A health insurance agent or broker can save you time and money, whether you're an individual seeking coverage or a business owner shopping for the best medical plan for your employees.
Licensed health insurance agents and brokers, known in the trade as "producers," are like insurance Sherpas to help navigate the complex hills and trails of America's health care system. "Captive" agents work for one insurance carrier alone and are typically employees of that company. Independent agents, also known as brokers, work with several carriers who pay them??either a percentage or flat fee on plans they sell to their clients.
Agent vs. Broker
Which is right for you? It depends. An agent representing a carrier directly may be able to offer you a lower rate, easier plan changes and a closer relationship with the insurer. A broker, on the other hand, may be able to find you a better fit by combing the market.
If it seems like a tossup, your best move may be to research agents and brokers online and even meet a few before choosing your approach. And, understand that there's little advantage to working with multiple agents because a broker can approximate the same results.
Agents and brokers make their money through commissions paid by the insurance company for making the initial sale. As incentive to keep you a happy camper, they can receive additional compensation when you renew.
What's the risk in forging ahead into the insurance market without an agent or broker?
"You may choose not only the wrong product, but you may not be with the carrier that is going to help you the most," says Scott Leavitt, senior vice president of sales for San Francisco-based Self Health Network. "With health insurance, there are a lot of moving parts and you're buying something for a long period of time."
The Difference With Health Insurance
Unlike purchasing auto, home or life insurance, buying a health policy is just the beginning, not the end of the process. Why? Your health and that of your family can change constantly -- and so can your insurance needs.
"About 80% of what an agent does comes after the point of sale," says Leavitt, who also is past president of the National Association of Health Underwriters, or NAHU.
He says look at life insurance by comparison. "You only have one claim: You die, they pay and you're done," Leavitt says. "In health insurance, an agent remains your advocate."
Since most of us receive our health insurance through our employer, we see very little of the ongoing services that agents provide. To give a few examples, NAHU says agents:
- Assist clients with claim issues, including writing letters to doctors and hospitals and compiling documentation to help resolve claims.
- Negotiate renewable rates for employers.
- Explain plan designs, benefits and options to employees.
- Resolve billing issues.
- Help COBRA-eligible beneficiaries with coverage following the loss of a job.
Some of those services may soon be changing in the face of health care reform, however.
Impact of New Law
Since 2011, the federally mandated medical-loss ratio, or MLR, has required health insurance companies to spend 80% to 85% of premiums directly on health care. That has resulted in widespread commission cuts to agents and brokers, who fought without success to have their services valued as a health benefit.
"If you had a job and you found out that in two months your income was going to be cut by 50%, would that affect you?" Leavitt asks. "That's what happened with the MLR."
The advent of state health exchanges in 2014 also has some agents and brokers worried about their livelihoods.
But Tom Baker, a University of Pennsylvania law professor who heads a team that is studying health exchanges, says those fears may be premature.
"It's going to differ in different states," he predicts. "The Affordable Care Act allows states to have two separate exchanges, one for individuals and one for small businesses, and most states are going to do this. Most brokers aren't making a lot of money on the individual market now anyway, and I think they'll just walk away from it. But I think they're going to continue to play an important role in the small-business exchanges."
There's evidence for that in Massachusetts and Utah, the only two states to establish state health exchanges prior to health care reform.
Agents, Brokers Still Find Role to Play
Brian Carroll, whose Carroll Enterprises Inc. has helped administer the Massachusetts exchange, points out that its plans are sold by brokers. "We pay lots of money in broker commission," he says.
Salt Lake City broker Ernie Sweat says he's adding small business clients specifically because he sells into the state exchange.
"For an agent, there's no reason to be afraid of the exchange," he says. "I'm putting one or two companies every month with the exchange."
Sweat says the exchange has "got its warts" but keeps getting better and is the right fit for some clients. "I ask those agents who say they'll have nothing to do with it, are you really providing your fiduciary duty to your people if there's a product that's perfect for them but you've decided not to sell it?"
Still, Anne Gauthier, senior program director for the National Academy for State Health Policy, which helps states set up their new exchanges, says health insurance brokers will have to adapt to survive.
"Initially, I think we will see most states use their agents and brokers as their partners to help get people into the exchange and purchase coverage," she says. "Depending on what functions the exchange does in terms of really helping consumers compare plans and assess their options electronically, I think that brokers and agents are going to need to prove their value in new ways."