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When you run a business, one person you usually meet and hire is a health insurance broker. In theory, these brokers work with the employers to secure the best deals for health insurance to meet the company’s health care objectives. However, in practice, the brokers serve as a sales force for the insurance companies who lavish them with bonuses, trips, and gifts. The seedy underbelly of the health insurance broker industry is that they are really not working to save money or get deals for their clients – the checks are written by the insurance carriers and that’s who they answer to.
Who do the brokers work for? You or the Carriers?
I spoke to Katy Talento in episode 111 who runs a business where she unbundles health insurance for employers and helps them run an efficient and less expensive health care plan. One of the problems she saw is that insurance carriers bundle all these services and then charge a very large administrative fee to run the plan. Also, their plans rarely save you money as they build in enough profit to cover the agents who sell those plans – the brokers.
That’s the world that David Contorno is trying to combat with his company at ePowered Benefits. The business was founded with the intent of looking at real ways of not just unbundling but finding high quality and inexpensive ways to receive care. As Contorno said, “The only way to pay less for health care is to pay less for health care.”
Health Plans Are Gimmicks
Through his 18 years of experience in the health insurance broker field, David points out that most of the various plans sold by insurance carriers are really just gimmicks that don’t really change the cost of care. Whether it is an HMO, PPO, of some hybrid FFS plan – it ultimately just ends up being the same in failing to control costs. The reason is that the care comes from the same hospitals and with the same contracts no matter how they make the employers and employees pay with copays, deductibles, and coinsurance.
Even HSAs (health savings accounts) which are held up as a way to control costs by putting the patient in charge, rarely bring about the cost control as advertised. This is primarily because even using an HSA and picking where you get your care still is within the framework of hospitals, insurance contracts, and provider networks which all have massively marked up prices. Only by leaving the insurance network entirely can one see real savings.
Why Don’t the Brokers Work for You?
Simply put, the work that health insurance brokers do is to carry water for the insurance carriers. The carriers are the ones who pay their bonuses, provide them with expensive trips to Tahiti, and give them sales targets for selling their plans. The checks aren’t written by employers but by the insurance carriers. So naturally, the brokers respond first and foremost to what the carriers want. This doesn’t make them bad people but understandably their incentives are not aligned with those you’d hope.
The reason most brokers don’t even know they’re working for the wrong people is best summarized by the quote from Upton Sinclair, “It is difficult to get a man to understand something when his salary depends on him not understanding it.”
David Contorno is the CEO and founder of ePowered Benefits. David spent 18 years as a traditional broker in health insurance but felt that it could be done in a better way.