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Dear Everyone!
Still no puff of white smoke from the dome of the capitol building. However, inside there is a lot of blue smoke... and mirrors.
All the politicians think we can lower health insurance without lowering the cost of healthcare. Obviously, none of these guys ever tried to run a business!
And talking about business, I thought I'd write a bit about agents and how this business "treats" us. You will see that the carriers don't think much more of us than they do of you!
It's all about the money.
-Al
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| Agent... or No Agent? |
There is a lot of talk in the healthcare agent community about what will happen to us if the state goes to some kind of guarantee issue plan similar to Massachusetts. One of the things the state will mandate is that carriers will have to keep their sales and admin costs under 15%. That is doable except they will have to cut commissions from 20% to about 7%.
Proponents of this argue that it won't be an issue. They point out that when an agent writes a group policy for a company they only get 7%. What they don't say is that it's 7% of a hefty premium if it is a large group.
Writing group is a lot of work... you have to accurately quote it, decide on carve-outs if any, work with the client deciding if there will be multiple carrier offerings, and finally you have to enroll and service the account. Now you know why only a few agents will bother writing small group (And those agents (like me) do it for the opportunity to maybe cross-sell life or an annuity to the owner.)
Say the premium for a 3 employee group is $600 a month. 7% is $42 or $504 for the year... for an effort that may take 30 hours of work (phone, email, meetings, quotes, collecting the tons of proof-of-payroll and proof-of-business documents, etc.) That's $16 an hour. You can't stay in business and pay the light bill, E&O (our malpractice) insurance, and gas up the car for that. The agent is better off getting a job at Starbucks (who give good benefits by the way!)
So what happens if we only get 7 points on selling individual (non-group) policies? Well, the idiot bureaucrats say "It will be the same as selling auto or house insurance. That's what they get. There are no shortage of agents doing that."
It doesn't hold water. Most property and casualty coverages are slam-dunk 'basic.' They are easy to understand and there is hardly any documentation needed. You have only a few moving parts. And to be honest, most people will never come close to getting what they pay into home insurance and only a few will end up with a net benefit with auto coverage. Property and casualty is for the MOST part sold on rate and rate alone. People don't much care about their coverage.
But health is a different story. I can give you good odds that you won't ever make a major claim on your home or auto, but you WILL (one day) make one on your health.
Also, health coverage is complex. Unlike home and auto, one size does not fit all. Sure, you can get your health coverage from the internet... the carriers are on their knees praying you WILL. Why? Because you will buy a crap policy that has crap coverage at an exorbitant (crap) price. Why? Because you won't know what the hell you are even buying, much less what you SHOULD be buying. Bottom line, the average person doesn't know crap about health insurance!
Oh, sure you CAN figure it all out. It's not that hard... but it takes time and effort. Do you really want to do that (and maybe still be wrong) or do you want an agent who costs you zilch to do it for you? Asked and answered!
Will agents be around to answer your phone call at 7% commission? Some will, but they won't spend much time with you. They won't be able to. It will become, like home/auto, a volume business. I see health agents going the same route that travel agents have gone... out of business.
You heard it here first. Don't be surprised if you see me at your local burger joint asking "You want fries with that?" :-)
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| As Earned?
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(Note: I borrowed much of the following with permission from John Petrowski, an agent in Maryland who writes an insurance agnet blog.)
Here is another reason why good agents (or any agents) are getting harder to find in the health biz. Money. The carriers won't pay us when we make a sale... they pay us on an "as earned" system. This means that when you make YOUR premium payment, a month after that, they send me my monthly commission.. which is 1/12 of my yearly commission which is usually 20% of the first year premium.
Example. Your premium is $300 a month or $3600 a year. The agent gets 20% of the first year's premium or $300 x .20 = $60 per month.... times 12 months = $720.
So somehow we're supposed to keep our doors open, pay all the overhead to say nothing of our own salary, while we get paid on an "as earned" basis. You wonder why young people don't enter the field? How can they? You have to have a minimum of one year's living expenses in the bank before you can even THINK about going into this field.
What if I opened up a pizza place and made the best New York Pizza in the area. People were flocking to my shop for lunch and dinner. I was raking in the dough (no pun intended!) And let's say just about everyone paid with plastic.
Now here comes the Visa and MasterCard people. "Yeah, you grossed $100,000 this month, but you know Al, these people take a year to pay us so we're only going to give you 1/12th of what you gross each month."
Yeah, that's going go over big when I tell my staff, "I can only pay you 1/12 of your wages." The state labor board would be on my ass faster than a chicken with the colonel behind it!
Why do the carriers use an "as earned" system? They claim that a lot of people drop their coverage in the first year and as such they get screwed on paying the commission. Sure some do drop (lapse) policies, but not many. I dare you to get the stats from any of the carriers on this. Now way would they tell you. They know it's a crock.
There is only one major medical carrier I know that advances commissions to health agents... a company called Assurant. But no one can sell their plans in CA because they are way, way, way overpriced. (And Assurant issues a charge-back to the agent if the policy lapses.)
What about other industries?
How do mortgage brokers get paid? As-earned over 30 years? Um, I don't think so. Just look at how badly the mortgage companies are getting hit over the sub-prime loan mess. Yet all those men and women who sold those loans have been paid.
The only new people the carriers can attract have working spouses or come into this biz with a lot of cash.
The bottom line that the 'as earned' system prevents the agent from paying their bills and marketing their lines. It also makes this job stressful - unless you think it's fun to close a deal, wait 3 months then get $22.35. No - it's exciting to get $2,600 in a week. I'm a salesman and proud of it. If I make a sale and bring revenue to my company or carrier... pay me!
Lots of carriers try to tie ethics to paying "as earned" as opposed to advancing commission. What a crock. (Health carriers and ethics? Gimme a break!) I know, you know, and everyone's Amway, Tupperware, Avon and Fuller-Brush salesperson knows there's not a sales job in this country where you sell and close a deal, and wait over the course of the next 12 months to get paid. Not one. The sales industry would collapse. I have no idea how ethics are tied to me selling Blue Cross and getting paid next week, or me selling Blue Cross and waiting 12 months.
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And Then There Is Greed (Part 3)
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Some of you know I've had a foot problem. My primary care doctor does not know the answer. He ordered an x-ray and an ultrasound. I reported about the gross overcharge that the ultrasound people made and how I was able to negotiate it down.
Two weeks ago I got a recommendation for a podiatrist who is supposed to be very good. I went to see him and brought my own x-ray. The doctor spent all of seven minutes with me (I timed it.) He looked at the x-ray for ten seconds.
He suggested I have a bone-scan. When I told him a bone-scan costs over $1,000 he said "So what, the insurance company will pay for it."
When I told him I had a high-deduct HSA plan and that it would come out of MY pocket and asked him if this scan would be definitive, all of a sudden he backed off... way off. Instead he asked if I wanted to try orthotics... which I agreed to (they hurt and have not fixed the problem... big surprise.)
I got the EOB from Blue Shield yesterday. He charged (sit down for this) $249 for the (seven minute) office visit and $25 to 'read' the x-ray. Now tell me again that there is no 'fat' in health care costs! This doctor had no problem suggesting a bone scan so long as the INSURANCE COMPANY was going to pay for it. And then to charge me almost $300 for all of seven minutes of his time... you wonder why insurance is expensive?
Oh, and get this. He sent me a bill for the orthotics... which cost $65. He did not bill Blue Shield for them. Why? Because he knows from experience that when people get doctor bills for small amounts they usually just pay them. He's working the system.... and he is good at it.
Blue Shield allowed him $130 for the office visit and nothing for trying to bilk them out of $25 for reading an x-ray.
Am I going to pay $130 for seven minutes? Not even in your BEST of dreams. For seven minutes... fifty bucks... tops. They want to make an issue of it? Fine. Let them sue me.
No matter what, I'm going to ask the Utilization Review drones of Blue Shield to pull up and go over every one of this doctor's billings for the past three years.
Am I being vendictive? No. I'm doing my legal duty.
Legally, an agent is what is known as a "field representative" for the carrier and he or she has a fiduciary duty to report to them if they see or suspect 'fraud' on the part of clients OR providers. It is part of my contract with the carrier. The Dept. of Insurance who issues my license is also on the side of fraud prvention.
I'll let you know how it turns out.
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Well, that's a wrap for this issue. I hope you've found some of the info above useful and interesting. If you have questions about life or health coverage, safe-money annuities, or employer group benefits just give me a call or send email.
Sincerely,
Alan N Canton
InsuranceSolutions123 Agency
InsuranceSolutions123.com
916-962-9296
CA License # 0F31110
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Al Canton, Owner
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I'm Al Canton, owner of the Insurance Solutions Agency.
Everyone promises the best service, etc. So I won't bore you with that message.
Bottom line, I know health insurance, work-supplements, medicare, life, and annuities.
Most importantly, I'm honest. I will not put you in a product just for the money. I've been here 25 years and I've built my business reputation on integrity and honor.
It's that simple.
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