Oscar Health, an insurer based in New York, sent a letter to all its affiliated brokers recently, notifying them all that their commission rates would be cut dramatically as soon as February. The cut is Oscar Health’s response to what it calls unstable market conditions.
"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 to all of our members," the letter read.
The insurer said it will reduce all commissions by more than half. Currently, Oscar Health pays brokers $14 per contract monthly for individuals and up to $26 for families. However, policies written after November 6 will only amount to $6 per contract monthly—regardless of how many individuals are in the plan.
Oscar Health credits its decision to cut commissions to the volatile marketplace. The insurer reported that it lost $41.5 million during the first three quarters of 2015 on top of $27.5 million in losses last year. Moreover, fees for hospital benefits and drugs tripled within the same period, costing the insurer $117.2 million through the first 9 months of 2015.
The losses greatly outweighed Oscar Health’s revenue, which it managed to double in the first three quarters to $83.8 million. The insurer also managed to double the number of its policyholders in New York at around the same time, but to no avail.
Many of the new policyholders that signed up for Oscar Health in the first three quarters came from the now-defunct Health Republic of New York.
