Three quick healthcare things this morning as I am drinking my coffee and hoping that my little guy’s asthma attack recedes after the nebulizer treatment is done so we both can get some sleep:
SUNDAY IS DEADLINE DAY TO SIGN UP FOR AN EXCHANGE POLICY DURING OPEN ENROLLMENT
CMS is indicating that there will be no extra time added to open enrollment. From what I am seeing, the numbers aren’t swamping the system, so I think they’ll follow through with closing the gate on Monday morning. So if you need insurance, get you act together and get it done today!
Some carriers are profitable
Charles Gaba does a fine job of assembling a collection of links that show some insurers on the Exchange were profitable in 2015. The insurers that did well were ones that had relatively low provider payment rates (either as narrow networks or as Medicaid managed care groups paying rates that bump on Medicaid rates instead of Medicare rates) and were priced well enough to get a good number of healthy people into their pool. They also tended to be fairly sophisticated to manage the administratively complex risk adjustment process.
“Unlike other insurers, Anthem said [the ACA exchange] business has been profitable”.
Anthem was holding around 9% of all ACA exchange enrollees at the end of the year, very similar to UHC’s 8%. Both companies are massive, multi-state behemoths with a similar presence on the exchanges.
Yet for all of UHC’s constant griping, rival Anthem somehow managed to make a profit….There’s 16 different carriers on the NY exchange (there were 17 until the NY Health Republic Co-Op went kaput), which means that 4 of them made money, although it doesn’t specify which of the four did so, or whether they just barely broke even or what.
So there is significant learning by doing that the old way of doing business in the individual market (relabeling a commercial product and screening out all the sick people) does not work, and that customizing a business model for a new market segment is needed. Competition is a bitch.
Finally, I saw this tweet from North Carolina:
BX of NC cutting comp to $0: Can I charge a fee? Surprising answer: https://t.co/fui2RDL7zP
— insureblog (@insureblog) January 28, 2016
Insurers have been either decreasing their agent commissions or dropping them entirely. One of the main motivating factors has been that this is a good risk management strategy in the short term. If insurers were seeing the initial risk pool look very sick and each new member signed up was sicker than initially projected, stopping a stream of enrollments via brokers is a loss minimization function.
However, I am seeing news that brokers are getting commission cuts even from insurers that aren’t losing money. At some point, I have to wonder if the creation of fairly standardized and mostly comparable products with increasingly transparent pricing on a functional website is cutting the brokers value proposition. Brokers were supposed to be able to negotiate a good deal and handle a maze of paperwork and unseen hazards for individual insurance shoppers. The exchanges have reduced the complexity of buying insurance significantly, so are the brokers getting disintermediated?
Betty Cracker
Hope the kiddo feels better soon!
WereBear
Best wishes to your little guy.
And so free markets can work if we apply good business principles and do not accept cheating and theft?
Dang. It’s a good thing I got a good education, thrice, and continue to observe and learn. Because I’ve spent my entire adult life with conservatives screaming that no one lets them do that.
NonyNony
I hate to see people lose jobs, but the brokers only have a job because of a market inefficiency. The more transparency there is in the market, the less you need someone whose primary job is to navigate the fog.
When lower costs are projected, these are the kinds of jobs I always imagine are supposed to be the first to go. The incidental operating expenses that aren’t directly related to either “providing payouts for care” or “getting payments from the customer”. It isn’t like the CEO is going to take a pay cut, so if money is being saved because inefficiency is being stamped out, well, that’s somebody’s job.
satby
Brokers can transition easily enough to life or property insurance portfolios. Most of them already sell those, so while they may have a drop in income, not many will lose jobs. But the rest of us get a better chance at health care insurance. So a net good thing.
Davebo
The brokers are the new travel agents. When options are easily compared and information is readily available people no longer need these “experts”.
It’s a good thing.
? Martin
Absolutely, but it would have happened anyway. The biggest result of the internet is the ability to acquire customers at (effectively) zero marginal cost. If your signup process is an online form, the internet allows you to deliver that form to anyone on earth effectively for free. Traditional marketing is used to convince people to fill the form in. Brokers are not zero marginal cost – they do not scale effectively.
The only reason why any industry retains brokers/agents etc is that they haven’t completed the infrastructure build to achieve the goal. In most cases it needs to come from the outside – as Expedia did to kill off travel agents. Or the brokers/agents provide a value-add that can’t easily be driven to zero cost. This is Apple’s retail model where retail employees are not clueless staff whose sole job is to efficiently make change, but individuals with expertise on the product you are looking to buy who can provide meaningful answers and are trusted by customers.
Bottom line – what value-add does the broker provide? If there isn’t one, then like all other jobs with no value-add, it’ll be eliminated through efficiency like everything else.