Health insurance companies aren't the only ones that raked in the dough as insurance premiums rose 138% over the last decade. Health insurance brokers, who get their pay as sales commissions from insurance companies, made out like bandits, too. A recent California Department of Insurance survey of four of the five top insurers in the state found that aggregate broker income rose from from $5.8 million in 2000 to $168 million in 2010–a 2800% increase. Some of that is growth of the broker industry as insurance became a for-profit product, but a lot of it is also broker pay rising along with premiums.
Yet now the brokers' lobby is crying poverty, demanding legislation to exempt their commissions from new health reform rules intended to trim health insurance administrative costs–including broker pay. Go tell the brokers' sob story to the bus driver who's been out of work for 18 months and whose family can't even afford health insurance.
The brokers are also pressuring the National Association of Insurance Commissioners to endorse this pay-protection legislation, even though the cost to consumers and taxpayers would be in the billions of dollars. Insurance commissioners with cooler heads, including California commissioner Dave Jones, got the NAIC to hold off and study the consequences first. It was also Jones who ordered up the survey showing the explosion in broker pay in California.
An NAIC committee did do a study–and found that consumers would lose more than a billion dollars in rebates if the brokers got their way. Plus insurance companies would likely raise premiums–with an ultimate cost to consumers and taxpayers in the billions. (See Consumer Watchdog's letter to NAIC here) All for an industry that has gotten a free ride for years, with percentage commissions rising along with insurance premiums. Yet it refused to incorporate the information on California broker pay.
The committee, with only Jones dissenting, dutifully passed along its study to the whole NAIC this week.
Now it's up to the 50-plus insurance commissioners to decide whether they'll endorse some tortured compromise to give the brokers paycheck protection (sometimes 2800% just isn't enough) and stick consumers with the cost. The simpler and fairer alternative would be to not endorse anything, and let the brokers sell the bill on on their own.