Health Net notified all their California agents by a letter dated January 29th, that effective March 1, 2014, they will slash the sales commission by over 50% on four of their five individual and family plans offered in California. This further reduction in compensation for agents since the ACA was passed continues to make customer service oriented health insurance agents a “family of dinosaurs” who will quickly become extinct.
Compensation continues to drop
Most insurance carries had already adjusted their compensation structures to rock bottom before open enrollment for the new Covered California plans began in October. Health Net, perhaps upon reviewing the compensation models of the other carriers, decided they needed to further reduce their agent commissions.
Dear Valued Broker,
As our business partner, it’s important that we keep you informed of changes that directly impact you and your business. As you are aware, the health inusrance industry continues undergoing changes that are reshaping how we do business. Please note that, following the direction from the California Department of Insurance, we are changing our California Individual & Family Plans (IFP) PPO commission structure. – Scott St. Clair, Chief Sales Officer, Western Region Health Net
Health Net is slashing their commissions just in time for the second wave of new enrollments into Covered California health plans. This ensures that Health Net will reduce their overall marketing and sales expenses since the commission expense will be less than half what it was on enrollments in 2013.
Insurance Commissioner ignores consumers
It’s pathetic that Insurance Commission Dave Jones whines when carriers want to raise rates, but he is as silent as a mouse when it comes to agents getting slaughtered with declining commissions. With lower commissions there will be fewer agents willing to help consumers enroll in a health plan and solve problems with the selected health plan. As a side note, Health Net is the only carrier offering Covered California health plans that is regulated by the Department of Insurance. All the other health insurance companies have their Covered California health plans regulated by the Department of Managed Health Care.
No incentive to help consumers
Truly, the business model of the health insurance agent providing customer service to his or her client is dead when the compensation has dropped to approximately $9 to $12 per person per month. Similarly, the compensation model for the Certified Enrollment Counselors (CEC) of $58 per enrollment is also proving to be a disincentive for recruiting qualified counselors. Covered California staff announced at the last board meeting they are reviewing how they can increase the compensation to attract more CECs. Just as prospective CECs see the token compensation for enrollment too low to justify their time, the commission cut by Health Net is just one more reason agents will leave the health insurance market place.
Agents answers questions year round
While some folks may speculate that compensating an agent $12 per person per month is more than fair, many people don’t realize the actual and potential time requirement necessary to provide decent customer service. Good health insurance agents are customer service representatives, administrators and advocates. Unlike a Certified Enrollment Counselor or the call center staff at Covered California, a family’s designated Certified Insurance Agent will always be available to advocate on their behalf. An agent’s clients turn to them to –
- Call Covered California about mundane and unique situations
- Update their Covered California accounts with changes to income, address or household members
- Contact the insurance companies with billing issues and approval for health care
- Explain the Summary of Benefits and Evidence of Coverage for the health plan
- Help them figure out the drug formulary and tiers for their medications
- Explain why a procedure or visit wasn’t covered
- Explain how their deductible, copayment and coinsurance work
- Explain the “in-network” verses “out of network” costs
- Research if their current or new doctors and hospitals are included in their health plans
A good health insurance agent is a patient advocate.
I can’t represent all health plans fairly
The low commission structure certainly impacts an agents ability to spend time working with clients. Some health plans are refusing to appoint agents so that they are eligible for any commission. Other health plans are specifying that no compensation is available even when they are appointed. (See: Covered California agents forced to work for free) In all honesty, I can’t fairly represent any health plan that I am not appointed with or offers compensation of no value. If I’m not appointed with the health plan I don’t have access to the necessary documents to help the clients and I can’t speak to the health plan on the client’s behalf.
Consumers driven into website corral
But Covered California, Health and Human Services, Department of Managed Health Care, Department of Insurance, along with the carriers, have little use for agents. The drive has always been to herd all the consumers into the “website corral” to be branded – “One touch and done” was the motto of Covered California. Health insurance companies would rather see all the sales pushed through Covered California where they don’t have to pay a commission or channel sales to large quoting sites like ehealthinsurance.com that offer little customer service beyond enrollment.
Customer service time spikes with new ACA plans
The current compensation model blessed by Department of Insurance and Covered California makes agents shy about taking on new clients. Agents are getting calls from families looking for new representation because their original agent either provided wrong information or won’t return their calls now that they have issues. The nightmare that is Covered California combined with the swirling mess of the insurance billing systems has spiked the need for decent customer service and advocacy at a time when carriers want to strip agents out of the process.
Certified Enrollment Entities only want Medi-Cal
A Certified Enrollment Counselor told me that her Certified Enrollment Entity, Sacramento Covered, is refusing to work with families that are eligible for the Advanced Premium Tax Credit. They only want to enroll Medi-Cal individuals and families. The compensation is the same whether the enrollment is Medi-Cal or a private health plan – $58. Sacramento Covered knows that Medi-Cal is a slam dunk and they won’t have to spend hours on the phone with Covered California or the health plan resolving their client’s issues. Guess who spends all those hours on the phone? Agents.
Would you like a life insurance with your health plan?
Health insurance compensation rates so low they barely cover the costs of utility expenses, only increases the pressure on some agents to squeeze more money out of their clients. I wouldn’t be surprised if some agencies sell their customer lists to other marketers. You can bet some agents are using the new ACA health insurance enrollments as a loss leader to capture the client and then put the full court press on later to sell a whole life insurance policy or some other equally useless, yet high commission, insurance product in a couple of months. Why do you think so many of the health insurance companies also sell term life insurance? Money.
Who will hire an old health insurance agent?
So if your long time agent suddenly stops returning your phone calls for assistance with your health insurance problems, you’ll know why? It’s not that he or she doesn’t love you, but when the insurance companies refuse to offer reasonable compensation, agents have to spend their time on insurance or activities that actually reward their knowledge and investment. As for me, you’ll see me with a big smile as I greet you on your next trip to Walmart…Do you need a cart ma’am?
Below are excerpts from the agent and carrier contracts with Covered California spelling out commissions and representation.
Agent agreement with Covered California
6. Representations. Agent shall represent the plans offered through the Exchange in accordance with the following:
a. Fairly and accurately present to Consumers all available enrollment options and prices regardless of the Agent’s appointments with any health plan;
b. Unless specifically requested by the Consumer not to, when quoting prices, Agent shall fairly describe and display the health plans that the Consumer is eligible for;
c. Agent agrees not to steer Consumers towards or against any of the QHPs sold by the Exchange solely on the basis of payment schedules or other consideration made to agent;
E. Agent Appointment
1. Appointments for plans sold through the Exchange shall be made as follows:
a. Individual Market
i. The Exchange does not appoint Agents in the Individual Market. QHPs are responsible for maintaining a reasonable appointment process for appointing agents to sell QHPs in the Individual Market.
Model contract for participating health plans
3.29 Agents in the Individual Exchange.
(a) Compensation. The provisions of this Section 3.29 apply to agents who sell Contractor’s QHPs though the Individual Exchange.
(i) Compensation Methodology. Contractor shall be solely responsible for compensating agents who sell Contractor’s QHP through the individual market of the Exchange. Contractor shall use a standardized agent compensation program with levels and terms that shall result in the same aggregate compensation amount to agents whether products are sold within or outside of the Exchange. Contractor shall provide the Exchange with a description of its standard agent compensation program on an annual basis.
