Health Insurance: Payments, plans and an unhealthy relationship

The American healthcare system consists of confusing insurance policies often heavily influenced by brokers (Photo Courtesy of Flicker/Creative Commons)

The intricate processes that make up the American healthcare system are immensely confusing and daunting to many citizens. Healthcare insurance, which financially covers needed procedures and other medical services, can be particularly cryptic, even for the employers choosing which insurance package to purchase for their workers. Insurance brokers are essentially financial go-betweens for insurers and employers, presenting different health coverage options to companies and providing professional advice to make the process less intimidating. This relationship dominates the financial landscape; according to a study released in 2017, 81 percent of employers reported that brokers influence the benefits that they provide to employees. However, a key problem with the role of the insurance broker exists regarding how he/she is paid.

The common trend in America is for brokers to be provided a commission by insurers for selling their particular insurance package. Usually, the commission is three to six percent of the total insurance premium, which can amount to about $50,000 a year for a company with 100 employees. However, these percentages can be as high as 40 to 50 percent for supplemental plans covering medical services such as employees’ dental care and cancer therapies. Some insurers have also devised other creative rewards for compliant brokers. For example, Cigna, a giant health insurance company, offers brokers with many sales a five-day vacation in Bermuda, and the company EmblemHealth gives their best-selling brokers the opportunity to play ball against Mariano Rivera, a retired New York Yankees pitcher.

These commissions and rewards represent a large conflict of interest, as brokers (and indeed anyone) will make decisions in the best interests of whomever is putting money in their wallets and food on their table. One cannot expect brokers to be a reliable source of advice for which package is indeed in the employers’ best interests, since they are naturally working in the best interests of the insurers. In addition, while the insurers may appear to pay for the brokers’ commissions, they are in essence paid for by the employers since the costs of the insurance premiums are raised in order to cover the cost of the commissions.

While laws exist in other fields to enforce transparency regarding what benefits brokers are receiving from a given deal, these rules are not present for healthcare insurance, allowing corruption to run wild. While many insurance companies and broker agencies disclose the bonuses offered to brokers from certain packages on their websites, some are marked “confidential,” and many brokers do not disclose their bonuses to employers unless they are asked directly. According to Marcy Buckner, Vice President of Government Affairs for the National Association of Health Underwriters, many employers do not know “how much brokers are making from their business… employers have no clear sense of the conflicts of interest that may color their broker’s advice to them”.

One potential solution to this problem is to shift the method of paying brokers so that they receive a flat fee and any bonuses from the employers themselves rather than from different insurers. This method appears to work well for protecting the employers’ (and employees’) best interests. For example, in 2017, the broker for Palmer Johnson Power Systems saved the firm so much money through this new method (while also improving the quality of coverage) that the company took all its employees on an all-expenses paid vacation to Vail, Colorado. Without monetary pressure from insurers, brokers will no longer be tempted to engage in unscrupulous practices such as switching a company’s insurance plan each year to benefit from commissions that only apply to the first year of an employers’ health package.

Some argue that brokers already act in the best interests of employers, since they wish to maintain their reputations in the field and keep clients for years to come. However, it is easy to manipulate companies, who often are not as educated in matters of health insurance as brokers, into choosing plans that may work, but are not the most ideal for workers. While America is a capitalist society, it is vital to remember that we are primarily a nation of employees. It is unrealistic to expect that large insurance companies will not hold an element of power, but when clear corruption exists, it is irresponsible to leave it unaddressed and harms other businesses that make up our economy, and the people working for those businesses.


Kate Lee is a contributor to The Daily Campus opinion section. She can be reached via email at Katherine.h.lee@uconn.edu.