Today’s article references a post and comment from back in July. We didn’t notice that we weren’t getting notified about the comments through the Facebook plugin until yesterday (fixed now).
My original article was about how our brokerage has long offered online comparison shopping for individual health insurance. When I read about the proposed services that the health insurance exchanges were going to start providing in 2014, I was struck by how similar they were to what we’ve already been offering to our clients in Colorado since our website went online in 2003 (not all carriers had online applications that early, but within a couple of years we had all of the major carriers available on our site with online comparisons and applications).
One of the comments on the post was from Dede de Percin, the Executive Director of the Colorado Consumer Health Initiative (CCHI). CCHI’s mission is an excellent one: ”… to expand access to barrier-free, quality affordable health care by bringing a united consumer voice to the policy and legislative arenas.” And to that end, CCHI has been actively involved in many of the grassroots reform efforts in Colorado’s healthcare arena.
Dede’s comment on my article referenced the point I made about consumers not having to pay additional fees to have a broker. Basically, health insurance is priced the same whether you go directly through a health insurance carrier (calling Anthem Blue Cross Blue Shield directly, for example) or through a broker (who will compare options from multiple carriers for you). Dede made this point:
“While a consumer or business doesn’t not pay a health insurance broker directly, broker fees and commissions are paid by the insurance companies – and rolled into the overall cost of premiums.
If plans purchased inside the new competitive insurance marketplace in 2014 do not have this additional cost rolled into the premium, its likely that insurance plans sold inside the Exchange will be cheaper than those sold outside the Exchange.”
It is definitely true that broker commissions are paid by the insurance companies and included in the overall cost of premiums. They are part of the “admin” expense that carriers incur. As a result of the Medical Loss Ratio (MLR) rules enacted by the ACA, the total admin costs cannot exceed 15 – 20% of the premiums collected by a carrier. That includes all of the overhead expenses, profits, advertising, etc. and broker commissions are one part of the equation.
But what do brokers actually do all day?
I mostly handle talking to insurance companies about underwriting questions as well as the back end part of our business, like the finances. But Jay spends his days (including evenings and weekends) talking to clients. His works is roughly split between comparing options for clients and answering questions. Our website is set up to be very user friendly and allow a client to complete the entire shopping/comparison/application process online, without any assistance at all. And very rarely, people will do just that. But they are a small minority, and even those people eventually need help with an underwriting, claims or billing issue. Most clients get quotes and then call or email for help. The sheer number of individual health insurance options that are available in Colorado can sometimes be overwhelming. We’ve been doing this for a lot of years, and we’ve found that most people definitely want to be able to talk to a real person (either on the phone or by email) before applying for a policy.
Once clients make a decision about what sort of coverage they want, they have to submit the online application. Although most carriers have tried to make the applications as user-friendly as possible, Jay gets calls all day and evening from clients who are unsure about how to complete the application – everything from how the entire process works to what’s up with the business group of one questions.
Medical underwriting – and the medical history questions on the application – are another area that gets plenty of questions from clients. We can assume that this will no longer be an issue in 2014 when all plans are guaranteed issue. But the exchanges are also going to be where eligibility for health insurance subsidies is determined. So my guess is that while applicants will no longer have questions about medical underwriting, they will have plenty of new questions about the income and tax information questions that they will be answering in order to determine subsidy eligibility.
Who is going to answer all of those questions for clients applying within the exchange?
Our experience is that no matter how user-friendly we make the website, and no matter how user-friendly the carriers make their applications, people still have lots and lots of questions. Health insurance is a complicated topic. Health insurance applications are complicated if you’re not used to them. The subsidy eligibility questions in the exchanges will add another layer of complication. There will still be lots of options for coverage, lots of price ranges, lots of legal-eze, and lots of questions.
People occasionally say that if there weren’t brokers in our current system, health insurance carriers could lower their prices because they wouldn’t have to pay broker commissions. That makes no sense at all. Somebody would still have to answer all of those client questions. But instead of independent brokers being compensated strictly on their knowledge and productivity, it would be salaried or hourly employees working for each of the carriers. Those employees would probably get benefits like retirement matching contributions and health insurance. The carriers would also have to pay Social Security and Medicare taxes for each of those employees.
Brokers are independent contractors and are only paid when they perform. The insurance company doesn’t pay for our health insurance or match a 401k contribution. We get no paid vacation time, sick days, or retirement benefits. They don’t pay for our continuing education. They don’t pay for our E&O coverage. This is a pretty efficient way for insurance companies to handle their payroll.
Once the exchanges are up and running, I believe that in order to be successful they are going to have to have a substantial number of employees whose job is to help people navigate the system. To be available to field questions over the phone, via chat, or by email. And trust me, there will be a lot of questions. I know that there has been talk about having “navigators” in place to help people, but I have to wonder if there will be enough of them. Our brokerage is just one of hundreds in Colorado, and our clients’ questions keep Jay busy far more than 40 hours a week. And he’s got a decade of experience with this – he’s very efficient at what he does.
I called HHS last week with a question and had to leave a message on their voicemail system. It informed me that someone would call me back within five business days (I did get a call back this week, and they are being very helpful – hopefully we’ll have more to report on that situation soon). HHS obviously gets far more calls than their staff can handle in a reasonable time frame. I suppose that’s fine for a government agency, but it’s definitely not going to be fine if it ends up being that way in the health insurance exchanges. When people are ready to buy health insurance, they want answers right away, and they want to be able to communicate with a real person. My experience with HHS makes me wonder if perhaps the exchanges are going to be woefully understaffed in terms of having enough people (knowledgeable, experienced people, not call-center temps) to answer applicant questions.
That all leads back to the second part of Dede’s comment. If the exchanges hire as many people as they will realistically need to help applicants navigate the shopping and application process (and presumably pay typical salary and benefits for their staff), will the admin cost of having those employees on board be any less than the current cost of having independent brokers helping clients? We don’t think so.
What do you think?
{ 3 comments… read them below or add one }
Louise:
Thank you, for your thorough and objective examination of this topic. A successful marketing plan is at the heart of any successful product or service. Exchanges are no exception. Insurers have known for decades that brokers are the most efficient delivery system for their products. If exchanges don’t recognize this as pert of their start-up plan, they are doomed to failure.
Louise:
Given the more uniform presentation of plans (plat, gold, siver, bronze), and the standardization within exchanges generally, I would think that in states where active purchasing/selective contracting transpires, the navigation process will require fewer people. Assumptions of course are proper training, and references that are easy to utilize, up to date.
If more open models pass muster and obtain waivers, more diversity and less consistency may require added expertise.
Not to devalue your hard work, but my gut tells me that a more regulated landscape may need less manpower.
How does Massachusetts handle query’s beyond FAQ and first level requests for info?
Brad
Brad,
That’s a valid point, in that there will likely be fewer plan designs within the exchanges. But our experience is that questions about plan design only account for a small portion of the phone calls and emails we get each day. Of course there are plenty of those questions, but they come along with questions about provider networks, the application process, the meaning of application questions, billing questions, and of course claims issues. And the exchanges are also going to be determining eligibility for premium subsidies, which will likely involve plenty of applicant questions as well. Even if there are fewer plan designs from which to select, there will still be several carriers and several plans from each carrier.
Given our experience over the last decade, I just can’t picture most people suddenly feeling comfortable going through the entire process with little or no “real person” assistance. You’re right that it may require less manpower, but I predict that it will still require quite a bit of manpower.
I am not familiar with how they handle this situation in Mass., although you’ve piqued my curiosity…