reform. People are MORE confused than ever, and it will continue to be that way during a transition to exchanges, mandated benefits, tax subsidies, employer vouchers, and (gulp!) government takeover (should that day come).

  11. Curt Cella said

    Wow. That is quite a leap in theoretical mathematics Alan. I’m going to wrap this up short and sweet: You left out the part where the travel industry is highly fragmented. HIGHLY. Travel agents can still serve a purpose because the sales & marketing arms of most travel entities do still require a middleman to serve the S & M function on their behalf.

    The health insurnace industry? NOWHERE near as fragmented with less than 10 real players. They can easily ramp up necessary sales opeartions to tackle whatever falls outside the boundaries of the Exchanges. With respect to Health Reform and new mandated MLR who do you think is going to take it in the shorts here? The insurance companies? Oh my: I have a new career Alan – I sell bridges: Would you like to buy one?

    • Alan said

      Curt, I’m not sure we see the world the same way. If anything consolidation in the airline industry has been at least as severe as in health insurance. Going from Point A to Point B? There’s a handful of carriers available to you. And they all offer the same thing: a seat on an airplane. In many states there are several carriers offering health plans and each of those are offering numerous plan designs — often dozens. Consolidation (which I believe you’re using as a surrugate for choice) is simply an element of the complexity factor. And maybe we deal in different markets, but there’s plenty of choice out there. And I believe there will be going forward.

      As far as whose shorts are kicked due to the medical loss ratio, if you’ve read any of my posts on the subject you’ll know I believe commissions are coming down. The impact will vary from state-to-state and from market segment to market segment. In states where small group commissions are 5% already, the impact of the MLR requirement will most likely be modest. In states where individual coverage commissions are 20% first year and 10% on renewals they’ll come down significantly. Brokers will need to adapt. OK. Good ones will and they’ll find a way to move forward, through diversifying the products they sell, by selling to different market segments, and by seizing on new opportunities (yet unknown) resulting from health care reform, new technologies and the like.

      But enough from Curt and me. What do other readers think?

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