Gene108 asked a good question yesterday that is at the limits of my knowledge as I don’t deal with the sales side of the insurance industry all that much, but I’ll try to help:
As a person, who has been handling benefits for a small to medium size business for 17 years, and does not have time to go to companies directly and therefore goes through brokers, what exactly is the relationship between a broker and insurance company?
Is there really a one-on-one relationship or do companies just need a company’s census and they hand out the same quote to any broker who asks for a quote?
Brokers are supposed to represent the interest of the insured or the shoppers while insurance agents represent the interest of the insurance company. There are plenty of insurance agents on the third floor of my building but no brokers anywhere in the building. The basic job of a broker is to give their client good, relevant, professional advice, and then take care of all the confusing crap that is involved in buying insurance.
Some brokers will consistently shop their clients to every relevant insurance carrier in a market. Others will know their market, and know the basic characteristics of their client and then shop through a few relevant options. The ACA world of community underwriting for small group policies means that there is less value in knowing how individual companies will write policies for any particular configuration.
Once a broker receives from their client a company census of who will be covered (including dependents) and the possibility space (cost, network, maximum deductible etc), the broker will start shopping around. The broker will talk with the sales reps to define plan design if the client is a mid to large firm, or for small group/individual, go through a menu of standard options. The sales reps (esp. if they work for Mayhew Insurance) will collect the group census and then promise three improbable things and one impossible thing in order to get the commission. The sales reps will then tell the plumbing team about the impossible condition a week before the policy goes active and then I don’t sleep for a while.
Larger groups may request certain pieces of information from the insurance companies that they are soliciting bids from. They will often ask for a network accessibility GIS report to see how good the network(s) that they are considering is for their actual members. If most of the buyer’s employees live in the central city heart of the network, access will be good even in a narrower network. If the majority or a loud minority live in the boonies, broader networks are probably going to be asked for. Disruption reports will often be asked for from new carriers. Disruption reports are a list of providers and claims/dollars paid for the group in the past two or three years under the current insurance plan and check boxes to determine if the new insurer includes a given provider in the network. This is an attempt to guesstimate how many people would have to change providers if the insurance plan switched.
Once the broker receives a set of quotes with supporting documentation/reporting, they are supposed to filter out the no way in hell bids, and then make recommendations as to what the client should buy. Once the client makes the decision, the brokers continue to support the client in handling all of the admin work of setting up a policy such as getting membership files built, determining payment structures etc.
For the final question, do certain insurers give certain brokers slightly better pricing? There is always a little bit of wiggle room in pricing. I don’t know if the wiggle room comes from keeping a broker happy/favorably inclined or from the fact that a smooth working relationship combined with big brokers bringing in big groups lowers the admin cost. I don’t know.
Baud
My world is shattered.
Richard Mayhew
@Baud: quick, someone find you some furry silly puppy pictures :)
gene108
Thanks for taking the time to respond to my questions.
Steeplejack
Am I crazy, or does 90 percent of all this sawdust-sawing go away in a commie pinko single-payer world? E.g., the “network” expands to become the universe of all providers?
gene108
@Steeplejack:
I would hope so.
Telling employees their benefits are either going to cost more or be more expensive or both starts to grind after 15 or so years.
Employee:”What do you mean I have to pay more for a higher deductible?”
Me: “Well we got a 15% increase because of ‘trend’ and can’t afford to absorb the increase entirely”.
Employee: “Trend?”
Me: “Yeah, the 40 year old 10 years ago is now 50 with high cholesterol and high blood pressure, so they figure we’re all a year closer to a catastrophic event.”
Employee: “But why are you can’t you do something different?”
Me: “Because insurance companies only give us so many products to choose from that fit our group. We have to take what they are selling, we aren’t large enough to dictate terms.”
Employee: “This sucks…I just want to say your benefits suck…I work hard and blah blah blah…”
Me: “Thank you for your service”.
Fucking fun.
Why businesses, who have to deal with this shit every year for the last many years are not crying for single payer escapes me. I guess it’s just fear of the big bad government.
The amount of time meeting with brokers that could be saved for actually productive work will be huge, let alone the cost savings.
Richard Mayhew
@Steeplejack: Yep, but how do we get there?
Steeplejack
@Richard Mayhew:
Don’t get me wrong: I’m not one of those whiners who claim we “missed it by that much” (Maxwell Smart voice) on single-payer because someone sold us out, or that it’s going to be easy to get there. I guess my mind boggles when I get a look under the hood and I see what a Rube Goldberg contraption the whole thing is. It’s hard to believe that anyone isn’t for reform, especially businesses, as gene108 said.
At this point I see slow, creeping improvement as the way forward, as Obamacare wraps its sinister tentacles around us and is shown to work.
Foxhunter
Insurance ‘agent’ here, all lines of business.
Years ago, a high head count census for health coverage and ancillary benefits paid a decent commission that justified pursuing health accounts. At some point in the late 90’s, early 00’s, health carriers started to phase out the commission piece and paid a flat rate per enrollee…to the point it wasn’t worth the time for a small agent (small health book, that is) to pursue health coverage as a means of revenue generation. The transaction cost outweighed the income, so we pretty much abandoned health insurance unless it was an entree request. Large groups were a constant headache with additions/subtractions/claims issues. Even given the 1-800 number to the provider, the client still wanted to deal with these issues through our reps because we are pretty damn good with service.
I have a ‘broker’ acquaintance that specialized in the health market, and he does receive bonus income when the metrics are right, but not necessarily on book performance. He’s a little freaky right now, because his broker arrangement is sure to suffer the same fate as the agent contracts with regards to commission.
To the original question, ‘quotes’ can be manipulated by the carrier showing preferential treatment to volume leaders, but it’s generally frowned upon. The easier method to make this work is for the broker to cut his slice of the commission. This is why broker friend is concerned…it will be much harder for him to compete with everyone else that has a contract, as his ability to cut commission on larger accounts will become restrictive and costly.
Mustang Bobby
Supreme Court rules 6-3 that subsidies are available. Short version: Obamacare wins.
gene108
@Steeplejack:
I do not think single-payer is practical at this point in time.
There’s too much in the current system that would have to be undone to implement single-payer, but I do think moving insurance off of employers would be beneficial in the long run.
Biz5th
If your business has fewer than 50 employees, there is no penalty if the employer drops group insurance, gives everyone a raise, and sends them to the Exchange to purchase their own insurance.
Guaranteed issue, no pre-existing condition limitations, no lifetime or annual maximums, each employee can buy the amount of insurance they want (within limits), and some employees could qualify for a subsidy.