In what seems like a strange move to most brokers, some carriers have stopped paying commissions on their most desirable plans, those with larger provider networks and out-of-network options. Why in the world would they do this? Do they not value the agent anymore?
That’s probably not the reason. Insurance companies file their rates for the next calendar year well ahead of time, before they even know what their current year claims experience will look like and before they know what their competitors are doing. If they end up having a bad year, they can ask to increase their previously filed rates, but it’s possible for those requests to be denied. That means that they can expect another expensive year.
Another possibility is that they’ve discovered that they’re in a position at increased risk for adverse selection because other carriers have filed plans with more restrictive networks and no non-emergency out-of-network options. This could attract individuals with serious medical conditions who want to see specific healthcare providers. Again, once the plans are filed, they can’t simply be pulled from the market.
The one thing carriers can do under these circumstances is steer business away from certain plans and toward others by adjusting broker commissions. For instance, a carrier may decide to stop paying commissions on its PPO plans (which are more likely to attract people with serious—and expensive—medical conditions) while continuing to pay commissions on more restrictive HMO plans (which are less attractive to people with ongoing medical needs and more attractive to young, healthy people who are just looking for catastrophic coverage).
This can put you, the broker, in an awkward position. While you want to do the right thing for your clients and get them the plan that best meets their needs, you’re also in business to make money. This is why this carrier tactic can be so effective at limiting enrollment in their more costly plan options. Some agents will simply not offer plans that don’t pay a monthly commission.
So what should you do? There are two schools of thought:
1. Only sell plans that you get paid for.
This seems like the logical thing to do. After all, you’re doing the work, you’re in business to make money and you only have a limited amount of time to do so. Nobody, not even your clients, would fault you for recommending the plans that actually compensate you for your efforts. After all, brokers don’t typically spend much time helping people enroll in public programs like Medicaid and CHIP that don’t pay them for their efforts. Why would they offer individual health plans from carriers that expect them to work pro bono?
2. Sell the client what he or she needs and trust that the money will take care of itself.
The other option is to quote every plan on the market and recommend the one that you believe is truly the best option for your clients, regardless of compensation.
If you choose this approach, you may want to make your clients aware of what you’re doing. Tell them that the insurance company doesn’t pay brokers to sell that specific product, but you’re quoting it anyway so they’ll be aware of all of their options. This will accomplish two things:
- You can warn the client that the carrier may choose to eliminate the plan altogether the following year, based on its current attitude toward commissions.
- They’ll appreciate the honesty, and it will establish you as the trusted advisor your clients are looking for, for all of their insurance needs.
It’s likely that, even if your clients chooses a plan that doesn’t pay a commission, they’ll still need some supplemental products to fill any coverage gaps. And if they don’t, these clients might need life insurance, dental coverage or some other product that you sell. Additionally, the chances of your being referred to their friends and family because of your honesty will probably increase exponentially. There’s money to be made there.
And the most important advantage of this strategy? Your honest approach to your clients’ insurance needs will have them returning to you year after year. Even if you don’t get them this year, you’re almost certain to win their business when they’re ready to switch to a different plan.