By David L. Fear, Sr. RHU
By the time this article is published it will be May, the same month that CAHU members descend on Sacramento to lobby their legislators at the annual CAHU Legislative Symposium (or as we used to call it back in the 1990s, “CAHU Day at the Capitol”).
As in past years, most of us will be speaking to members of Legislature about proposed bills that affect the cost and condition of health care here in California. Bills come and go, some are signed into law but the majority die in committee or are vetoed by the governor. However, one important message that still needs to be communicated each year is that of the value of the agent/advisor in the health care system.
A few years ago, CAHU published a white paper called “A Case for Minimum Agent Compensation”. At the time, CAHU was pushing the envelope to address the concerns of agent/broker/advisors about the free-fall of commissions that have taken place since 2013 – especially in the individual health market.
It opens with this statement: “Fair and sustainable compensation for California’s license health insurance agents.” I further quote: “Since the passage of the Affordable Care Act, enrollment involves complex rules for determining eligibility for subsidies, cost sharing reductions and gathering new documentation to prove citizenship and household income. More than 14,000 of California’s Certified Insurance Agents (CIAs) provide year-round enrollment and service support to the more than 2 million Californians enrolled in individual and family plans (IFP). Current compensation for medical plans ranges from zero (during SEP) to as high as 7%, with some carriers paying a PMPM (per member per month) ranging from $15 to $22. Kaiser is an outlier, paying a one-time payment of $100 for each effectuated application. Renewal year commissions are often in the 1 or 2 percent range.”
The executive summary of the white paper goes on from there to cite seven (7) key points:
1) Between 2014 and 2016, agents enrolled over 2 million Californians in Covered California;
2) Independent licensed health insurance agents are small businesses in every town of California;
3) Licensed agents received the highest consumer satisfaction scores or rankings;
4) Shrinking compensation in the IFP market threatens the ability for these agents to continue their work;
5) Bureau of Labor Statistics data shows that the average California agent earns about $34.38 per hour putting their annual income at around $71,510, putting an agent with a family of 3 below the 400% FPL level;
6) Certified agents receive no compensation for Medi-Cal enrollment, which can affect up to 40% of their enrollments in a given year;
7) Covered California has repeatedly recognized the value and worth of the licensed, certified health insurance agent in helping people enroll for IFP coverage.
I know many agents who candidly state that they no longer seek out IFP sales because it pays little or nothing and that’s a quick way to go out of business. Yes, most will help an existing client, but the outreach to new clients for this line of coverage has pretty much stopped due to this reduced compensation.
Yet agents who walk the halls of the Capitol rarely discuss their commission challenges. Instead they have repeated time and time again, what an agent does for the consumer in sorting through the complicated and confusing world of buying health insurance. This is a story that we must constantly re-tell to both elected officials and to the general public.
I’ve just spent the last five years assisting employers of all sizes to figure out how they are going to comply with the Employer Mandate requirements of the Affordable Care Act. Rather than charge hefty consulting fees, I provided this service on the basis of compensation through the commissions I’m paid by the carriers whom I represent. Very few legislators and their staffers understand the process that an employer goes through in complying to offer benefits to their workers. But agent/broker/advisors do and have shown their value many times over for employers of all sizes.
The fact is that health care is complicated and in spite of legislative efforts to simplify things, consumers are even more confused than ever before about the myriad of rules and regulations now imposed on them, producers and carriers in the insurance industry. We have an obligation to stay on top of things so when our clients call with a problem, we’re able to get to the bottom of things and resolve the frequent conflicts that happen between consumers, business owners, carriers and providers. It never ends.
Given the fact that agents have demonstrated their value to their clients, it makes sense to have a discussion about how they are compensated. Legally, CAHU and NAHU cannot negotiate commissions with carriers. Yet, insurance agents look to CAHU/NAHU leadership for help in matters like this. Going forward I see more pushing of the envelope when it comes to the compensation paid to agents.
Ultimately the client decides who they want to appoint as their agent/broker of record, and it seems to me that those clients should not have that ability denied them because carrier compensation is insufficient. Perhaps it is time that agents be allowed to charge a modest fee for their services – that is paid by the client and not the carrier?
Cal Broker editorial advisory board member David L. Fear, Sr., RHU, is managing partner of Shepler & Fear General Agency and a 40-year veteran of the employee benefits industry. He is a past-President of CAHU and NAHU and 2015 recipient of the NAHU Harold R. Gordon Memorial Award as ‘Health Insurance Person of the Year’.