If you are a large company, you probably don’t have one person or department contacting various insurance agencies, hospitals, and pharmacies to get everything in place for the health insurance you provide to your employees. You likely work with a broker who is your agent in negotiating with insurance and healthcare companies. They help you understand the contract you sign with a carrier, and if you are going the self-insured route, they likely help navigate hospital and pharmacy contracts as well.
The broker you choose can greatly influence how much your company is going to pay for the health insurance provided to employers, for the administration of a self-insured plan, and even for individual services with providers. Brokers often position themselves as buyers agents, that is as representatives of the company looking to purchase coverage or administration, however, many brokers are simultaneously working for hospitals or for insurance agencies. What’s more, the hospital or insurance agency might compensate the broker more than your company, making the broker more of sellers agent than a buyers agent. Dave Chase highlights and explains this in his book The Opioid Crisis Wake-Up Call:
“Your business is just one piece of the total, but keeping it with the same carrier can boost the broker’s total compensation by 50% or more. Because this compensation isn’t specific to you, status quo brokers will often claim they’ve disclosed fees and commissions. But they are actually only disclosing your account-specific fees and commissions that may not even be the most significant piece of their overall compensation.”
If a broker is getting paid by an insurance carrier to keep your company with that carrier, then your chances of shopping around to find better alternatives are slim. Your broker is likely to encourage you to stick with your current carrier and accept whatever fee increase they present you with for next year’s coverage.
Chase continues, “Forward-looking brokers have sent me letters from insurance carriers saying they’d be fired when they spoke the truth about egregious practices the carrier was inflicting on the broker’s clients. This makes it clear that the carriers view brokers as a quasi-employee they can fire at will. In other works, they are working for the carrier, not your organization.”
The company that Dave Chase runs can help you identify trustworthy and high quality brokers. If you select a broker at random or just because you have a good relationship with them, you run the risk of working with someone who is not as independent as you think. The connections and world of insurance carriers and brokers is complex, and navigating it successfully on your own is challenging.
At another point, when addressing brokers, Chase writes, “You should always ask your benefits broker or claims administrator if a local hospital is a client, as that is a clear conflict of interest, especially when the hospital itself owns the insurance carrier.”
It is clear to me that the healthcare industry has too many entities that are tied together in unclear ways. If we hope to change the system in the future to be more equitable, to reduce prices, and to actually provide quality services, these status quo relationships will have to be broken up. That might be a task the government can solve, but Chase would argue that companies have the tools to do that work as well, they often just don’t utilize the leverage that they have.