An update on why Medical Loss Ratios are important

The Health Care Reform act includes the limitation of how much a plan must pay out in claims.  The unintended impact of this is the reduction in service (already) by most broker.  For insurers, cutting commissions was the easiest way to meet the requirements.  More than half of brokers have seen cuts of 25% and some have seen cuts of 50%.  To put this into perspective, a typical small group with 5 employees, pays about $3600 a month in premiums, of which $144 is commissions to the agent (some is also kept by some carriers or general agents).  On average, I found that a 5 person group average 15 issues a year, averaging about 20 minutes per call to discuss, resolve, and report back.  Thats 5 hours.  Negotiating the renewal, setting up the paperwork, drafting the employee memos, holding the educational meetings, handling the phone calls and getting everything processed takes about another 5 hours. 

Calculating in staff salaries, copy cost, technology and other overhead (phones, rent, etc) that leaves about $250 profit before taxes. 

Now lets cut that by 25-50% and any small business owner can see the problem.  The broker is left no choice but to cut back somewhere.  A recent study shows that 13% have laid off staff, 30% have cut services already, and another 30% plan to by year end.   Nearly 40% have stopped selling policies for individuals (they pay less)

Brokers do much more than sell insurance – They serve their clients (not the insurance companies), helping peol;le when they have trouble getting procedures done, guiding them through the system, handling questions and concerns.  The provide clients with advice and guidance on the ridiculous amount of regulations that impact every decsion that an employer makes.  They provide individual enrollment guidance for each and every employee.


Just thought you should know.