HJLR May/Jun 2019

Health Insurance Hustle Human resource directors often rely on independent health insurance brokers to guide them through the thicket of costly and confusing benefit options offered by insur- ance companies. But what many don’t fully realize is how the health insurance industry steers the process through lucrative finan- cial incentives and commissions. Those enticements, critics say, don’t reward bro- kers for finding their clients the most cost- effective options. Here’s how it typically works: Insurers pay brokers a commission for the employ- ers they sign up. That fee is usually a healthy 3 to 6 percent of the total premium. That could be about $50,000 a year on the pre- miums of a company with 100 people, pay- able for as long as the plan is in place. That’s $50,000 a year for a single client. And as the client pays more in premiums, the broker’s commission increases. Commissions can be even higher, up to 40 or 50 percent of the premium, on supplemental plans that employers can buy to cover employees’dental costs, cancer care or long-term hospitalization. Those commissions come from the insur- ers. But the cost is built into the premiums the employer and employees pay for the benefit plan. Now, layer on top of that the additional bonuses that brokers can earn from some insurers. The offers, some marked “con- fidential,” are easy to find on the websites of insurance companies and broker agen- cies. But many brokers say the bonuses are not disclosed to employers unless they ask. These bonuses, too, are indirectly included in the overall cost of health plans. These industry payments can’t help but influence which plans brokers highlight for employers, said Eric Campbell, director of research at the University of Colorado Cen- ter for Bioethics and Humanities. “It’s a classic conflict of interest,” Camp- bell said. There’s “a large body of virtually irrefut- able evidence,” Campbell said, that shows drug company payments to doctors influ- ence the way they prescribe. “Denying this effect is like denying that gravity exists.”And there’s no reason, he said, to think brokers are any different. Critics say the setup is akin to a single real estate agent representing both the buyer and seller in a home sale. A buyer would not expect the seller’s agent to negotiate the lowest price or highlight all the clauses and fine print that add unnecessary costs. “If youwant to draw a straight conclusion: It has been in the best interest of a broker, from a financial point of view, to keep that premium moving up,” said Jeffrey Hogan, a regional manager in Connecticut for a national insurance brokerage and one of a band of outliers in the industry pushing for changes in the way brokers are paid. As the average cost of employer-spon- sored health insurance premiums has tripled in the past two decades, to almost $20,000 for a family of four, a small, but growing, con- tingent of brokers are questioning their role in the rise in costs. They’ve started negotiat- ing flat fees paid directly by the employers. The feemay be a similar amount to the com- mission they could have earned, but since it doesn’t come from the insurer, Hogan said, it “eliminates the conflict of interest”and frees brokers to consider unorthodox plans tai- lored to individual employers’ needs. Any bonuses could also be paid directly by the employer. Brokers provide a variety of services to “They [brokers] present them with benefits options, enroll them in plans and help them with claims and payment issues.” 20,000 “As the average cost of employer-sponsored health insurance premiums has tripled in the past two decades, to almost $20,000 for a family of four, a small, but growing, contingent of brokers are questioning their role in the rise in costs.”