Healthcare Reform Update - 18May2010

Healthcare Reform Impacts Agents’ Commission

• A recent Wall Street Journal article highlights one of the overlooked repercussions of the healthcare reform law.
• Insurance salespeople will be among the first to feel the effects of the new law, as their commissions for selling policies to individuals and small groups are changing.
• The law requires that insurers use at least 80 percent of their premiums (85 percent in some cases) to pay for medical care for members, rather than for administrative costs and profit-taking.
• This will put pressure on insurance companies to reduce administrative waste and other overhead, including commission paid to insurance agents/brokers.
• Currently, commissions typically run between 4-6 percent of a policy's premium, but can be as high as 30 percent for the first year.
• Companies are already beginning to change how they pay these salespeople. For example, beginning May 1, Independence Blue Cross stopped paying small-group agents a percentage commission and switched to a monthly flat fee for each contract sold.
• Read more: http://online.wsj.com/article/SB10001424052748703612804575222291352083452.html?KEYWORDS=health+overhaul