85.7 F
San Fernando
Friday, Mar 29, 2024

Brokers Worried Over Aetna Changes To Their Pay

A plan by health insurance carrier Aetna to change the way its brokers are compensated due to new health care reform regulations leaves some brokers concerned about their livelihoods. Starting Feb. 1, the insurance carrier plans to exclude broker commissions from health insurance premiums in the fully insured large-group market. That means instead of bundling the broker commission into premium costs, employers purchasing group plans will see the cost in their bill as a separate fee. The standard commission brokers usually receive for health insurance plans in the large-group market is generally 5 percent. The move is believed to be a result of the government’s new requirements that mandate certain premium percentages that insurers must use toward medical costs. The medical loss ratio requirement, which is part of the Patient Protection and Affordable Care Act, requires that 85 percent of premiums in the large-group market must go to medical expenses, leaving 15 percent for administrative costs. The regulation went into effect Jan. 1. Some in the industry expect other insurance carriers will follow. Fear of instability Jim Garrison, the chair for the Valley Industry & Commerce Association’s health care committee, said Aetna’s change is stirring up some concern in the local broker community. One concern is that broker customers, now more aware of how much the broker fees amount to, might choose to try and lower the fees or cut out the broker altogether. “Several brokers have brought this to the attention of VICA and have asked us to assist them and watch the issue,” Garrison said. “The several brokers that have talked to us are not so concerned about disclosing their compensations. They’re more concerned that their role of just helping people with their insurance has been compounded by having to negotiate with the buyer.” He said this could be an even greater concern for brokers who work with companies with less than 100 employees, which are not required to disclose broker compensation from their health plans to the Internal Revenue Service and therefore might not be aware of how much brokers are actually paid. Barbara Oberman, founder of Barbara C. Oberman Insurance Services in Agoura Hills, said the new regulation puts brokers at risk. “This is like the biggest shakeup in our industry for insurance brokers probably for 50 years because it’s shaking the foundation of how we make our living and pay our bills,” Oberman said. “It puts a lot of questions into the equations of how we’re compensated, or even if we should be compensated for the services that we provide and to what level. (We’re) getting very curious about how the other insurance carriers are going to respond to those changes in Washington.” Garrison said VICA has not yet taken an official position on the matter and is waiting to hear more feedback from brokers in the community. Some support Meanwhile, other brokers welcome the change. “We actually look at that as being a positive,” said Ross Pendergraft, president of the Arroyo Insurance Services office in Sherman Oaks. “The reason is that really puts brokers in a position where they have to validate their services to the client. And we don’t have any problem with that.” Pendergraft said brokers who oppose Aetna’s move probably do so because they feel threatened by a change they are not accustomed to or because they fear clients now aware of the costs will turn to other brokers with more extensive services. Thom Lewis, regional CEO of USI of Southern California Insurance, shared Pendergraft’s sentiments. “I believe brokers that are not helping their clients manage their cost trends and communicating with their employees to engage them in wellness solutions and other new ideas to control costs are going to find themselves losing clients,” Lewis said. Renee Glickman-Cohn, vice president of RGEB Employee Benefits in Woodland Hills, said she prefers having to charge her clients separately for the fees than risking her brokers’ commissions being cut because the carriers couldn’t afford to pay the costs. Dramatically lower broker payments by carriers for her company could equate to having to let people go, she said. “I think it would put in jeopardy the premium, I think it would put in jeopardy the broker’s commissions, and it would put in jeopardy what they’re able to do with the client,” she said. Atena Policy ChangeEffective: Feb. 1, 2011before: Broker commission part of premiumAfter: Broker compensation applied as separate feeApplies to: Large-group insurance policies for companies with 50 or more employeesnew law (medical Loss Ratio): 85 percent of premium for medical costs; 15 percent to administrative costs

Featured Articles

Related Articles