I just finished reading a LifeHealthPro.com article about Obamacare, and it hit me: Even LifeHealthPro.com reporters are missing the point.
The reporter talked about the questionable studies showing that health care costs more in the United States than in Europe, then focused on the Obamacare minimum medical loss ratio (MLR) issue, as if the effects of the Obamacare MLR provision on agent compensation were agents’ biggest concern.
The difference between health care costs in the United States and Europe is a red herring — a meaningless argument often used by liberals to obfuscate the discussion and make it appear there is something terribly wrong with health care in America.
The focus on the effects of the Obamacare minimum MLR provision on agent compensation is really just another red herring. Reporters seem to assume that the effects of the MLR provision on commissions is agents’ biggest concern about Obamacare.
The biggest concern I have is not my commission percentage, but the percentage of my clients who will be completely forced out of the health insurance market when premiums rise 200 percent or more next year due to Obamacare mandates.
The MLR provision doesn’t make sense in a competitive environment. Competition itself is bound to hold administrative costs to the lowest prudent, practical level.
But the most important point about the health insurance agent compensation structure is this: It isn’t the boogeyman that’s causing rising premiums.
It doesn’t matter (except to the writing agent) if the commission rate is 2 percent, 4 percent or 8 percent, when 80 percent or 85 percent of the premiums are being used to pay claims. The health care costs eating up the 80 percent or 85 percent of the premium dollar is obviously the factor driving total health insurance costs.
Unless someone figures out how to “bend the cost curve,” agent participation, or the lack thereof and what agents are paid is meaningless.
A meaningful topic to think about is the underlying health of the population.
We need to talk more about the fatter people who reside in a nation where obesity accounts for as much as 70 percent of chronic illness. Most of that obesity, and chronic illness, can be reversed or eliminated with diet and exercise. But we are a nation of pill poppers, especially anti-depressants which drive up the cost of health care more than any nominal commission paid to an agent.
The media aren’t addressing the effects of poor lifestyle choices on claims costs, in part because few reporters are aware of that problem, and the ones that are believe insurance carriers and agents are way overpaid.
Another problem is that most reporters don’t understand the difference between profit and profit margin. When they see that Big Insurance had $800 million in profits, they automatically think that is money that belongs to the policyholders. They don’t realize that the $800 million is just a tiny sliver of the premiums that the insurers collected.
Without or without the MLR rules, health insurance premiums will continue to rise, and probably at about the same rate we’ve seen over the past three years.
And now, because carriers face artificial limits on the percentage of revenue they can use on customer service, the policyholder is starting to feel the effects of those restrictions, and the situation will only get worse.
Before Obamacare came along, health insurance was sold in a free-market system. Customers never thought to ask how much the carrier was spending on claims vs adminstration.
And with good reason: The answer did not matter.
All customers wanted to know was “How much is the premium?”, “What are my benefits?” and “How is the customer service?”
Loss ratios be damned. For-profit carrier vs. non-for-profit carrier be damned. If carrier G needed $300 for plan A and carrier M asked $250 for plan A, that was all the prospective policyholder wanted or needed to know.
It is completely irrational to make a buying decision on the profit status of the carrier or the loss ratio.
Obamacare has made it an issue in a way that is detrimental to everyone, and now we all will suffer the consequences.