The Three Year Approximate Commission Calculation

Individual health insurance policies don’t stay on the books with a particular carrier for long. There’s a variety of reasons for this lack of persistency, but the most common reason for a policy lapsing is that the insured has been offered coverage through their job. Since employers usually subsidize at least half the the premium, dropping one’s own policy and taking the company’s is invariably a better value. Actuaries are pretty good at anticipating the lapse rate for a particular plan.

Lapse rates are highest during the first year a policy is in-force. This reflects the loss of consumers who purchased coverage while between jobs or the like. As a result, it’s not uncommon for one-third of individual and family medical plans to terminate in their first year. It takes roughly two years, however, for the next one-third to lapse. Put another way: sell 100 individual policies on January 2011 and you can expect to have 67 still on the books come January 2012 and 33 remaining on January 1, 2014. These are estimates and averages applied over large numbers. Your results may vary.

It’s also important to note that carriers and brokers have different experiences with lapses. A broker moving a client from Carrier A to Carrier B represents a lost case to Carrier A, but not to the broker.

How does all this tie into commissions? Because persistency is an integral part of the very idiosyncratic way I compare different commission schedules. And given the changes going on with broker commissions in light of the Patient Protection and Affordable Care Act’s medical loss ratio provisions, comparing commission schedules has become, by necessity, an obsession of most brokers.

The method I use to evaluate the commissions is what I call the Three Year Approximate Commission Calculation. Here’s the “thinking” behind it:

  1. According to the lapse rates by actuary friends have shared over the years, a typical individual health insurance sale remains is on the books for approximately three years. Some never make it that far; others stay far longer, but three years is a good rule of thumb.
  2. Broker compensation is usually (but not always) based on a percentage of the premiums paid by the consumer. Which means one way to compare broker compensation resulting from any particular sale is to add up the commission percentages paid each year and apply it to the first year’s premium. This is, admittedly, just one way and would, no doubt, make my actuary buddies cringe). Using this approach, a commission schedule that pays a flat 10% commission each year over three years is paying out roughly 30% of the first year’s commission over that period. A schedule that pays commissions of 15% first year and 7.5% on renewals is also paying out roughly 30% of the first year’s commissions.
  3. Yes, this fails to take into account the impact of rate increases, but I’m not claiming to offer a precise way of determining commission equivalence. This is a way to approximate the value of a commission schedule on the fly – no spreadsheet software or calculators required. There’s a reason “Approximate” is in the name of this calculation.Besides, guessing at the net impact of future rate increases is just that, a guess.

The result is the Three Year Approximate Commission (or TYAC). While it was developed for comparing individual medical plan commissions it can be used on small group health insurance commissions, too, which also are likely to remain with a carrier for roughly three years on average.

The Three Year Approximate Commission Calculation is especially useful in comparing the “before and after” of commission schedules being announced by carriers seemingly on a daily basis. As I’ve written before, the math imbedded in the Patient Protection and Affordable Care Act demands broker compensation be cut (absent regulatory or legislative relief). Put simply, carriers will have 7-to-8 percent of individual and small group premium available for broker distribution after allowing for administrative costs and margins. This works out to a Three Year Approximate Commission of 21-to-24%.

Which is pretty close to what brokers are reporting in the Tracking Commission Changes post (please note: these are reported commission schedules and have not been independently verified – if anyone has corrections, please send them along).

In Arizona, Cigna is reducing individual plan commission from a Three Year Approximate Commission of 30% to one of 22% – a roughly 27% cut.

In California, Anthem Blue Cross’ 40% TYAC is dropping to 28% for the top tier – a 30% reduction. Their lowest tier pays has a TYAC of 21% – a reduction of 47.5%.

In Georgia, Humana is going from a Three Year Approximate Commission of 33% to one of 25% – a 24% drop.

Illinois BCBS’s TYAC is moving from 30% to 23% for top producers – a change of roughly 23%. For those selling less than 25 cases the TYAC is dropping from 25% to 20% – a decline of 20%.

You’ll note some carriers have tiered commission schedules paying more to larger producers at the expense of those writing just a few cases. While you may disagree with this approach, it is “broker-friendly.” A producer writes less than, say, 10 cases a year isn’t really in the business of selling individual major medical plans. Such producers earn the bulk of their income from other product lines. Selling an individual policy is often done as a convenience to an existing customer. The amount they are paid on these sales is secondary to the income they receive from clients on other lines of business.

A broker selling dozens or even hundreds of individual health insurance plans a year, however, is relying on this line of business for the bulk of their income. That carriers would want to soften the impact of commission cuts on these produces is reasonable and, for these large producers welcome.

Still, commission cuts of 20%-30% or more in one year are life changing. Name a city or state who who could withstand a 30% decrease in tax revenues in one year? A CEO announcing a 25% drop in revenue would not be CEO for long. And the resulting cutbacks in service, layoffs and closures would be a devastating on citizens and employees.

That impact – how big it is, what it means and what brokers can do about – will be the topic of upcoming posts. For today I just wanted to introduce the Three Year Approximate Commission Calculation so we’d have a common way of describing differing commission schedules.

36 thoughts on “The Three Year Approximate Commission Calculation

  1. The new law and its impact on agents is forcing myself to remodel my company and focus on more life sales and alternative supplemental plans to make up for the Incredible financial losses we are now faced with selling major med plans. which I feel is going to have a negative effect on people seeking major med coverage and will result in a loss of Highly skilled Knowelegable brokers to service the needs of people seeking major health plans unless something is amended to actively reward professional brokers for their skill and knowledge through the exchanges.

    • I’m doing the same. On a positive note, my Group Health Cooperative rep informed me that in their meeting last week they will not follow Regence BlueSheild’s commission decrease. Fortunately, the main guy, who came from Mercer, is well aware of the value of the broker. He said 90% of the large groups,85% of 2-50 and 60% of individual plans are developed and managed by brokers. So far in Washington State, Regence BlueShield is the only one so far.

  2. Commission driven by production forces the broker to choose one or two insurance companies. It is anti-consumer driven.

    Our experience has been that ins. companies are competive or not competive depending on the age, gender, type of product we are comparing and the service the insurance company provides. One insurance company’s product may be competive at age 34 and not at age 53.

    It quite possible to have the cheapest premium and because of the costs a brokers and a comumer incur to get a claim paid or a billing corrected the cheepest becomes the most expnsive. In order make your production driven commission system work I would need to make choices for my client based on what would not be in the comsumers best interest. In fact in some cases choosing the company that gave me the best production bonus would be financial damaging to my client.

    Writing 10 cases with one carrier in a year is not uncommon. However that does not mean I am “not really in the business of selling individual major medical plans.” What it does mean is I am doing what my client thinks I should doing which is finding he best coverage for them. Therefore I write 10 with one company, 20 with another, 40 with another and 3 with another etc. depending on the needs of my client.

    Advocating production driven sales is a anti-consumer idea which many of us threw away when we desided to be an independent broker rather then an insurance company agent/employee.

    • Commission driven compensation schedules, sales incentives, trip rewards, etc. are a way of life in our business. I think similar methods exist in the business of selling everywhere whether it be cars, boats, door knobs or what have you. It is needed to move product. In the long run, normal market forces will mean the cream, and this includes brokers, will come to the top. If the consumer winds up getting not the best product he or she will change to upgrade.

      • If they change to another company to “upgrade” I will either loose the client to a competitor who has their bonus built up enough to make it profitable and loose all my commission or change them myself to the new more competive company and not make enough to pay to service the client correctly.

        It one thing to get a bonus on a insurance product that pays enough without the bonus to make it profitable to sell it.

        We are not being offerred that. We are going to have sell only one or two companies to get the bonus up enough to make them possibly profitable to sell. Most insurance in which we do not have enough production to qualify for a bonus will be unprofitable to sell.

        If I Choose company A as my main company because they currently have a competive product then I am Ok for the current year. If Next year Company A decides to not be competive or company B desides to be more competive and then I have a choice of trying to keep my client where they are (not good for my client) or moving them to company B where I have no bonus.

        I can then try to move over the next 12 months my book to company B as rate guarantee expires but in the mean time I will have no bonus with the new company and a decreasing bonus with company A.

        The one company option is even worse with small group.

        Bob

  3. Cutting commissions on future business is one thing, but doing that to inforce business as well is unforgiveable.

    If commission reductions apply only to future business then it gives us a decision to make, do you want to continue in that line of business or go on to something else. But if it applies to existing business it immediately reduces the value of an agent’s book of business.

    Are these changes in anticipation that the MLR requirements will be honored in the various states. But what happens if a state
    doesn’t want to go along? Will they go back to the old schedules. Am I missing something here?

    • Thanks for your comment, Dick. I think most reasonable people would agree that reducing commissions retroactively creates an unfair hardship on brokers. As I wrote in a previous post, no CFO would allow their carrier to sell policies that allow consumers to arbitrarily reduce their premium payments. Brokers expect the commission schedule in place when they sell a policy to remain in-force as-is while that policy remains in-force.

      As for whether carriers will modify their commission schedules if a state gains a waiver on the MLR or if the MLR rules are changed to exempt some or all of broker commissions, one would hope so, but there’s no guarantee.

  4. BCBS Texas finally released their individual commissions. 8% first year, 5% renewal on initial preferred (best possible rate) premium.

  5. There is one very large agency in the country that markets health insurance. Everyone knows who they are. In most of their quarters they net about 15% of their gross. I don’t understand how they are going to make it (without major changes) with a 40% drop or so in their gross.
    Does anyone have thoughts on this?

    • I’m told they receive advertising monies from the carriers for positioning on their website results. They also have many of the carriers submit the info for the exchange for the HHS through them. With all their lobbying, I’m sure they are are the preferred medium for the new exchange.

  6. Alan,

    I starting reading your blog a few months ago and wanted to take this opportunity to thank you. The information you provide is both timely and pertinent. It’s also been helpful to see the posts from other agents here in order to get a national view of our ever changing industry.

    Keep up the great work!

  7. Alan, I’ve followed your blog for months. I appreciate the input. The first shoe has dropped in the individual market of Washington State. Regence BlueShield announced today that they will pay $12 per member rather than 8% of premium received. I’m hoping the other carriers do not follow suit. Not sure yet how groups will change other than they will pay 0% for micro groups ( what an incentive). I agree with Andrea, we are the scapegoats. Fortunately, I’m a financial planner too. Time to focus on more assets under management.

  8. I find it interesting that there is so little anger here about what in some cases (i.e. Anthem CA) is a 55% cut in income.

    I also find it interesting that some agents are echoing the exact message (I prefer to call it “spin”) that the carriers are putting out on webinars and emails… that all you have to do is WORK HARDER AND LONGER.

    That’s exactly the “mindset” that the carriers have hoped for… that you folks will be willing to work twice has hard and long to get what you had before.

    And I find it interesting that some of the folks who are giving us the happy-talk message of “Not a big deal, keep working, and work more, and don’t worry” are people who may have a vested interest in current system being perpetuated… they make money off of leads, or they recruit, or they have associations, or they work for GAs etc.

    If IFP at 9% FYC with a 3% renewal is sustainable for your lifestyle, that’s great. If you WANT to work a lot harder and longer ON THE CHANCE that you can stay at the same income level you are now, then go for it. You will have all the encouragement you need from many people in the business, especially your favorite carrier and/or GA.

    But here is the truth, as I see it. It seems to me that many agents are saying “I lose money on every sale, but I make it up on volume.”

    And what I don’t understand is why do so many agents WANT to work for 9% in health when you can work just as long (and hard?) and get 90% in life products as well as a lot more than 9% for other coverages?

    I’m not telling anyone what to do. If you want to stay totally focused on IFP health products, knock yourself out. But there are better options for most of us. Yes there is a learning curve, but I think it will be much easier than having to work your $#@ off just to maintain what you have now.

    I have no doubt that the top execs at the major carriers sat around a table and debated the issue of “How much can we cut comp on agents and still keep them selling?” My guess is someone said “Let’s go for 55% and follow the reaction on the chat boards. Agents are pretty stupid. We can spin this thing and they will buy in. They are like sheep anyway.”

    They were right.

    But I wonder what might happen if every agent called or wrote their carrier rep or their GA or the CEO of the company and said (respectfully and politely, of course) that they would no longer be writing health insurance because it was economically unsustainable given other options available.

    You know, if one person, just one person does it they may think he’s really sick and they won’t listen to him. And if two people, two people do it, in harmony, they may think they’re both weirdos and they won’t listen to either of them. And three people do it, three, can you imagine, three people walking in singin a bar of Alan Katz’s Insurance Blog and walking out. They may think it’s an organization. And can you, can you imagine fifty people a day,I said fifty people a day walking in singin a bar of Alan Katz’s Insurance Blog and walking out. And friends they may think it’s a movement.

    Al

    • Al: boy did you hit the nail right on the head! The Georgia market, at least up until the economy went south, has had plenty of business for good, ethical, agents, especially in Atlanta (if you can afford the advertising). There is also competition here (BCBS, Coventry, Cigna, Assurant, Kaiser Permanente, Humana, Aetna, etc). In other words, most agents are friends with each other as we are in the same boat, and we do not necessarily feel threatened by each other’s successes. Because of that, we do talk to each other and believe me there is plenty of anger. I just don’t think the reality of the situation has sunk in yet, even though we really have had plenty of warning, and shouldn’t be suprised. I for one feel betrayed by ALL of the companies we sell, except for Kaiser maybe as they are actually raising their commissions here, go figure. Too bad the HMO model is a tough sell here, and their rates aren’t quite in line (wish they would actually listen to us, the people who know what the public wants, hmm). I can’t tell you how many times I have been by told by insurance reps (RSMs, VPs whoever): “you are our best source of good clients” “you are invaluable to our existence”, “your business is cleaner than the direct callers” blah blah blah. Yet for the most part these same companies compete with us directly, and now, they are drastically cutting our pay. In some cases (BCBS, with an emphasis on the BS) is cutting our existing block by 3%, which because of my block funds a good portion of my overhead. But, with what Aetna and Humana are doing they almost make BS look good.

      We spend A LOT of money to make our phones ring, and pay our employees well, so we can screen clients and put them with their best fit (and not just with the companies with the best commission). We do it at no cost to the insurance company until they decide to accept that client. We get no support from the insurers, except supplies and the occasional “top producer” plaque, and have no guarantee of anything doing this. Perhaps the insurance companies are right, maybe we are stupid. I for one don’t believe we are, its just how to proceed from this point forward? Do you quit and go do something else after 25 years, do you fire everybody and do it all yourself, do your break your lease and work from home again, what?

      I don’t want to put a politically correct happy face spin on this. Agents, and the public, are being screwed. Sorry for my language but that is the truth. The next people to be cut will be our RSMs and customer service reps, you can guarantee that. That will be great for the public, let them have to discuss their claims with someone in India or Costa Rica because you won’t have time to help them anymore. Let them call the company directly when their child is rated up 500% because the insurance company has to take them NOW, before mandatory coverage is in place, and by the way you get NO commission on that sale now. This is a reality simply because Washington can tell the public: look, we are forcing insurance companies to take children with pre-existing conditions, aren’t we wonderful? I never want to see a child go uninsured, but really, come on!! And forget it if you need child-only coverage. Can’t help you. Haven’t heard much about that in the media, huh?

      Again, I know I am being so blunt, not happy smiley but this is reality. The higher ups at insurance companies, and Washington could care less about us. The only reason insurers use us is because they don’t have to pay our overhead, and we do the upfront screening for them (at no cost to them). The question is, do we continue to do it. Unfortunately it isn’t easy to just “go do something else” if this is what you have built your career out of. I know there are those who’s jobs are disappearing completely, and maybe the unemployed wouldn’t have much sympathy for us, but that doesn’t make any of this right, unless EVERYONE, including CEOs sacrifices something, not just a few of us. I won’t hold my breath on that one however. Andrea

      • As John McClain said so aptly in ‘Die Hard’ – “Welcome to the party, pal!!!!” I couldn’t agree more! I called this waaaaay back and I’ll do you both one better: This is all a moot point – come 2014 the screwing we just got on commissions will seem downright friendly compared to what the Exchanges will do to our profession.

        Are you guys regular readers of this blog? No matter what comes down the road – the steady succession of bad news, and worse news still, the usual refrain here is: Oh don’t worry…still the 2nd inning….still plenty of life left in this game! The other refrain – “Oh well….regardless of Health Reform, this was bound to happen anyway!” The other week I even saw a happy happy happy comment posted here: “Oh well just become #1 on Google and you’ll sell more and this will all seem like a blip in the road!”

        I mean….seriously?!….I don’t know how many different ways to say it so I’ll just say this: The comments here by Al and Andrea are THE first two RATIONAL comments I have seen here since I’ve been reading this Blog. Bless you both as I was beginning to think I was the one guy here who had somehow missed the extra large helping of Kool Aid that was required to take all this in.

        Alan – here’s the deal: It MAY be the 2nd inning but we are losing 20 zip. My suggestion is that you actually post an article here – JUST ONE! – that acknowledges that fact and further postulates just what our post-apocalyptic world will look like in three short years (And by the way – based on the clients I talk with? – we’re two years away: I’ll call it right here and now – if an Exchange will be up and running by 2014, people will stop buying IFP in 2013 and wait for their “free” insurance in 2014. Oh yes, Alan: A delusional public has CONVINCED themselves that this will all be dirt cheap or free come 2014.

        Another movie quote for ya all – courtesy of Cher in Moonstruck – “SNAP OUT OF IT!!!”

        • Curt: Thanks for the comment and the request for a post. I appreciate it. And I will be writing about the commission changes and, hopefully, sooner rather than later. Things have been busy (and this blog is, after all, a hobby rather than a job). But again, I’m delighted you’re interested in a dialogue on commission cuts and that you continue to be a regular reader of this blog.

          One thing I won’t be writing about in my post, so I’ll mention here, concerns not the substance of your comments, but their tone. That you feel passionately about your positions and perspectives is great. It makes your comments vibrant and interesting. What I don’t understand is your apparant need to have everyone agree with you. Any variance from your view you condemn as evidence of someone “drinking the Kool Aid”. Only those who see things as you do are “rationale.”

          Sorry, but I do see differently than you. As I said when you first started posting, you may be right. Agents may be driven from the market. It could happen, but I don’t think it will. I didn’t then and I don’t nowl. Will brokers need to change how they do business? Absolutely — I’ve been saying that since before the 2008 election. But brokers have dealt with changes before. And even if PPACA was repealed they’d have to deal with change in the future.

          You have a bleaker view of what’s happening than me (I say that descriptively, not prejoratively). You would describe it as being more realistic, and that’s OK. I don’t object to your viewpoint. I respect it and, again, I recognize you may be right. But dismissing other, more hopeful viewpoints does not strenthen your arguments. Quite the contrary.

          Anyway, thanks for sharing your thoughts and I hope you’ll keep an open mind as the dialogue continues.

        • Hi Curt: like you, I don’t like the taste or ingredients of Kool Aid, fake artificial color and lots of sugar to make it taste good, but not good for you. Seems like Alan doesn’t like the tone anymore, and is perhaps more positive than some of us. It’s his blog after all. I don’t know his situation, but I have bills and employees to pay, children to educate and feed, and don’t have time to sit around hoping everything goes our way. I do know where my pay is headed in the immediate future, and have no certainty of my role in this industry anymore (in possible exchanges, repeal, whatever). What I do know is once an insurance company sets something down on paper, they aren’t about to make it better if they don’t have to. So, I gotta start making money other ways. I can’t wait for Washington, whoever to figure this out. Over and out!

        • Alan – this is all an anonymous medium: Whether the entirety of the Alan Katz Blog world agrees (or disagrees) with me is pretty much a useless exercise in wish fulfillment. I’m not running for office nor am I trying to win any popularity contests within my own (broker) community.

          What you are reading in my comments as some sort of deep seated desire to have every agent within earshot of this blog agree with me is actually my thorough enjoyment at (FINALLY!) seeing two posts by Al and Andrea that were spot on and – in my opinion – far more realistic than anything I’ve been reading here previously. It was nice to see that I’m not some paranoid locked away in my cabin but an actual living breathing member of a group of professionals who see with clarity just how devastating this is going to be and how bleak our future.

          Sorry Alan but when you come here and read the contents it just gets to be like Pravda or something I imagine the folks in North Korea listening to each and every day. Seeing Al and Andrea just literally burst out of the pack with their commentary was a long overdue glorious sight and you’ll have to forgive me if my joy at knowing I’m not alone overrode the usual preferred bland proceedings here.

      • I’ve been an avid reader of the blog over the last year(wishing there wouldn’t be long periods between posts). I have similar feelings to Andrea and Curt but I’m try to keep a level head. I’ve had many sleepless nights and ALOT of anger. It’s short sighted on the part of insurance companies to discount the brokers involvement. My optimism comes from how we are viewed by companies offering MedAdvantage and supplements. It was only a matter of time when they payed a flat fee. As a financial planner, it’s difficult to create a 5 year plan with this uncertainty. I’ve begun shifting my focus to assets under management to diversify my income. I’m envious of the commissions paid in all these states. We’ve been low for quite a while. 7.5-8% for individual policies, 2-5% for groups. Thanks Alan. I know your trying keep it civil.

    • Alan,

      I’m considering creating a fee for service model for my very small groups. Groups of 1-3 are not worth my time unless.. maybe I charge a fee similar to my financial planning clients. Do you know of anyone discussing this idea or how it could work?

      • Harold: You’re not alone in thinking that negotiating a fee as opposed to collecting a commission is a business model for the future. I don’t know of anyone who has moved in this direction yet, but lots of brokers are talking about it. Whether this is a viable alternative will depend on several factors — including whether it’s legal. In California, for example, brokers receiving a commission cannot also charge a fee. Given what’s happening in the state, it might be time for CAHU and others to seek a change to this law.

  9. Alan,

    I know you doubt that Obamacare will be repealed,and I agree with you that that is true as long as Obama is in office.

    But let’s say we are fortunate enough that we get a Republican President and Republican Congress in 2012 and it is repealed and along with that, MLR goes out the window. Do you think we would be stuck with these lower commissions?

    I think, in a way, this is just the excuse the carriers needed to lower our remuneration and wouldn’t feel the need to revert back to the old commission schedules. What do you think?

    • Good question, Stevie: It may not be popular to point out in this environment, but the status quo pre-PPACA was unsustainable. Health insurance premiums were increasing at a far greater rate than general inflation. Too many consumers were unable to get coverage at any price. And some insurance practices were unacceptable to the public.

      Given all this, some change was inevitable — including changes to commission structures. It’s possible, but difficult, to argue that broker compensation should increase at the rate of medical inflation as opposed to general CPI, but example. While this disconnect was tolerable in the past, it was increasingly becoming apparent some change was necessary. So commission rates would likely have decreased somewhat regardless of what happened to heatlh care reform — but not nearly by the amount necessitated by the PPACA. So if some or all of commissions were exempted from the MLR calculation or the new law is repealed in the future, it’s unlikely commission rates would return to pre-reform levels. But carriers would likely increase them somewhat.

      • We need to know that other players are also sacrificing something here. Right now it seems to be on the agents 100%.

  10. There is an inherit logic flaw in these two statements:

    “A producer writes less than, say, 10 cases a year isn’t really in the business of selling individual major medical plans. ”

    “A broker selling dozens or even hundreds of individual health insurance plans a year, however, is relying on this line of business for the bulk of their income.”

    The first is per carrier. The second is per broker. For example, our agency has cases with 8 different individual carriers. It’s entirely possible that a broker could be writing a ton of cases across many carriers and yet be in the lower brackets for all the carriers.

    The system is not “broker friendly”. It is “dedicated broker friendly”.

      • A lot of us in the ind small group market operate in that manner. Most of us are, thankfully, in states with competition, which is good for our clients as one size doesn’t always fit all. Good for agents because frankly you would be foolish to have all your eggs in one basket. I have seen agents lose it all when one carrier decides their business model isn’t effective anymore and they pull out. Sometimes their block is picked up, sometimes not.

        We aren’t in the P&C world yet, where you work for yourself but can only sell one carrier. These commission structures would force some to think that way though, especially given the bonus and % structures being offered by some carriers for high producers.

        • “We aren’t in the P&C world yet, where you work for yourself but can only sell one carrier”

          In the P&C world independent agents contract with various carriers.

  11. Same thing here in Georgia. BCBSGa is part of Anthem and as a large individual producer, they have slashed my operating budget around 30% just on their commission cuts alone, not to mention the other companies we sell. They would prefer to get rid of us totally, and PPACA is giving them the excuse. Unlike you I am harboring some ill will so I apologize.

    Also, has anyone else been doing this: we are getting uninsurable clients applying for coverage just so they can get the decline letter to apply for the high risk pool. We get nothing for doing this. We have done 3 in the past couple of weeks. I am paying people to do this. Just wondering if anyone else is in this position. I mean I want to help people out but not if I get too many of those. Its costing me money.

    • We do it, but it is such a minor amount of time. We just give them the signup link and let them go on their own. It’s worth it for the potential referrals (they are usually referrals from an existing client in our case) and possibly getting them back in 2014.

      • That would be nice wouldn’t it (getting them back in 2014). The ones we have done have called us out of the blue just to go through someone to get the denial. It would be okay if the insurance companies wouldn’t ask us to get more information even though they know they are going to decline them. Unfortunately the online systems we have to deal with don’t always get all the info they need to make a determination of acceptance or denial. Then we get involved again. For now we are glad to help, but because of commission cuts we are going to have to lay someone off January 1 so we may not be as able to help people for free (or at a cost to me) after that.

        • Slept on this one – what makes you think we will be getting these people back in 2014? I hope you know something I don’t. Agents involved in the exchanges? The thinking in my state is we are being cut out completely, at least that is the opinion of our largest ind producer (not me sadly).

  12. Anthem Blue Cross of CA IFP underwritten (FYC/renew):

    1-9 lives issued 9%/5%
    10-24 lives issued 10%/5%
    25-99 lives issued 12%/5%
    100+ issued 14%/6%

    Assuming the vast majority of agents will be at the 12% level, that’s a 40% cut in their income from the current 20% commission level%. (20-12=8, 8/20=40)

    IFP is too much work and too much decline-risk (unpaid work) for 12%.

    Anthem will spin it saying we need to add ancillary products, write more cases, etc., but there is no way you can spin a 40% pay cut and get anyone but the most stupid of agents to buy into the argument.

    I wonder if anyone we speak to at Anthem… the reps, the agent support people, the members services folks, the UWers, the execs have had their salary reduced by 40%? I tend to doubt it.

    IFP’s been a good ride but the carnival guy has stopped the machine and it’s time for us to get off. The fair is over, the midway is closing down and it will not be back in our town again.

    We all knew it would happen, so it does not come as a surprise. Obviously Anthem’s IFP division believes they can… and will… do just as well without agents, so all I can say is that I wish them all the best.

    They have been good to me and I harbor them no ill will. But I won’t write Anthem IFP for 12 points (unless if falls in my lap and it is a slam-dunk, clean case.) I have better options in (their) group health and (their) Medicare products as well as in the life, DI and annuity sectors.

    • don’t forget Blue Cross will also in the future only pay renewal commission on the ORIGINAL premium, NO COMMISSION on premium increases for the future…the really funny thing is if you are a high producing IFP agent, you only get 1% more renewal commission than the slacker agent!!! LOL!!!! …thanks Obama, thanks Pelosi, Reid, etal…oh and thanks Blue Cross for sticking by your agents…thanks for shooting the weakest link in the health care chain (agents), for shooting the messenger…you think the “suits” at Blue Cross are taking pay cuts? the drug companies, hospital corporations, medical equipment, etc., you think they are going to take any pain here? think again! they have greased all the palms in Congress and so let’s find a patsy the agents, and let’s just crush them, Hope and Change we can Believe In!

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