Friday, April 15, 2016

Fee for Service Insurance

So, with more and more carriers cutting health insurance commissions, the idea of a fee-based model becomes more and more attractive. Here in The Buckeye State, we're allowed to do so, with some caveats [ed: those in any of the other 57 states should consult their Department of Insurance]. Since I'm basically cheap frugal, I was hoping that my good friends at Cornerstone would be able to provide guidance (vice me paying mega-$$'s to my attorney).

And yesterday I was pleasantly rewarded (but not surprised - they are first-rate); it occurred to me that it might be interesting to share some of what I learned, particularly as it seems to be the wave of the future, and I know a lot of our readers are also consumers with a horse in this race.

So, some basic info:

As noted above, Ohio agents may charge a fee when selling health insurance. Almost counter-intuitively, it may not be offset by any commissions that are ultimately paid (I'll circle back to that). Further, one can't discriminate regarding protected classes; that is, one can't charge different fees based on a customer's race or sex, etc. One may discriminate between current and new clients, though.

The next challenge is determining the amount and frequency of that fee. In reverse order: one must decide whether this is a one-off, or annual (recurring, such as during Open Enrollment). One must also determine on what it's based: a flat dollar amount or some percentage of premium. By far the most rational and effective is the flat amount method (for a variety of reasons).

The hardest part, of course, is determining the size of that fee: too much, and one's priced oneself out of the market; not enough, and one's both undervaluing oneself and risking a potentially crushing workload with little to show for it.

Quite the conundrum, and one I'm still noodling through.

There are also various disclosure requirements: basically, one has to tell folks upfront that one charges a fee (and how much, etc), and cannot offer to refund any part of it based on the completion of a sale or any commissions. This makes sense: anything that looks like rebating most likely is rebating (and thus verboten).

So, that's the big picture, and I'm still wrestling with how and when (maybe even if) to implement it. The good news is that Cornerstone has graciously (and generously) shared their disclosure and other forms so that, once I've figured out my end, it's pretty turn-key.

Interesting times ahead.
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