Hey DOI, Where'$ The Money?

Wednesday, April 6, 2016
Insurance agents make their living from the commissions that they earn on policies they sell. Those commissions are "baked into the cake;" that is, they're already included in the premium (except for certain group plans that are essentially fee-based). Some commissions are calculated as a percentage of the premium, others are a flat amount. Until recently (past 3 or 4 years), individual health insurance almost always used the percentage of premium model; that changed and most (all?) now pay a flat fee.

The key point to keep in mind is that the commissions are already included in the premiums, which are filed with and approved (or not) by the 58 state Departments of Insurance.

Come now carriers that have decreed that they will no longer pay those commissions (at least on plans written between Open Enrollment seasons), and the question arises: what happens to those commission dollars?

If you answered "well, since the agent's not getting them, then the consumer must be" you'd be wrong. Sure, it makes sense, but that's not what's happened. Instead, the carriers are keeping these dollars allegedly to offset other costs. But they'd already (ostensibly) calculated those costs, and priced their products accordingly. So in reality, this is just pure profit for the carrier.

But Henry, you may note, if that's true, then why isn't the Department of Insurance stepping in and making them reimburse that excess back to the policyholders?

Good question, and one I decided some months ago to pursue. I reached out to my own state's Department of Insurance seeking an answer.

Multiple times, with no response.

Finally, frustrated, I contacted every state representative and senator associated with my zip code, as well as the chairman of the Insurance Committee, asking them for assistance.

To his credit, and all the others' shame, only State Representative Niraj Antani replied. He (like his colleagues) was unaware of the conflict, and agreed to look into it.

Which he did, relentlessly. Over the course of several months he reached out to the Department of Insurance (DOI). I don't know that they're connected, but it was after Rep Antani began his quest that I finally received an answer from the DOI; unfortunately, they answered only a few of my questions, completely ignoring the most important one: where's the money going?

[ed: For those interested, I've posted the letter here]

Eventually, Rep Antani got an answer from the DOI's Deputy Director, who told him that she was aware of the issue, but that the rates were already filed and couldn't be changed at this time. Which is nice and all, but irrelevant: no one's asking Anthem (for example) to change their rates, only to refund to consumers the amount that should have been paid out as commissions. She also said that the Department has no power to "compel" carriers to do so.


Seems like government agencies have a lot of power to force other industries to toe the line, just not insurance? Interesting.

So here's where we are: carriers priced commissions into their rates and aren't paying them to agents or reimbursing them to their insureds. And from the media? /crickets. I know that Rep Antani also broached this to the Ohio Consumers Council folks, but that seems to have gained no traction.

Why isn't this a bigger issue, especially in an election year? One would think that it's custom-tailored for state and national candidates: most folks have to buy insurance, and here's a very obvious, and easily fixed, rip-off.


[Special IB thanks to Rep Antani and Lindsay S]