Short Takes On News & Events

Brokers Associated With More, Cheaper Health Coverage, Study Says

By Jay Hancock

August 22nd, 2013, 6:07 AM

Health insurance agents, feeling threatened by the Affordable Care Act, will welcome research from the University of Minnesota that supports their longstanding argument that agents and brokers make insurance shopping easier and cheaper.

A new paper by economist Pinar Karaca-Mandic and colleagues finds that small employers were more likely to offer medical coverage in markets with many brokers competing for business and offering health plans. “We also find that increased agent/broker competition is associated with lower premiums,” they wrote.

Like middlemen everywhere, health insurance brokers argue that their ability to steer customers through the market thicket makes them worth their commissions. (For medical policies, commissions are usually paid by insurers.) Often they act as virtual benefits departments for small employers that can’t afford their own human resources staff. Others say broker fees add to administrative expenses and drive up overall health costs.

Karaca-Mandic found that small firms were about 20 percent more likely to offer health coverage in counties with the most brokers serving small firms than in counties with the least. The data are from 2008. In counties with the fewest brokers, the average annual premium for a single employee was $5,173. In counties with the most brokers, the annual premium was $4,495 — 13 percent less.

The report, posted as a working paper by the National Bureau of Economic Research, was funded by a grant from the federal Agency for Healthcare Research and Quality.

The findings raise a chicken-and-egg question. Did employers in the broker-rich counties offer more coverage because they had access to better information? Or were there more brokers in those places because of higher employer demand for health insurance?

Karaca-Mandic and colleagues tested the data for clues. For example, if higher overall demand for health insurance was the cause of wider coverage in some markets, they reasoned, large employers would show the same variability in premiums and coverage patterns from county to county as small firms. But they didn’t, suggesting something else was influencing small firms to offer insurance. Large employers don’t usually use brokers, they figured, so maybe brokers were the X factor for greater coverage among small firms.

“Greater availability of brokers and more competitive broker market structure play an important role in reducing search costs and improving offer rates in small firms,” they concluded.

The Affordable Care Act was supposed to make insurance shopping easier for small firms and individuals by offering comparable products through online marketplaces due to open in October. The Obama administration is financing the training of “navigators” to help individuals enroll, giving taxpayer subsidized competition to brokers.

Brokers also lost out when regulators declined to count commissions as part of the minimum medical claims and quality-improvement spending insurers must achieve. Bipartisan legislation is pending in the Senate that would reverse that.

Given the lack of awareness about many aspects of the Affordable Care Act, “I would say there will still be a lot of demand for brokers, at least in the short term,” Karaca-Mandic said in an interview.

26 Responses to “Brokers Associated With More, Cheaper Health Coverage, Study Says”

  1. H. Quinn says:

    Given a choice of the corruption of private profit driven health insurance companies or a public government run single-payer healthcare system, I’ll choose the government every time. At least with government, I have some power at the ballot box. I have absolutely no power when I’m up against a corrupt corporate board room and a host of greedy share holders.

  2. R. Howell says:

    Brokers are only paid when they satisfy a customer and AFTER they complete their work. In many cases, they give unlimited amounts of professional, free advice to small and mid-size employers who can’t get it anywhere else. I can’t wait for you to speak with a government employee with six weeks training (provided they answer the phone in less than 30 minutes) funded by OUR tax dollars. The experience of entering a SHOP exchange (oh, I forgot, they’re not ready, although funded in the ACA) will also, in my opinion, be a simple and rewarding process for small business owners. Yes, you’re right, the carriers often win. But please don’t shoot the messengers who, unlike government employees, only receive compensation when they successfully complete a task. State governments require producers to pass competency exams, obtain licenses and ongoing CE credits. Producers also purchase E&O coverage and are monitored by insurance departments and can be fined and at risk to lose their licenses for misconduct. Ask any state insurance commissioner if he/she values the role the broker plays in the small group health insurance marketplace. I think you will be surprised by the response. Your “power” at the ballot box most likely has increased your health insurance premiums at a higher rate, increased unemployment, taxes, burdened all employers with “fuzzy” compliance mandates and penalties and added a new partner to the “corrupt” insurance carrier boards… OUR government. Can you say “mortgage Industry?”

  3. gary d says:

    How naïve to think once again government has the answers. You say you have power at the ballot box, well it only presents itself once every two years. You can access your power daily when making YOUR OWN purchasing decision while shopping for health insurance., providing you actually have someone to talk to.

  4. Sheldon says:

    Under the ACA, agents/brokers will continue to sell insurance. They will continue to get paid by insurance companies to do so. And there will be millions of new customers.

    So, why all the complaining? There will be plenty of business to go around. This will be a boon to brokers and insurers. Take a deep breath and calm down . . .

  5. killroy71 says:

    H. Quinn – you’ve got power at the ballot box, eh? So you’re the guy.

    R. Howell – yes, there are some states that are doing the SHOP exchange, it’s only the states trying to sandbag the ACA that aren’t doing individual or business exchanges.

    The only thing people hate more than paying for health insurance is paying medical bills…oh, wait…that’s what INSURANCE does.

  6. Native Texan says:

    R. Howell & Gary D – H. Quinn is just another low-information voter. Let’s see how he/she feels at the end of 2014 – when he/she has to pay “double” the rates he/she is used to paying for health insurance now – or, is fined 1% of his/her annual salary for not having “minimum” coverage insurance.

  7. J. Claborn says:

    Killroy71 – You’re wrong, unfortunately. SHOP was delayed by the Obama administration until 2015 for ALL states.

  8. Jacqueline says:

    I am most concerned about the lack of a background check on the navigators that are already poorly trained to help people understand their options. These people will have access to all your personal information!!! With the Medicare and Medicaid fraud we already see being exposed on a regular basis what protections are in place to keep our data safe? What remedies do we have if our information is stolen? This is never discussed in the media and needs to be shared with people.

  9. Paula says:

    Any broker that thinks they are going to make a fortune selling exchange products is about to be run over by a Mack truck. The individual and small group broker is going away, and so are the rights and safeguards they provide the public. The Covered CA management has announced in public more than once that brokers won’t be needed for the exchange products in 2 years.

    As for the SHOP. it is fully up and running for 1-1-14 in California. The FFE is delayed in part as in the rest of the country only as to choice issues. The SHOP will not be a contender for anyone but small employers under 25 employees that currently receive the SBHCTC.

    I can’t wait for the supporters to see their 30-50% rate increases for January 1. I already have some on my desk. And, with the imposed plan limitations, the market can’t save them this time. Elections have consequences!

  10. H. Quinn says:

    Native Texan? Doesn’t Texas rank last in residents without health insurance? Aren’t over 25 percent of Texans uninsured? Since when does Texas have anything legitimate to add to the healthcare discussion? Low information voter, huh? The only information that I need at the ballot box is the fact that a bunch of Republican backed Wall Street bandits took America to the cleaners at the end of 2008. For that reason alone, without any doubt, many “low information voters” like myself will never vote for a Republican ever again. There’s a whole bunch of Wall Street types that still need to go to prison. With any luck, that process will begin to happen very soon! Not to mention how the GOP treats women. Not to mention how the GOP treats minorities. Not to mention how the GOP treats undocumented immigrants. Add all of that to the mix and there’s no wonder that we probably will not see a Republican in the Oval Office any time soon. You moron wannabes that are struggling to get your collective heads above the glass ceiling don’t have a clue that, in reality, you are trapped with the rest of the low paid slugs in the 99 percent. Face facts you idiots, you’ll never get to play golf at the country club! The only way you’ll get to suck up to the wealthy elites on the golf course is to carry their bag, clean their clubs and clean their balls. P.T. Barnum once said there’s a sucker born every minute. Most rank and file Republicans (especially Texans) fit that description perfectly. Most Republicans are nothing but a bunch of suckers that were told a lie and were dumb enough to believe it! The fact is, just like the rest of us, you are only a few paychecks away from foreclosure. Not to mention having health insurance that actually works when you get sick or injured. If you don’t think so, if you think you are closer to the top than you are to the bottom, you are as deluded as it gets! Bunch of dimwits!

  11. RA Jensen says:

    J Claborn::: the administration only delayed multi-choice for small group in the federal exchange until 2015. SHOP will still be available as long as a small group employer is willing to live with a single plan choice. The reason for this is that multi-choice requires the SHOP exchange to act as a receivables conduit from the employer to the various insurance company. At least at the federal level, they will not be able to do that until 2015. SHOP exchanges at state operated exchanges will also be available for 2014. Some will be able to offer multi-choice, some others will not.

  12. Sue says:

    SHOP was not delayed until 2015.

  13. D. Weber says:

    Wise men talk because they have something to say, foolish talk becaue they have ot say something.
    If Massachusettes boarderd Mexico, how do you think their Romney care wold look today.
    the Dems have had power now for the last 5 years. What sucesses can you point too:
    the economy?
    iternational relations?
    Democratic SanDiego Mayor’s are the best case for how to treat women.
    maybe we can split a Weiner someday whil discussing all of your points.

  14. Ajay says:

    1- The economy failed under the Bush administration. It is much improved under the current administration look at
    2- international relations – if measured by wars and US soldier casualties – much improved. I don’t know other objective ways to measure this, both critics and supporters have their own spin based on their prejudices – not objective.
    3- unemployment significantly reduced when compared to Bush’s final days.
    4- healthcare – how do you measure this. The USA has ranked low on objectively measured healthcare outcome comparisons of industrialized nations for quite some time – certainly longer than current administration. Conversely, No country comes close to USA healthcare costs.

  15. D. Weber says:

    Remember that the economy was in a free fall when Bussh took office
    Do you really believe our relations with Europe, Russia and the middle east are better under Obama? While I did not believe in the Iraq war, the Afghan War was due to an attack on the US.
    bush’e worst month for unemployment was 7.8%. that would be one of Obama’s best months although his numbers do not include the workforce that has left the market.
    Of course there is alweays food statmps.
    We have the best helthcare in the world. It is expensive for many reasons which would take up too much time to explain in detail. Where do the wealthiest and most powerful people in the world come to be treated for serious illnesses?

  16. jerry says:

    So, I’m guessing we should all think that you are a wise man? Duh?

  17. jerry says:

    “Remember that the economy was in a free fall when Bussh took office”

    Wishful thinking or what?

    Nice try Pinocchio!

  18. D. Weber says:

    No, we are to think that you are an idiot. Hope you did well in the market in 2000.

  19. Russell says:

    Good come back Web…very cerebral! I’m very impressed!

  20. jerry says:

    Sorry, but just like most Neanderthal Republicans, you ignore the facts. The Dow Jones Industrial Average (DJIA) was at about 3300 when Bill Clinton took office. The DJIA was at about 11000 when George W. Bush took office. When George W. Bush left office in 2009, the DJIA was at about 7600. Today, after almost 5 years of President Obama, the DJIA is at about 15000. Hope I did well in the market in 2000? Fact is, by 2000, I had 8 fantastic years in the market. Then, from 2001 until 2009 under Bush/Cheney, the entire country (mostly hard working average Americans) experienced a recession that almost became “The 2nd Great Depression”. In November of 2008, America woke up and realized the damage and devastation that a Republican President can really do with a healthy economy. So, we elected President Obama and we have all been seeing steady improvement. In spite of the blatant lies told here, those are the facts.