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What happened to health broker comp?

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Researchers say health insurers paid brokers $8.3 billion in commissions and other compensation in 2013.

The 2013 compensation total was down 1.1 percent from the 2012 total, and down 4.6 percent from the 2011 total, according to a paper written by Michael McCue and Mark Hall and distributed by the Commonwealth Fund.

See also: MLR researchers: Broker comp fell 3.5% in 2012

McCue is a health administration professor at Virginia Commonwealth University, and Hall is a professor at Wake Forest University.

They included figures on health insurer broker compensation in a report on the Patient Protection and Affordable Care Act (PPACA) minimum medical loss ratio (MLR) system.

The drafters of PPACA included the minimum MLR system in an effort to push health insurers to hold down administrative costs. The system requires insurers to spend at least 85 percent of large-group revenue and 80 percent of individual and small-group revenue on health care and quality improvement efforts or else pay rebates.

See also: HHS: MLR rebate total falls again

The Commonwealth Fund has historically backed researchers who support PPACA and favor the idea of cutting health insurance distribution costs along with other non-medical health insurance system costs. 

The issue of insurers’ spending on brokers “is significant because some industry observers expect that increasing MLRs will cause issuers to reduce the role of — or compensation for — independent brokers,” the researchers write.

See also: GAO: Agent comp exclusion would slash PPACA rebates

The researchers also looked at insurers’ underwriting gains, or the percentage of premium left over after an insurer pays claims and takes care of broker expenses and administrative expenses.

For a look at more details from the researchers’ paper, read on.

A student

Individual market

2013 broker expense: $1.3 billion

2013 broker expense as % of premiums: 4.2%

2011 broker expense: $1.4 billion

2011 broker expense as % of premiums: 4.8%

See also: Earnings: More PPACA impact news drips out

Two guys in an office

Small-group market

2013 broker expense: $3.7 billion

2013 broker expense as % of premiums: 5.1%

2011 broker expense: $3.9 billion

2011 broker expense as % of premiums: 5.2%

See also: View: Why broker health plan fee agreements no longer work


Large-group market

2013 broker expense: $3.3 billion

2013 broker expense as % of premiums: 1.7%

2011 broker expense: $3.4 billion

2011 broker expense as % of premiums: 1.7%

See also: PPACA: Not much effect on employers’ fourth-quarter earnings

Small child thumped on head by ball

Overall underwriting gain

2013 underwriting gain:  $7 billion

2013 underwriting gain as % of premiums: 2.3%

2011 underwriting gain: $7.4 billion

2011 underwriting gain as % of premiums: 2.5%

On a percentage basis, broker comp expenses and underwriting gain were the only two figures the researchers tracked that shrank, and the drop in the value of underwriting gain was 5.4 percent, which was steeper than the 4.6 percent drop in total broker comp spending.

See also: What to know about the insurers’ PPACA safety padding


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