The Difference Between a Health Insurance Broker and Agent

Two health insurance professionals shaking hands in front of a desk.

A health insurance broker is a professional who can help you secure the best policy for your needs. But how are they different from a health insurance agent? What should you know before using either of their services? Do you get a better deal using one over the other?

When it comes time to search for a new insurance company or employee policy it pays to understand the difference between an agent and a broker. Before you sign on the dotted line for your next policy review what each has to offer and some finer points you may be unaware of.

What a Health Insurance Broker Does

A health insurance broker’s primary job involves working one-on-one with clients to locate a health insurance policy that’s right for them. These brokers are authorized to guide clients through the various policies available to them. They explain the nuances of each plan so clients can make a well-informed decision. They also assist clients in enrolling in a Qualified Health Plan (QHP) via the marketplace.

Brokers are licensed and must have passed a series of examinations and courses to attain that license. After they’ve received their legal license, brokers may be required to take additional classes by the state. Once they’ve passed these examinations, they are required to stay up to date with the latest policy and law changes. Currently, health care reform has required brokers continuously educate themselves to ensure they can provide their clients with relevant information. Additionally, states constantly change their health care policy, making it an even greater challenge to be a broker.

In addition to securing and negotiating health care coverage for clients, brokers are also involved in day-to-day insurance activities. They resolve claim disputes, assist with enrollments, manage the status of family and child care policies, and resolve billing problems. They are more than just a middleman between the individual and the insurance company.

Most brokers are independent of insurance companies. They work as “free” brokers and are given the authorization to offer clients a host of insurance plans. A health insurance broker earns more by finding clients affordable plans with high benefits, which works in the favor of his clients.

Brokers may also be paid a fee by companies to isolate the best plan in the local marketplace for their business.

The Affordable Care Act (ACA) has increased demand for brokers as the complexities of the bill are difficult to follow. Individuals and small businesses are in particular need of brokers to identify the best plans available.

To recap, health insurance brokers do the following for clients:

  • Shop local healthcare markets to find the best plan options
  • Help clients with claims
  • Negotiate rates
  • Assist with billing issues
  • Outline plan designs and options

What a Health Insurance Agent Does

A health insurance agent is a bit different. While their primary job description is the same as a health insurance broker (identifying the right plan for clients), who they answer to is different. Most brokers are able to offer a wide variety of health insurance policies to their clients because they don’t work for just one. Instead, they receive a commission on the sale of policies, but this does not increase the costs for their clients.

Agents, on the other hand, may represent a single insurance company, instead of several. They are paid by that company in a more generalized sense. The number of plans they can offer is limited to that company. Obviously, this can cause their clients to pay more for the same or similar policies that a broker might suggest.

Interestingly, however, a health insurance agent may be employed by a health insurance broker. These agents work with brokers to isolate the best plan from a specific company. The word “agent” and “broker” may also be used interchangeably, but most brokers will advertise that they are a broker since most in the market associate that title with greater options and lower priced plans.

Health insurance agents, like brokers, can also help their clients understand the benefits offered by non-government exchange plan options. The marketplace is designed to bring about lower priced premiums, but recently that hasn’t been the case. To get a more affordable plan, most individuals and employers need a qualified and highly educated agent in their corner working to explain their plan options. However, with most agents, you won’t be able to purchase the plan through them since they are restricted by the company they work for. Nonetheless, the information they provide is invaluable.

Another offshoot of health insurance agent is a “captive” health insurance agent.

What Are Captive Insurance Agents?

Captive agents, also known as “direct” agents, sell policies exclusively for a single insurance company. You can easily spot these captive agents via their marketing. Notice a specific insurance logo in their emails or invoices? If so, they are likely a captive agent.

An independent agent is usually called a “broker” as they shop the marketplace for the best policy and then once they identify a plan that works for you, they become your ‘agent’. Because they aren’t bound by the insurance company’s options, they won’t sell you a policy that might not be right for you. Captive agents, however, are bound by the company and will do their best to sell you plans that may or may not be right for your needs.

How You’re Affected

Whether you’re hiring a health insurance broker to find a good group employee plan or an individual family health care plan, a broker is a crucial tool in lowering insurance costs. Additionally, the right broker can secure a plan that has all the benefits you need and more. They save you time and money along the way.

A health insurance agent can also save you money, but if they are a captive agent they might corner you into a plan you don’t want because they don’t have the freedom to search the entire marketplace. If you’re looking for the best plan option, then the best route to take is to hire a health insurance broker who can then become an independent agent once they find the right plan.

Also, working with multiple agents won’t save you money. An independent broker can provide the cost savings you’re looking for without the headache of working with multiple agents.

Companies are particularly in need of a broker. Negotiating employer-sponsored plans is difficult and outsourcing this task to a professional saves time and money.

Either route you go, remember that entering the market without a broker or agent can cost you big time. The savings you can secure with a professional on your side is incomparable.

Frequently Asked Questions

What is the main responsibility of a health insurance broker?

A health insurance broker’s primary role is to work one-on-one with clients to find a health insurance policy suitable for their needs, guiding them through available policies and explaining their nuances.

How does a health insurance agent differ from a health insurance broker in terms of the policies they can offer?

While both aim to identify the right plan for clients, brokers can offer a variety of health insurance policies from multiple companies. In contrast, agents may represent only a single insurance company, limiting the plans they can suggest.

What are captive insurance agents and how do they differ from independent agents or brokers?

Captive agents, or “direct” agents, exclusively sell policies for a single insurance company. An independent agent, often called a “broker,” shops the entire marketplace for the best policy. Captive agents are bound by their company’s options, while independent agents or brokers offer more flexibility.

How can a health insurance broker save clients time and money?

A health insurance broker shops the local healthcare markets to find the best plan options, helps with claims, negotiates rates, assists with billing issues, and outlines various plan designs. By having a wider view of the market, they can secure cost-effective plans with the necessary benefits, eliminating the need for clients to navigate these complexities on their own.

Is it beneficial for companies to work with a health insurance broker for employer-sponsored plans?

Yes, companies benefit from using brokers. Negotiating employer-sponsored plans can be complex, and a broker’s expertise can save the company time and money by securing the most suitable and cost-effective plan.

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