The difference between a health insurance agent and broker
Agnus Smith | Published: June 14, 2018
In the search for an affordable health insurance plan, there are many factors to consider. Working with a health insurance agent or a health insurance broker is one such consideration. Is there a difference between the two? If so how does that impact the search for a health insurance plan? This article explains everything you need to know about obtaining health insurance through an agent or a broker.
The Main Difference
Brokers and agents both serve as the middleman between the person seeking insurance and the insurance company. They are also legally obligated to help individuals find affordable health insurance that fits their needs.
The main difference is that an insurance agent represents the health insurance company while a broker represents the purchaser of the health insurance. In simpler terms, a health insurance company typically only represents one health insurance company, where a broker carries plans from multiple health providers.
Insurance agents or representatives can represent one insurance company or several different ones. Those who represent one company are considered captive while those who represent multiple companies are known as independent. They cannot charge any fees to you personally. The compensation they receive is through their commissions and/or a salary with commissions. The health insurance quotes they give are in line with those offered by the company
Representatives who sell insurance products on a company’s behalf must be appointed to do so. The appointment is an agreement between the agency and the insurer. It lists the products that the agency can sell as well as the commission paid out for each product. It also states that the agency has the ability to confirm or bind the policy. Not every policy is able to be bound through an agency though.
What are Binders and What is Binding?
Binding means that the policy is confirmed either in writing or verbally. The binder itself is a policy that temporarily covers the insured person and is issued by the insurance company. There is usually a waiting period set by the insurance company between the purchase and effective date for the majority of insurance plans. This is known as an implementation period and it lasts for between 30 and 60 days on average. Some agencies or representatives can bind policies depending on the type. Others have to be issued by the insurance company itself.
It is important to note that receiving health insurance quotes does not equal coverage. It’s just a quote.
Since healthcare intermediaries or intermediaries represent the buyers of insurance, their interest is in finding the best insurance plan for an individual’s health care needs. Unlike a representative, an insurance intermediary does not have an appointment or contract with insurance companies. They still receive commissions just like representatives do. Every insurance policy has paid commission fees built into them so the insurance intermediary will receive those.
People usually go to an insurance intermediary because they are insurance industry experts. They are knowledgeable in health insurance law, understand the market, and have received the necessary credentials for their industry. They will either work with certain types of insurance buyers or with certain industries. In addition to their expertise in finding the best plan for your needs at an affordable price, they also help manage your insurance plan.
This means that if you have an issue with a claim, your eligibility for coverage, or the way something is billed, they can help with it. They can provide the assistance necessary to solve the problem by making phone calls, submitting documentation, or whatever else is required. They also help renew insurance plans from year to year too.
There is a cost to this, however. In addition to the commission that an insurance intermediary receives, they often charge extra fees to their clients. These fees are paid directly to the intermediary as compensation for the work they do on your behalf to manage the account.
Is a Health Insurance Agent or Broker Right for Me?
Going to an insurance representative or an insurance intermediary depends on your health insurance needs and your personal needs. If you already know which insurance company or companies you want to buy from, a captured or independent agency may be the right fit.
Insurance intermediaries are an excellent option for those who need certain kinds of coverage because of their health or if they’ve run into issues with insurance claims or billing before. If this is the first time you’re buying insurance, they are a good option as well. Since they are knowledgeable about insurance and each of the carriers, they will walk you through your options and let you know what you need to be aware of.
Budget is a factor though. Before committing to an insurance intermediary make sure you understand if extra fees are charged and if so, what they are. Since extra fees are paid directly to an intermediary, they need to be accounted for in the budget.
The prospect finding affordable health care insurance is a daunting task when done on your own. That is why finding a qualified representative or intermediary is essential in the process. Both will help you find an affordable plan for your needs. Choosing a representative or an intermediary will ultimately depend on what your personal situation is if you’ve gone through the process of buying insurance in the past and if you have any health issues that play a role in your decision.