A Day Without Challenges

[dropcap]A[/dropcap]gents face struggles every day. In fact, I believe the ability to meet challenges and face adversity is one of the measures by which you can judge whether a professional independent agent will be successful or not. In my five decades as a professional, independent agent, I can honestly say I have never gone to bed and said, “Gee, I faced no challenges today.” Without a doubt, the decision of Blue Shield and Blue Cross to pull out of the small business arena abruptly on April 1, 2012 would have profoundly challenged all agents and small businesses around the state. For that reason, I began writing this article early in December when insureds in small group health products received notices from Empire Blue Cross/Blue Shield, notifying them that their products were being withdrawn from the market. My article was to be a furious commentary on the poor way the carrier handled the withdrawal and the article was to end complaining about yet another related insult to agents (that part remains unchanged, and I will get to at the end).

Fortunately, upon hearing of Empire’s plan to terminate these products on a date certain, the Professional Insurance Agents of New York contacted the Department of Financial Services to express its outrage and questioned the legality of the move. During the week of Chanukah and Christmas, Empire Blue Cross announced that it would execute its withdrawal from the small group market more slowly, phasing out several of its products over the next year, rather than all at once within only a few months. Because of the efforts of PIANY and the state’s health insurance agents’ organizations and no doubt, furious calls from agents and insureds alike, producers will have more time to move their affected Empire policies. Now, I understand that the small group market is not as profitable for the carriers as it used to be—I get the necessity of making hard business decisions, but imagine the impact of Empire dumping a reported 20,000 businesses (covering some 250,000 employees and their families) in New York state all at once. Moving this business midyear would have been a nightmare! Clients would have had to incur unplanned expenses and I’m not sure where agents and brokers would have been able to place all that business. While the market withdrawal still is painful, this more restrained exit is, no doubt, good news for agents and especially for their insureds.

Nonetheless, this temporary reprieve is just a longer gangplank that will end up in the same place, and I know PIANY will continue to work with other groups and policymakers in an attempt to further stabilize the market.

But, there is a greater pain producers face in the health insurance arena—the widespread move toward “per contract per month” compensation. When the carriers announced that they would reduce the number of plans they offer, they also announced they would change their commission structure from a percentage of premium to as little as $5 per month per employee on small group contracts as early as Jan. 1, 2012. So, where an agent used to get 3 percent commission on a total group, he or she will now get $5 per individual or family.

Health carriers are calling this a product “simplification,” to ensure their small group plans “remain affordable.” But, let’s call this tactic what it is: an effort by the carriers to move off the small group book without formally withdrawing from the market. They figure that if producers can’t make enough money selling these contracts, they’ll stop doing so, and maybe even move the business they have in search of greener products. This has been going on for years in the property/casualty arena—the big insurance companies would rather do business with fewer large agents than with a lot of small agents because of the expense to them. And, that leads to the final insult I mentioned at the top of this column—Lo and behold: As soon as the carriers announced they were closing certain small group products in November, the payroll services stood up and noticed. They are now going to their small business clients and telling them their insurance divisions can take care of finding new coverage and put it all on the payroll deduction and they will take care of all the administrative work. Here’s another product we small agents have been selling and servicing all these years that the payroll companies are now trying to take from us.

Seems every day another entity finds a way to steal business from independent agents. I’m never going to have a day without challenges.