By: Justin Brock
It seems like the entire time I have been building our enterprise in the health insurance distribution and consulting world, we have been told about the SILVER TSUNAMI! Every year, we are reminded that 10,000 people a day turn 65. The data has shown for some time that it would eventually plateau, but it didn’t show that, prior to any bear market driven by a lack of prospect volume, there would be monstrous disruption caused by the salivation of industry executives and entrepreneur wannabes.
Carriers, distributors, and the government have all had a hand in this rapid turn. The sales and marketing world is full of vultures that descend on what they perceive as an opportunity to exploit a market, and what better market to exploit than one where you get to advertise free money in someone’s pocket and get paid to distribute the product. What’s the problem with that? Well, it should be pretty obvious. That marketing and sales hook is attached to someone’s healthcare. Over the last decade, the sale of Medicare Supplements and Medicare Advantage plans transitioned from an agent and broker base primarily comprised of field agents, local brick and mortar offices, and educational resource marketing call centers to virtual reps working from their homes, trained poorly or to intentionally deceive, and fed “inbound calls” generated by bait and switch marketing tactics.
EBroker stocks for companies like GoHealth “GOCO”, eHealth “EHTH”, and SelectQuote “SLQT” plummeted as their client Lifetime Value estimates continued to fall short of their expectations. Carriers kept rolling out marketing incentives and the right hooks to drive this volume, which was not only bad for consumers but ultimately bad for the sustainability of the entire marketplace. For the agents, brokers, and entrepreneurs that had built businesses “the right way” in this industry, it invited scrutiny on their practices that was frankly unnecessary and burdensome more on the ones not causing the issues than it was on the ones responsible almost entirely for them.
And then the nail in the coffin came through Biden’s Inflation Reduction Act. The Part D overhaul proved to be something that many carriers, especially those offering many PPO plans, could simply not afford. Carriers like UCare in Minnesota completely pulled out of the marketplace, shedding 158,000 members. The only other plans in that market decided to close as many enrollment channels as possible and stop paying commissions to avoid taking on all that unaffordable business. This sparked a rapidly evolving marketplace trend in which carriers were pulling out of certain markets altogether and surgically removing commissions in others to prevent enrollment in plans they did not want to grow.
One of the underlying issues with healthcare plans is the strict timelines the government sets for when plans must submit their bids and final bids for the following plan year. Between the final bid and next year’s plan, however, many variables can change, causing these carriers not necessarily to be able to afford the business they previously thought they could. This is where I blame the government for changing too many variables too often. Administrative volley leaves a market controlled heavily by government funding reeling.
The silver lining here is that the first dominoes to fall in distribution have been the ones causing the most problems. We are not in free fall for the industry, but in a massive correction. There is still far too much money flowing through that system for it to fail completely in a short time. So what will happen? Well, over the next few years, we’ll see those who focused on high-quality marketing, education, customer satisfaction/persistency, compliance, and more grow at disproportionate rates, but like anything, eventually the cycle will likely start to repeat itself. The real winners will stick around and double down during the valley.
Citations
UCare Terminates Medicare Advantage Plans for Next Year and Lays Off More Than 140
