GAO Report Insults Consumers, Attacks Agents

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Tel. 215-682-7075, rfs270@aol.com

“The great enemy of the truth is very often not the lie – deliberate, contrived and dishonest, but the myth, persistent, persuasive, and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought.” – John F. Kennedy (1917-1963)

A report published recently by the Federal Government Accountability Office (GAO-11-392-R) shows a massive lack of understanding about economic markets, insults consumers and attacks health insurance agents.  On page 24 of the report it states, “Currently, insurers typically pay agents and brokers to sell health insurance through commissions based on the price of the product sold.  This may motivate them to sell higher cost products or products that may not best meet the needs of individuals.”  Although the report lists “experts” who provided information for the report, after requesting it GAO could not document how they made such a ridiculous statement.

The statement insults the buying public since people do not simply accept the most expensive insurance if they have an alternative.  Any agent that operates in such a way will soon lose his or her clients and quickly go out of business.  I know an agent who had a client that claimed he was gouging her because her price for her insurance was $1.43 per month more than her neighbor’s premium.

There is a paternalistic assumption among those in government that Americans are incapable of shopping for insurance. Therefore the government needs to create a massive system of state exchanges to help us. State Legislators and Governors have now been thrust into the role of creating health insurance markets and new entities that don’t exist currently. All of this is in the name of reform.  Who will pay for the cost of implementation, staffing and housing these exchanges?  We will.

Further evidence of a poor job by GAO in their report is this strange footnote on Page 19.

“Employers may be reluctant to bring insurance agents into the workplace or to adequately compensate them, and appropriate compensation mechanisms need to be developed to ensure employees are steered into the most suitable plans rather than those that maximize revenue for the brokers.”

Does our government really understand how health insurance is sold, enrolled and serviced?  An agent who is not on site meeting with employees and taking care of their needs will not be in business very long.

Why would employers be reluctant to have their agent take care of this function?  Most of my small business owner clients don’t want to be in the position of taking care of the enrollments and explaining benefits.  They have their businesses to run.  They “hired” me to handle this for them.  I earn my commission, which is the revenue to run my business by performing these important tasks for them.

GAO has done many excellent and professional reports in the past.  This report on how people acquire insurance and suggested alternatives is not one of them.  The entire concept of exchanges is based on an insulting myth that we Americans can’t make our own decisions.  The exchanges will be an expensive, unnecessary and bureaucratic addition to all the other costs of Obamacare implementation.  We taxpayers have already paid $105 billion for the government’s administrative costs for the “reform.”  Where are the savings they promised us?

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3 Responses

  1. When HSA’s first became available I was able to exploit that and get ahead of the learning curve for most agents by about 18 months, then, my advantage ended because every other agent responded to what I was doing, learned HSA plans and began showing HSA’s to their clients. How I wish that what the GAO says is actually true. I would be able to grow my business every year.

  2. The same could be said of stereo salesman or Neiman Marcus. Should we put them out of business too?

    Oh wait, don’t answer that.

  3. For a fee of about 2% of the premium, an employer can hire an agent to keep up with carriers’ new product offerings, shop the market for the best premium, handle open enrollment meetings, manage ongoing eligibility and coordinate any servicing issues. That 2% (which is often “baked” into the premium, so the employer pays it whether it uses a broker or not) probably is the best investment the employer makes during the year when it comes to being able to focus on his or her business.

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