The second health insurance company in a month is attempting to stem significant losses by instituting severe cuts to the commissions it pays to agents.
Manhattan-based startup Oscar announced in a letter that it will no longer be paying brokers $14 per contract per month for individual subscribers and $26 for enrolled families as planned. Instead, all policies Oscar received after November 6 will generate only $6 per contract per month regardless of the number of people in the plan – a decrease of more than 50%.
The fallout disproportionately affects agents in markets with less competition, where a large number of clients have chosen plans via Oscar.
Jason Samel, owner of JayMar Insurance Agency in New York said that after the state’s nonprofit co-op, Health Republic of New York, collapsed, about 80% of his customers enrolled in Oscar.
“For [Oscar] to turn around just after open enrollment began, it has killed me,” he said.
The announcement comes just weeks after the insurer reported a $41.5 million loss through the first three quarters of the year. That’s more than double its loss at the same period in 2014, and Oscar blamed its broker-fee cut on these circumstances.
“We recognize this will add to your challenges at an already difficult time,” Oscar said in a letter to agents. “Given the unprecedented circumstances in the market, this change is necessary to ensure we are able to grow our business in a controlled manner and can continue to offer a great experience ot all of our members.”
Oscar is not the first insurer to respond to poor results by slashing broker commission. UnitedHealthcare announced this month that it will implement cuts of up to 80% on commissions through the end of the year, and eliminate commission payments altogether beginning in January.
These decisions have led agents to readjust their business models. Many have elected to no longer assist clients who select Oscar or UnitedHealth plans, while others are focusing more heavily on other markets.
“I’m not really gearing more toward the small-group space,” said Richard Varney Jr., owner of Insurance Suffolk in Long Island. “I’m going to put less of my time in the individual market.”
