3. Brokers' incentives to keep premiums high
Employers often turn to brokers to help them find the right health care plan for their workers. But there's a catch: Brokers have several layers of incentives to steer companies toward plans with higher premiums.
How it works: For starters, brokers' commission is a percentage of the plan's total annual premium. Higher premium, higher commission.
But there's more, as ProPublica reports.
- Insurers offer brokers big bonuses to the agents and brokers who rake in the most business, including cash (up to $100,000 per employer) and trips to the Bahamas.
- Those bonuses are built into the insurance plans' premiums, but the costs aren't disclosed to employers unless they ask.
- "It's a classic conflict of interest," Eric Campbell, a University of Colorado bioethicist, told ProPublica.
Some brokers are trying to do better, switching to flat fees instead of commissions, hoping to draw a sharper contrast with agents who may not have the employer's bottom line in mind.
- But even efforts to work around this incentive structure can go awry.
- Morris County, New Jersey paid its broker directly, in an effort to make the broker unbiased about which plans it recommended. The broker collected that fee and also a $235,000 commission from Cigna, according to the lawsuit.
- It also accuses the broker of hiding the costs of switching to a Cigna plan, including $800,000 in administrative fees.
Go deeper: The unclear benefits of drug price coalitions