Health Insurance Rebates: Say Goodbye if Brokers Get Their “Pay Guarantee”

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One of the best consumer protections of the health reform law was a requirement that health insurance companies spend at least 80% to 85% of your premiums on actual health care, leaving 15% to 20% for overhead and those multimillion-dollar executive salaries. If companies don't meet this efficiency level, the they have to pay back some of the premium in rebates. Consumers are now seeing their first annual rebates rom the so-called "medical loss ratio" rule. The estimated total of $1.1 billion in rebates nationwide for individuals and employers shows just how bloated the companies are.

But the the insurance sales lobby is mounting a new campaign in Congress to make this annual rebate the last annual rebate.

One part of health insurance overhead is commissions to brokers and agents–the people who sell insurance to you or your employer. Those commissions can be up to 20% or more of the annual premium for the initial sale. The brokers don't want to get less. Who would? With the inexorable rise of health insurance premiums, they've gotten fat as commissions rose in tandem with double-digit price hikes. The result was a 2800% income increase over a decade. So even if they don't get 20% as insurance companies become more efficient, they'll still make a living. 

However, the brokers have a plan to do away with all that efficiency, in a way that will deprive consumers of their rebates. There are bills in the House (HR 1206 by Rogers ) and Senate (SB 2288 by Landrieu) to simply remove broker commissions from the calculation of health insurance overhead, as if by magic.

So if insurance company A is paying an average of 5% a year on broker commissions, the 5% just vanishes from the 20% allowance for overhead. No insurance company will ever have to pay a rebate again.

The broker lobby's latest move is a mail and phone-call blitz aimed at the Senate, which is less likely than the House to pass the brokers' bill. Their argument is that consumers will be devastated if brokers cut back the time they spend on the sale. Yet brokers and agents' role in health insurance purchases is already declining, first with online purchasing of health insurance, and now with the establishment of insurance "exchanges" in the states, which will make purchases simpler, easier and cheaper.

The brokers also don't want to admit that their advice is sometimes influenced by the size of their bonuses for sending more clients to a particular company. 

Health advocates including some members of Congress keep making it clear that the medical loss ratio requirements–spending more on health care and less on overheard–are the single most important consumer protection of the Affordable Care Act.

Brokers just want income protection. They're willing to demolish a chief consumer benefit to get it. And that's the point we advocates have to keep making, over and over. I'd be easier with a multimillion-dollay lobbying budget, but at least we consumers have truth on our side.

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