Medical Loss Ratios..Agent or No Agent..'Freedom to Choose'

Unknown to most consumers, a couple of days before Thanksgiving, coincidentally a historically slow news holiday, HHS and the NAIC decided to force Insurance Carriers to include Insurance Agents commissions in the mandatory Medical Loss Ratio (MLR) requirements. The aforementioned, immediately opened the door for Insurance Carriers to dramatically reduce Insurance Agent commissions.

Question: So what's the harm? Why should the consumer be concerned about an overpaid Insurance Agent receiving less money.

Answer: The concern should not be for the Insurance Agent, but what soon could be, the defenseless consumer.

Let's examine the most critical points in framing, the virtually ignored, debate, concerning Medical Loss Ratios (MLR)...Obama Care and the future role of Health Insurance Agents's.

To everyone who understands the dynamics of the debate, the future is clear; the MLR requirements will eventually remove the Insurance Agent from the consumer transaction of purchasing Health Care. To fully understand the devastating Market Disruption this will create; it is necessary to examine the basic function of a Health Insurance Agent; specifically, as it relates to the President's 'Stated' Goal in passing Obama Care (PPACA).

The 'Stated' goal of Obama Care is, to provide 'AFFORDABLE' Health Care to the consumer; both the currently insured as well as the current uninsured population.

The goal of Health Insurance Agents, is to provide their clients, whether they are Individual or Employer Group Health Plans, the most competitively priced 'AFFORDABLE' quality Healthcare in the prevailing market.

The reason the relationship exist between an Health Insurance Agent and a  Healthcare Consumer, is to provide an 'Uninformed Buyer/Consumer' (Individual or Employer) with representation against an 'Informed Seller' (Insurance Carrier).

Competition between Insurance Carriers is created by the Annual or Semi -Annual 'Insurance Carrier' Renewal Marketing process that is conducted on behalf of the 'Uninformed Buyer/Consumer', by their Health Insurance Agent. The aforementioned process, is the sole reason Insurance Carrier premiums stay competitive. Additionally, this annual marketing of Insurance Carriers motivates/forces the Carriers to continue to provide 'state of art' innovated products.

Now to the MLR situation/debate.

Question: If Insurance Carriers are only allowed to retain 15% to 20% of the Premiums they receive; lets call that the Pie and if this 15% to 20% of the Pie is not sufficient for their book of business;  What will they do?

Answer: Simple, they will increase the size of the Pie. With the Consumers representation IE. their Health Insurance Agent having been removed from the transaction.

Question: Who will stop them.

Answer: The Goverment.

Question: How? If Insurance Carrier premiums rise in unison; the increased premiums become the new accepted Cost Basis.

I would proffer that, The Government won't make any real attempt to curb the rising Premium. The Government will allow the Insurance Carriers unbridled greed for profit destroy their own future.

Question:How?

Answer: Without Health Insurance Agents holding Insurance Carriers accountable, the Carriers will continually raise their premiums. At which time, the consumer will say 'No Mas' and welcome any financial relief.

Question: Who will be the financial savior?

Answer: A new, even more robust form of Government run Health Plan..Obama Care on Steroids..HealthCare Security for everyone.

Most consumers, who are provided Healthcare thru their employers are unaware that annually, Insurance carriers request millions of dollars in rate increases; that are never fully realized.

Question: Why not?

Answer: The Annual Health Insurance Agent / Renewal marketing process. On behalf of their clients, during this marketing/comparative process, Health Insurance Agents force Insurance Carriers to compete against each other, prompting them to be remain both Competitive and Creative.

If the rate increases Insurance Carriers requested were realized, the money to pay these increases, would flow out of the local business/consumers hands and into the pockets of Insurance Carriers.

Let’s consider the financial impact of just one regional firm. Our firm, The Benefit Planning Group is a regional firm representing clients primarily in Georgia. Currently TBPG clients spend over $300,000,000 in annual Health Insurance premiums.

Conservatively, in 2010, we reduced the average 'requested' rate increase from our clients various Insurance Carriers by 10% or $30,000,000. The $30,000,000 that our clients did not have to pay, remained in their own respective corporate economy.

Consider this:

If our average client yields a profit of 10% off Gross Revenue, they would have had to increase products / services sold by $300,000,000; just to pay for the Insurance Carrier Increases negated, by their 'Informed Advocate/Representative IE their Health Insurance agent.

The debate over MLR's brings to the forefront the financial importance of an Health Insurance Agent. The Financial Impact of taking away the Consumers Informed Advocate/ Representative..IE their Health Insurance Agent, will eventually cause irrefutable damage and disruption to the Health Care System and the Consumer.

Question: By the way what did it cost those clients to save the $30,000,000 in rate increases? Just how much did the Health Insurance agent receive?

Answer: Less than 10% of their total savings or less than 1% of their total premium.

In summary it is impossible to provide Consumers with AFFORDABLE Health Care if their informed representatives are taken away.

Question: How can the consumer remain protected and the country miss the financial disaster created by HHS forcing Insurance Carriers to adhere to MLR's?

Answer: Give consumers 'Freedom to Choose' give them a 'BOX'. A "BOX" that allows the consumer the right to have a knowledgeable representative (Health Insurance Agent).

Question: How?

Answer: This can be accomplished by the State Insurance Exchanges providing a BOX on the exchange's enrollment system; that the consumer can check For example...Agent ___ or NO Agent___.

In conclusion, one last question; Why wouldn't HHS or the State Health Exchanges want consumer's to have the 'Freedom to Choose'?

About The Author

Upon graduating in 1978, from  University of Georgia, Mr. Stepp entered the Healthcare arena with Sun Life of Canada as a Risk Management Analyst and Underwriter. Based on his interaction with his assigned Broker /Agent  contacts he believed Employers  were 'under represented' in the area of Healthcare expertise. As a result of this conclusion, Mr.Stepp began his pathway to becoming a Healthcare Consultant.

To aquire the expertise needed to professionally represent Employers, several carriers were strategically targeted as future employers. A successful career with the targeted carriers culminated in 1984 with Mr.Stepp becoming one of the founding Partners of The Benefit Planning Group.

The Benefit Planning Group (TBPG)is a mutlti faceted Healthcare Consulting firm which represents a wide diversity of Employers. TBPG's diversity of discipline in the Healthcare field creates opportunities from both sides of the Healthcare aisle. Services range from traditional Employer representation to working on behalf of Providers in providing representation for Physicians and Hospitals in the field of Managed Care; Medicare; Health Continuam Management; Healthcare Insurance Carrier market.etc

Currently Mr. Stepp is the Managing Partner of TBPG who is one of Atlanta's largest privately held Healthcare Consulting firms representing over 200 clients with annual revenue/represented premium in excess of $300,000,000.