Katherine Streeter for NPR
The arguments of health insurance brokers are tempting.
"Go to Bermuda," says insurance giant Cigna, offering the best-selling brokers five days in one of the island's luxury resorts.
The tone of Health Net of California is not subtle: a smiling woman in business suit rides a huge 100 dollar bill like a surfboard. "Sell more, register more, get paid more!" In some cases, depending on its advertising, a broker may "increase" the bonus of $ 150,000 per group of employers.
Not to be outdone, EmblemHealth, in New York, promises the best-selling brokers of "the luck of their lives:" to face the legendary veteran Yankees pitcher, Mariano Rivera. In another offering, the company, which stands as the largest non-profit state scheme, focuses on cash: "The more you subscribe to subscribers … the greater the payout". The bonuses, it is said, reach $ 100,000 per group, and "there is no limit to the number of bonuses you can earn."
Such incentives look like typical business tactics, until you understand who pays for them: employers who engage insurers – and, of course, their employees.
HR directors often rely on independent health insurance brokers to guide them through the clutter of costly and confusing benefit options offered by insurance companies. But what many do not fully realize is how the health insurance sector is leading the process through financial incentives and lucrative commissions. Critics say these solicitations do not reward brokers for finding the most profitable options for their clients.
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Here's how it usually works: Insurers pay a commission to the brokers they hire. These fees generally represent 3% to 6% of the total premium. This could represent around $ 50,000 a year on a company's premium of 100 people, payable as long as the plan is in place. It's $ 50,000 a year for a single client. And as the customer pays more in premiums, the broker's commission increases.
The commissions can be even higher, up to 40 or 50% of the premium, on supplemental plans that employers can buy to cover the dental expenses of their employees, their care in case of cancer or their hospitalization long duration.
These commissions come from insurers. But the cost is built into the premiums that the employer and employees pay for the benefits plan.
Now add to that the extra bonuses that brokers can earn from some insurers. Offers, some with "confidential", are easy to find on the websites of insurance companies and brokerage firms. But many brokers say that bonuses are not disclosed to employers unless they ask for it. These premiums are also included indirectly in the overall cost of health plans.
Eric Campbell, director of research at the Center for Bioethics and the Humanities at the University of Colorado, can not help but influence the choices brokers plan for employers.
"It's a classic conflict of interest," Campbell said.
According to Campbell, "there is a great deal of virtually irrefutable evidence" that shows that payments made by pharmaceutical companies to doctors affect how they prescribe. "Denying this effect is like denying that gravity exists." And there's no reason, he says, to think that brokers are different.
Critics say the setup looks like a single real estate agent representing both the buyer and the seller at a home sale. A buyer would not expect the seller's agent to negotiate the lowest price or highlight all clauses and clauses in fine print that result in unnecessary costs.
"If you want to draw a direct conclusion: it was in the interest of a broker, from a financial point of view, to keep this premium on the rise," said Jeffrey Hogan, Regional Director Connecticut for a National Insurance Broker. and a group of industry outliers who demand changes in broker compensation.
While the average cost of employer-sponsored health insurance premiums has tripled in the last two decades, reaching nearly $ 20,000 for a family of four, a small but growing number of brokers wonders about their role in rising costs. They started negotiating flat fees paid directly by the employers. The fees may be similar to the commission that they could have earned, but since they do not come from the insurer, says Hogan, this "eliminates the conflict of interest" and allows brokers to consider unorthodox plans tailored to the needs of each employer. . Any premium could also be paid directly by the employer.
Brokers provide a variety of services to employers. They present them with benefits options, enroll them in plans and help them solve their claims and payment problems. Payments from the insurance industry to brokers are not illegal and have been accepted as a cost of doing business for generations.
When brokers are paid directly by employers, the results can be mutually beneficial. In 2017, David Contorno, the broker for Palmer Johnson Power Systems, a heavy equipment distribution company based in Madison, Wisconsin, saved so much money for the company. l & # 39; improvement Palmer Johnson took the 120 employees on an all-expense paid trip to Vail, Colorado, where they rode four-wheelers and white water rafting. In 2018, the company again saved money and rewarded each employee with a "dividend" in the health sector of about $ 700.
Contorno was not altruistic. He won a lump sum, plus a bonus based on the savings achieved through the plan, which roughly corresponds to what he would otherwise have earned.
Craig Parsons, owner of Palmer Johnson, said the new payment agreement forced the broker to avoid excessive spending. His previous broker, he says, had no real incentive to help him reduce his costs. "We did not have a lawyer," he says. "We did not have anyone who really took care of our best interests." (The former broker acknowledged that there were some problems, but said that he had provided a valuable service.)
Work for employers, not insurers
Contorno is part of a group called Health Rosetta, which certifies brokers who agree to follow some of the best practices related to health benefits, including eliminating any hidden deals that increase the cost of benefits to employees. To be licensed, brokers (who self-identify as "benefits advisors") must disclose all their sources of direct and indirect revenues – such as bonuses, commissions, consulting fees – and their payment to employers. that they advise.
Travis Dove for ProPublica
Dave Chase, a Washington businessman, created Rosetta in 2016 after collaborating with startups in the healthcare industry and launching Microsoft's services in the healthcare industry. He says he saw an opportunity to transform the health care sector by changing the way employers buy benefits. He says brokers have the most underrated role in the health system.
"The good ones are worth their weight in gold," says Chase. "But most benefit brokers introduce themselves as agents of the buyer, but they are paid as an agent of the seller."
There are only 110 Rosetta Certified Brokers in an industry of more than 100,000, although others who follow a similar philosophy see themselves as part of the movement.
From the perspective of the employer, one of the great benefits of working with brokers such as those certified by Rosetta is transparency. Marcy Buckner, Vice President of Government Affairs at the National Association of Health Underwriters, says: Marcy Buckner, Vice President of Government Affairs at the National Association of Health Underwriters, has no corporate compensation standard d & # 39; insurance. the trade group for health benefit brokers. And so, she says, employers have no clear idea of conflicts of interest that could influence their broker's advice.
The Buckner Group encourages brokers to charge commissions directly to their employers in order to eliminate any conflict of interest, but it is difficult to change the culture. Nevertheless, Buckner says that insurer payments do not hurt the work of brokers, who must act in the best interests of their clients, otherwise they risk losing them. "They want to have these customers for a very long time," says Buckner.
Across the industry, transparency is not the norm. ProPublica sent a list of questions to 10 of the largest brokerage firms, including some worth at least $ 1 billion, including Marsh & McLennan, Aon and Willis Towers Watson, asking if they were collecting bonuses and bonuses. insurance commissions and if they disclosed them to their addressees. customers. Four companies refused to answer; others have never responded despite repeated requests.
Insurers do not seem to have any payment problems either. In 2017, the Health Care Service Corporation, which oversees the Blue Cross Blue Shield plans serving 15 million members in five states, disclosed in its documents that it was spending $ 816 million in broker bonuses and commissions, or about 3% of its sales figure that year. A spokeswoman for the company acknowledged in an email that it is the employers who pay these fees; the money just went through the insurer. "We do not think there is a conflict of interest," she said.
In an email sent to a ProPublica-reviewed broker, Blue Cross Blue Shield, North Carolina, called the bonuses offered – up to $ 110,000 for having gathered more than 1,000 people – the "icing on the cake" ". The company told ProPublica that these bonuses are standard and it still encourages brokers to "offer their customers the best product for them".
Cathryn Donaldson, spokesperson for the America & # 39; s Health Insurance Plans business group, wrote in an email that brokers are urged above all to serve their customers. "Guiding employees to a plan offering quality, affordable care will help build their business and their reputation in the industry," she wrote.
However, the arguments of some insurers clearly reward the dedication of brokers, not necessarily their clients. "To thank you for your loyalty to Humana, we want to thank you with a bonus," says a brochure presented online to brokers. New Jersey's Blue Cross Blue Shield Horizon offered brokers a bonus as "a way to express our gratitude for your support". Empire Blue Cross announced to its brokers that they would offer new bonuses "for bringing back the business of a large group … and for keeping them with us".
The grounds of Delta Dental of California seem to go even further, rewarding brokers as "key members of our small business program team".
ProPublica has contacted all the insurers named in this story, and many have not responded. Cigna said in a statement that it offered affordable and high quality benefit plans and saw no problem in offering incentives to brokers. Delta Dental pointed out in an email that it complied with the laws and regulations in force. And Horizon Blue Cross said that it gave employers the ability to pay brokers and disclosed any compensation.
The effects of such financial incentives are troubling, says Michael Thompson, president of the National Alliance of Health Care Purchasing Coalitions, which represents employer groups offering benefits. He says brokers do not usually blatantly undermine their clients, but their own financial interests can create an "intimate relationship" that makes them wary of "turning the pot".
Employers should know how their brokers are paid, but because health care is complex, they often do not even know what to ask for, he said. Employers rely on brokers to be a "trusted advisor," he says. "Sometimes this trust is justified and sometimes not."
Tactics of bad faith
When officials in Morris County, New Jersey, asked a new broker to manage the county's benefits, they said candidates could not accept payments from insurance companies related to their activities. Instead, the county would pay the broker directly to ensure unbiased research of the best benefits. The county hired Frenkel Benefits, a New York City broker, in February 2015.
At present, the county sues the company in the New Jersey Superior Court, accusing it of double deduction. In addition to county fees, the broker is accused of having collected a $ 235,000 commission in 2016 from insurance giant Cigna. The broker received $ 19,206 more the following year, which corresponds to the claims. To get the commission, one of the agency's brokers would have certified, wrongly, that the county would be informed of the payment, the prosecution said. The county claims that it has never been notified and has never approved the commission.
The lawsuit also alleges that the broker "deliberately concealed" the costs of transferring the county's health coverage to Cigna, which included an administrative fee of $ 800,000.
In an interview, county attorney John Bowens said the county had been trying to protect itself from the broker who would be swayed by a large commission from an insurer. Frenkel brokers did not respond to requests for comment. The firm has not filed a response to the claims contained in the lawsuit. Steven Weisman, one of the lawyers representing Frenkel, declined to comment.
Sometimes employers do not discover that their broker did not get the best deal from them before switching to another broker.
Josh Butler, a Texas-based Amarillo-based broker who is also Rosetta certified, recently hired a company with about 200 employees that had a high cost plan. The former broker had enrolled the company in a supplemental plan that paid workers $ 1,000 if they were admitted to the hospital to help cover the costs that were not covered. But Butler says the premiums for this coverage cost about $ 100,000 a year and only nine employees use it. This would pay much less for the benefit without insurance.
Butler suspects the previous broker of encouraging hospitalization benefits because he came with a large commission. He sells the same type of policy for the same insurer. He therefore knows that the plan provided for a 40% commission in the first year. This means that about $ 40,000 of the employer's premium was paid by the broker.
Butler and other brokers say that insurance companies offer huge commissions to promote lucrative supplemental plans like dental care, vision care and disability. The total amount of commissions on a complementary cancer plan offered by an insurer is 57%, says Butler.
These massive first-year commissions lead some unscrupulous brokers to "spoil" their extra benefits, Butler explained, persuading employers to switch from one insurer to another each year for the same type of benefits. Butler says insurers do not see any problem with employers paying the bill. Brokers can also "dump products," says Butler, which means pushing employers to hire employees for several types of optional extra coverage, which pays them a hefty commission on each product.
Carl Schuessler, an Atlanta-based broker and certified by the Rosetta Group, explains that he likes to help employers determine the profits that their insurers realize on their premiums. Some states require insurers to provide this information. So, when he took over the account of the Gasparilla Inn, an island located on the Gulf Coast of Mexico, he got the report on the company's last three years of coverage with UnitedHealthcare. He learned that the insurer had only paid 65% of the claims that the inn had paid in premiums.
But during those same years, the insurer had increased the hostel's premiums, says Glenn Price, its chief financial officer. "It's hard to swallow" our premium increases when the insurer makes solid profits, says Price. UnitedHealthcare declined to comment.
Schuessler, who is paid by the hostel, helped her to move to a self-financing plan, which means that the company bears the cost of health care bills. According to Price, the Inn has gone from about $ 1 million a year to about $ 700,000, with lower costs and better benefits for employees, and no increase in three years.
A need for regulation
Despite the important role of intermediaries as intermediaries, their role in the market has been little studied.
Don Reiman, manager of a brokerage and financial planner in Boise, Idaho, said the federal government should require health care brokers to follow the same rules it applies. in the financial field. The Employee Retirement Income Security Act, better known as ERISA, requires pension advisors to disclose to employers all compensation for their projects, thereby exposing potential conflicts.
The Ministry of Labor requires certain employers offering health benefits to file annual plan documents, including payments to brokers. The ministry posts the information on its website.
But the data is notoriously messy. After a 2012 report revealed that 23% of the forms contained errors, it was proposed to reorganize the data collection in 2016. It is not known if this work was done, but ProPublica has tried to analyze the data and found them incomplete or inaccurate. Data deficiencies prevent employers from comparing payments to brokers.
About five years ago, Contorno, one of the leaders of the Rosetta movement, was happily pleased with the status quo: he had his preferred insurers and could usually find classic solutions that seemed to meet the needs of his clients.
Today, he regrets his role in increasing the health costs of employers. One of his posts on LinkedIn compares industry acceptance by the control of insurance control by insurance companies to Stockholm Syndrome, the feeling of trust that a hostage would have toward a sensor.
Contorno began advising the Palmer Johnson equipment distribution company in 2016. Upon taking office, the company had a self-financing plan and its claims were reviewed by a director belonging to its broker, Cottingham & Butler, based in Iowa. Contorno relied on an independent claims administrator who reviewed the claims closely and provided detailed cost information. This change has saved a lot of money, says Parsons, the owner of the company. "This has opened our eyes to what a good claims process can represent for us," he said.
Brad Plummer, senior vice president of benefits at Cottingham & Butler, acknowledged that "things were not going well" with the claims management company. But overall, his company has provided valuable services to Palmer Johnson, he says.
Contorno also provided resources to help Palmer Johnson's employees find high quality, low cost suppliers, and the company waived any direct expense to encourage employees to consult with these medical providers. If a patient required an off-network procedure, the price was negotiated in advance to avoid massive unplanned bills to the plan or the patient.
The company also has a contract with a provider for drug coverage that does not use the secret discounts and hidden price systems that are common in the industry. The annual health care costs per employee of Palmer Johnson have dropped by more than 25%, from about $ 11,252 in 2015 to $ 8,288 in 2018. This amount is lower than what it was in 2011, according to Contorno.
"Now that my compensation is entirely related to achieving clients' goals, it's my only goal," he says. "Your broker works for whoever cuts their check."
Sophie Chou, Data Manager at ProPublica, contributed to this story.
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