The second trend is that health insurance companies are reducing commissions for health insurance brokers. As of January 2011, health insurance companies must spend no less than 80% of revenue from health insurance premiums directly on healthcare. To trim administrative costs, many carriers reduced commission rates. When state-run health insurance exchanges go live in 2014, broker commissions may even be state-regulated.
In addition to these two trends, there is a key insight that makes individual health insurance unique. Indeed, many people sense that health insurance is different from other kinds of insurance without putting their finger on why.
Here it is. Unlike other lines of insurance, e.g. life, auto, home, property and casualty, etc., there are government subsidies and programs as well as private market products available to consumers that no insurance agent is incentivized to learn about and subsequently share with clients. Programs like COBRA, the federally created Pre-existing Condition Insurance Plan (PCIP), Guaranteed Issue Plans, and products like Short Term Health Insurance are neither well understood nor widely embraced by the public.
From the perspective of the consumer, the experience of shopping for health insurance is more like filing taxes than shopping for auto insurance. There’s a good reason for this; in all existing distribution channels, insurance agent compensation comes from commissions paid by health insurance companies. For the aforementioned programs, little or no commission is earned for helping consumers enroll, so there’s no financial incentive for anyone to become an expert.
So, a new model is emerging that solves this problem for consumers. Because of the two key trends and one key insight described above, the market is already embracing fee based health insurance advisory. This model is being pioneered by Bernard Health in two markets already. In Nashville, Tennessee and Indianapolis, Indiana Bernard Health offers fee-based health insurance advisory services to individuals and families in a retail store setting. For flat fees ranging from $49 - $399, clients can walk in, talk to a non-commissioned advisor face-to-face, and get the kind of health insurance advice that isn't available by calling a health insurance carrier's 1-800 number or doing research online. Seriously. Check it out:
The result is that Bernard Health clients save an average of $2,000 annually on health insurance related expenses. They also save time and get peace of mind that they're not making costly mistakes navigating the complexity of the individual health insurance market. In an industry confronted by increasing complexity and decreasing broker compensation, consumers need more help than ever. And that's the problem fee-based health insurance advisory (pioneered by Bernard Health) solves.