Conspiracy? Price fixing cartel? Tweedledum, tweedledee, tweedledoo? You decide.
Wed., Dec. 8—Aetna emails its agents who sell individual health insurance, detailing a complicated set of tiers that will cut agent’s commissions to about 4% of gross premium at first, then declining as clients get older.
Thurs. Dec. 9—Blue Shield posts a byzantine apology—not summed up in any email, rather you have to navigate several big documents to find it–for dropping agents to about 5% of the gross.
Also December 9—Blue Cross is straightforward as it tells us we will get a flat 5% of the initial premium. No increase as customers get older. The latter 2 companies continue to pay roughly double for the first year. All three are a cut of 50% or more from the habitual 10% of premium for folks paying the published price.
The timing is revealing. None of these companies had the guts to make this unavoidable move by itself. There were murky hints last summer. Do these three actually compete? With such agreement in the timing and the terms, it doesn’t look that way. Aetna will fall in favor among those agents who heavily weigh their own bottom line, and Aetna must know this, so my respect for them goes up a little. But I worry about their long term viability if their market share falls too much.
Many of us agents were expecting a change like this. It’s one easy and essential step for keeping administrative and marketing costs under 15%. Or at least appearing to have a plan for reaching that. The level of marketing right above us, the regional representatives, was cut back by varying amounts. Blue Shield used to have about a dozen covering the state and buying us lunch frequently while keeping our knowledge base fairly current. Now there are 2 virtual people who don’t travel at all. Blue Cross has cut the number of reps, who now hold mostly big group events.
The fourth significant company, Kaiser, depends less on outside agents. I’d welcome hearing from anyone who knows their commission and financial situation. Healthnet is in disarray.
My advice to folks who have to buy individual health insurance is mostly to ask more questions and take careful notes. Find plan summaries that you can understand, or slog through the 90-page official versions. As your agents get reduced access to company insiders who know the plans’ details, they may need more time to get answers for you. I wouldn’t assume that the bigger agencies can watch out for you better and judge the policies objectively. The insurance companies have more types of leverage—bonuses mostly–to push those agencies around. We smaller agents gave up on those long ago. And with bigger agencies, your main point of contact may be customer service staff with less training and experience.
Finally, you can say I’m whining but that’s not my intent. I’ve been saying for years that agents are overpaid, and that I would work the same if paid at these new rates. I want my customers to keep their insurance a long time, in a stable and fair market, and lower commissions promote that. Other agents dismissed such radical talk before.
