Have you ever felt like you were being rushed off the phone or ignored by a health insurance agent? If I am your agent, I hope the answer is NO. But there might be a reason behind the rush … Health insurance agents work on commission. The insurance companies pay the agents a percentage of the monthly premium that you pay each month (NO, it is not cheaper to buy insurance directly from the company instead of using an agent, the prices are the same. If you use an agent, you have someone on your side to help with you have questions. If you do not have an agent, you must call the insurance company yourself). 20 years ago, the commission rates were nearly 20% on first year commission and 10-15% on subsequent years. An example might be: A family paying $1000 per month for health insurance, the agent makes $200 per month for the first year and $100-$150 per month on the following years. So if your insurance agency have 50-100 clients, you have a pretty good base of income … In 2014, the year the Affordable Care Act (aka ObamaCare) became law, insurance companies lowered the agents’ commission rates significantly. The insurance companies said; “People are not required to have health insurance. You will have tons of new clients and will be making a lot more money, even at these lowered commission rates.” What they didn’t consider though, is that a lot more clients means a lot more work and a lot more time on the phones.
Anyway, why should you care about this? Maybe you shouldn’t. But, it is my opinion that CoveredCa, The Affordable Care Act and the insurance companies are trying to get rid of agents by lowering our commission rates so significantly that we cannot afford to pay the rent in our offices. Let’s use the same example as above: A family paying $1000 per month for health insurance. This family represents that same amount of work and service as they did in the above example, but in 2019, one of the major insurance carriers in California has lowered the commission rates to 1.3% for the first year and 1% the following years … That’s $13.00 per month for the first year and $10 per month in later years … But the work load is the same.
Don’t be surprised when individual health insurance agents begin to disappear. We can stay in business for $13 a month.