Marshall Allen on How Insurance Brokers Undermine Employer-Sponsored Health Insurance

About 55% of Americans receive health care coverage through their employers, according to the U.S. Census Bureau. Most are satisfied with their plans, a recent survey from the Employee Benefit Research Institute indicated, though many worry about rising costs. The average family plan costs more than $22,000 a year in premiums, the Kaiser Family Foundation’s 2021 Employer Health Benefits Survey reported. 

Employers typically cover about three-quarters of those premiums. But investigative reporter Marshall Allen points out that companies aren’t doing their workers a favor. 

“Stop saying employers are the ones paying for the health plan,” said Allen, author of Never Pay the First Bill: And Other Ways to Fight the Health Care System and Win. “Of course they fund it, just like they fund the wages of the employees. But a benefits package includes your wages, your time off, your sick time, your retirement contribution, and your health benefits.” 

Allen believes employers—and, in turn, their employees—could get a better deal if they understood how to navigate the system. The first step, he says: Get rid of insurance brokers who get rich selling overpriced plans. 

“Traditionally, health insurers and vendors pay benefits brokers fat commissions and bonuses and reward top performers with lavish vacations and other perks,” Allen wrote in his Substack newsletter. “ … You've got insurance brokers advising employers while getting paid by insurers.”

No Patient Left Behind spoke with Allen about how employers can maximize benefits while minimizing costs. This interview has been lightly edited for space and clarity. 

NO PATIENT LEFT BEHIND: You write that brokers who help employers select insurance plans often receive incentives from insurance companies to steer clients their way—and until recently, they didn’t have to disclose this compensation. How has this arrangement affected the insurance market? 

MARSHALL ALLEN: It’s undermining the purchase of employee benefits, and it creates a conflict of interest because when the brokers are being paid by insurance companies, they’re not actually incentivized to come up with a solution that might not include insurers. It puts them in a box that is not necessarily going to bring about a more disruptive—and by disruptive, I mean better—solution.

For example, the typical commission on insurance plans would be 3% to 5% of the total premium. If you have a company that has 100 employees, you could expect their premiums to be about $1 million a year. Of that $1 million, about $30,000 to $50,000 would be going to the broker. 

Then you also have the bonus structure. And companies like UnitedHealthcare or Aetna or Cigna also have incentive bonuses. So if you keep an employer with the [insurance] company for another year, you can get a bonus based on renewals. You can also get a bonus based on overall volume. It’s almost like an airline frequent-flyer program. 

You have various incentives that are influencing, guiding, and spurring the broker to present a plan [to employers] that will also lead to better compensation for them.

You mention that insurance companies try to bundle services into their plans. Tell us more about that. 

Let’s say it’s UnitedHealthcare. They’re going to require you to use OptumRx as their [pharmacy benefits manager, or PBM]. It might not be the best solution for you to have Optum as your PBM, but because you’re going through UnitedHealthcare, their plans require you to use Optum. 

You would want a vendor to do a review of your claims to make sure that you’re not overpaying for claims and to make sure that you’re not a victim of fraud—and that’s something that if you’re in a traditional arrangement with one of the big insurance companies, they often have restrictions on how much you can audit the claims. You’re not allowed to check to make sure they’re doing it correctly even though you’re the one paying for it.

[But] you don’t have the flexibility to unbundle all of these different types of solutions for your plan to get the best possible solution for each part of your health plan.

So unbundling gives the employer more control? 

One thing that employees can be suspicious of—because they’re like, “Wait, what’s my employer trying to do, take away my benefits?” There’s this myth of rich health benefits. 

I did a story about the New Jersey teachers union. They were getting completely ripped off on out-of-network payments for acupuncture, chiropractic, and physical therapy. They were getting overcharged for acupuncture, chiropractic, and physical therapy to the tune of about $120 million or $130 million a year. I got the data, and it showed that some acupuncturists were being paid more than $600 per session. Meanwhile, you’ve got the teachers striking, literally walking picket lines because of their high healthcare costs and low wages.

That’s how a lot of deceptive schemes are allowed to proliferate. Because no one’s looking at the numbers. 

For small businesses, figuring out each component of a health care plan might seem like too much to handle. What would you say to them? 

This is why it’s essential that they have a health benefits adviser who is not conflicted. I mentioned Health Rosetta in my book. That’s a group of advisers who are like-minded—many of them are taking direct payments from the employer instead of from the insurance industry, and that way their incentives are aligned. Another one’s called NextGen Benefits. 

Then you’re hearing more and more from different agencies—it’s not the majority by any stretch—about health insurance brokers who are willing to buck the traditional system. 

In your book, you talk about a benefits adviser named David Contorno, whose clients no longer use PPOs but instead use a reference-based pricing model. How does that work? 

With all these hospitals and doctors where you have pre-negotiated rates, you base your rate on what Medicare charges. Medicare prices are public. A reference-based pricing plan says OK, we’re gonna price it based on Medicare, and we’re gonna pay you 150% of Medicare, for example, or even 180% or whatever, but you’re going to put a ceiling on that price. It’s benchmarked to Medicare. And that is how you control your cost and also know what your cost is in advance.

For decades now, it’s been accepted that a working American who’s not on Medicare is required to pay two times or four times or five times or even 10 times more than Medicare. That’s something that I fundamentally think is not right. To me, that is discrimination against working Americans. 

It sounds like the current system exists because it’s hard for employers to figure it out. What needs to change to give them—and their employees—more of a say in their health care? 

First of all, you’re seeing it happen already. It is changing. But it’s still very early. I think the biggest thing that needs to change is for employers to take responsibility for actually caring for their employees by protecting them instead of just passing the cost on to the employees. 

I get it—the employers are victims here, too. But the employers have a fiduciary responsibility to protect the money in those health plans because that money is their employees’ money. So I think that the employers need to get more engaged and get some courage and stop making excuses for being so passive and letting all of their employees’ compensation get sucked away into the healthcare industry through all these deceptive schemes.