As the health insurance market is still thriving, other lines of business such as real estate have plummeted since the economic crash of several years ago. This leaves thousands of sales-savvy individuals searching for a more consistent outlet for their skill set, and the door to health insurance seems worth a knock to many.
When investigating the health insurance market, as applied to broker bonuses and compensation, rates vary by state, type of policy sold, and company. Depending on the brokerage or health insurer an agent works for, their rates will be different, though they are typically in a similar range. Because for a salesperson, every percentage of commission makes a significant difference, it is obviously going to hold importance with who gives a higher pay out.
However, recent changes to health insurance laws have created a dilemma for health insurance agents, mostly in the group market. As a result of the Affordable Care Act’s Medical Loss Ratio (MLR), requiring each health insurance company to make budget cuts for the sake of spending more money on improving quality of care. Therefore, the current state of health insurance broker commissions is very uncertain and has seen pay decreases thus far. This law took shape in 2011, and there are still bills waiting to be resolved in order to stop commission cuts, and the need to fire more brokers. Read the following article for more information on the bills and the MLR’s effect on commissions and the health insurance industry.
The MLR is based on how much an insurance company spends from the money they make from premiums. The percentage of premiums used for commissions and bonuses is different in every state, ranging from 0 – 10%. This is likely due to the competitiveness of the insurance market in various states, how insurance is sold, the frequency of individuals changing carriers, and the level of commissions paid by the company. Therefore, the weight of the MLR will shift in every state, depending on these factors. The MLR rewarded checks to millions of Americans in the past few months, therefore causing agents to see changes in their income over the past year.
Attached is a list of the most current national rates of pay for brokers and agents in the small group and individual health insurance markets from Kaiser Family Foundation. Their last survey was taken in 2010, before this law took effect. Keep in mind that how much brokers earn varies from state to state, and company to company, as well as the MLR’s effect. Overall, the average rate of pay, per member per month in the United States was 5.7% as a percentage of premiums in the individual market in 2010.
The MLR rules took effect on January 1, 2011, and so far have reported that 53 percent of all surveyed agents experienced a commission decrease of at least 25 percent. 17 percent of that group stated their commissions were lowered by at least 50 percent. As of 2010, our brokerage using a volume contract with all major health insurance carriers averaged about 25% per year to top brokers and 20% to standard brokers. Some carriers pay out less than others, as low as 10%, and since the MLR has done so much to affect commissions, those are likely paying even less now.