Wednesday, February 25, 2015

No fees, please

Over at LifeHealthPro, Craig Gottwals has a very interesting take on the role of fees in the age of MLR (Medical Loss Ratio). Craig's an attorney specializing in health care law, so what he says has a lot of credibility.

In a nutshell, one of the challenges facing agents in the fully insured large group market (where most of the whole fee discussion takes place) is how employers and their agents deal with the annual rate increases. Traditionally, it's not been unusual for the employer to pay his agent a fee for procuring coverage, and the agent then negotiates with the carrier to deduct the cost of commissions from their premium calculations.

Alternately, the agent might agree to a simple commission reduction (although this might be classified as rebating, but that's another post).

Regardless, the goal is to find a way to lower premiums.

Craig asks a simple question: Will this strategy still work in the age of MLR?

The short is answer is "No," but I really recommend reading the whole thing. There's precious little insider lingo, and he does a great job of explaining why this arrangement is not only spinning wheels, it can actually put you in reverse.

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