Home » Welcome to the Third World » Welcome to the Third World, Part 15: Insurance Agents Lose Their Health Coverage

Welcome to the Third World, Part 15: Insurance Agents Lose Their Health Coverage

by John Rubino on May 19, 2014 · 17 comments

One would think that great health coverage would be a basic perk of working for an insurance company, but those days are apparently over. Investment News reports that John Hancock has not only eliminated health insurance for its agents, it has converted those agents from employees to commission-based independent contractors.

John Hancock B-D to terminate health and insurance benefits

Registered representatives at Signator Investors Inc., John Hancock’s broker-dealer, received some dismaying news on Tuesday: The firm will be terminating its health and insurance benefits and will freeze its retirement benefits plan at the end of the year.

Effective Jan. 1, 2015, the firm will change its compensation structure “to one more representative of those commonly offered in the industry as a whole,” according to an e-mail confirmation from Melissa Berczuk, a spokeswoman for John Hancock Financial Services Inc.

Signator has been migrating from a pure career agency to a model that’s more based on that of an independent broker-dealer, Ms. Berczuk said.

John Hancock in 2009 overhauled its business model to give its career reps the option of going independent. The reps also had the option of maintaining a traditional relationship with John Hancock as statutory employees, which would give them support from the company, as well as health and retirement benefits subsidized by the company.

The new notices to reps and employees, obtained by InvestmentNews, include a breakdown of options for health and insurance benefits once the plan terminates at the end of the year.

Signator suggests that reps and staffers look into the public insurance exchanges, as well as health coverage bought through a private channel such as an insurance agent. There’s also the possibility of going without coverage. However, the firm warns that “as a result of the Affordable Care Act, an individual mandate applies for medical coverage and a penalty may apply if you do not have medical insurance.” Those who were in the health plan will get access to resources to help them weigh their options.

COBRA coverage, which allows individuals to continue the benefits they received at work at a higher cost, won’t be available to affected reps and staff because termination of a health benefits plan isn’t a COBRA-qualifying event, according to the notice.

Basic and supplemental group life insurance coverage will be discontinued, but reps and staffers can obtain an individual policy on a guaranteed issue basis from MetLife Inc., the provider, as of Dec. 31, according to the notice.

As for Signator’s 401(k) plan, workers won’t be able to make contributions once the plan has frozen. Auto-rebalancing and fund changes will be allowed to continue, however. Loans from the 401(k) accounts won’t be permitted on or after Jan. 1, according to the notice.

Meanwhile, those who are in the pension plan will stop receiving pay credits on Dec. 31, but they will continue to earn interest credits until they begin receiving benefits, according to the notice.

The pension participants’ grandfathered status will not be affected by the plan freeze. As long as these participants maintain their current contract or continue to be employed by the same agency, they will continue earning credit toward the unreduced benefit, according to the notice.

The change will be a shock to the system for reps. “Those two items [health insurance coverage and retirement plans] are a key reason that keeps people in their seats; they don’t go independent because of it,” said recruiter Jodie Papike, executive vice president at Cross-Search Inc. “If they take that away, it’s a really big deal for a lot of those folks.”

Some thoughts
Companies of every kind are closing down their in-house insurance programs and migrating their workers to the new government-managed exchanges. But when an insurance company does this it’s a bit more notable, kind of like a Pizza Hut telling its workers to get dinner at the corner grocery store. You’d think that if a company makes a given product, the marginal cost of providing that product to employees would be pretty low. But apparently not.

In any event, the bigger trend is what’s really interesting: Formerly-secure jobs with good benefits are being replaced by less secure jobs in which workers have to manage their own health care and retirement savings. Both kinds of jobs count as “employment” in government statistics, which means the official numbers are overstating the benefits to the average person of recent hiring increases.

In fact, most of the new jobs being created are some combination of 1) part-time work, 2) service industry work that pays far less than manufacturing or symbol manipulation, or 3) independent contractor positions like the above that both pay less and are far less secure than the jobs they replace.

The result: a nation of workers who make less than they used to, have to cover big expenses like insurance and retirement savings on their own, and can be unemployed virtually overnight with no severance or other consideration from their “employer.”

Life, in short, is getting a lot harder for millions of people and much of it is happening under the radar, hidden by the government, unreported in the media and unappreciated by those not directly affected.

Previous posts in this series are here.

  • Bruce C

    It will be interesting to see what the fall out is with this trend. When I was an “employee” in the early 80’s I was surprised at how many benefits were offered. Ironically, though, I tried to get them to just pay me more in lieu of medical insurance coverage and a few other “perks” but they wouldn’t do that. Their argument at the time was that benefits encouraged loyalty and camaraderie. Maybe it did or maybe that was just a euphemism for dependency, especially at companies that did not allow the portability of policies (i.e., most if not all). Assuming they did, however, it will be interesting to see how things work as people begin to feel even less secure and loyal to their employers. Maybe things are becoming so automated and commoditized that individuality and the “human factor” won’t matter that much any more, at least in business.

  • Jason Carter

    Going without insurance in the U.S. is a big deal. An overnight stay in a hospital can bankrupt many in the “middle class” who have no insurance. My family and I have been without insurance for 100+ days now. I have 5 children, 4 of whom are 5 years and under. I’m praying they don’t injure themselves or get sick before I can obtain health insurance from my current employer. It takes 90 days of full-time employment before I can apply for family coverage. The U.S. health care system is so expensive because it is so over regulated. Many have no idea that if all we had was cash-n-carry health care with no government intervention, Medicare, Medicaid, etc, prices for procedures and treatments would drop by 90% and would be within reach of today’s middle class. As it stands, no one but the well-insured full-time, the government employed, and the wealthy have access to U.S. healthcare. The current push for healthcare for all will result in reduced access to healthcare for the masses and privileged access for those who can pay extra.

    • sculptor bill

      jason, I’ve lived my life with out med insurance, I have 5 young kids 2 thru 11. Med insurance for my family would be over 1200. a month!?! (for middle level care) instead of med ins, I save. I save over 15k per annum, by not paying insurance, I have out of pocket expenses for med care when needed and can usually negotiate a cash price that is 1/3 of “retail” for med care. Med care is inflated in order to scare folks into ins. Ins cos pay a much lower rate to settle your bill, but charge you the 20% co-pay against the full retail rate.

      Relax, spend your money on good quality food, get family exercise, do yoga, etc and save the ins premium for a rainy day. Find a good family doctor who accepts trade or cash, and if you get some symptom, go to the internet to research it instead of running to a doctor

      • Gunther Ngugi

        Good points. I just wonder about covering emergency care.

      • Vizar

        Good luck is someone gets
        cancer in the house.

        • prattner

          He’s got no choice. For most people, 15k a year is a huge bill. Best solution to an illness like that is treatment outside of America. Not ideal at all, but what can he do?

    • Antiehypocrite

      I thought it was the doctors who charge insane rates for procedures that cost a fraction that was the real problem?

      • Jason Carter

        No. The real problem is the cost of operating a business as a “doctor” is extremely expensive due to the cost of complying with all the regulations. A full-time employee or more is need just to keep up with all the paper work requirement and billing procedures. Why do you think the same procedures are so much cheaper in many other countries? No free market = much dinero.

    • pipefit9

      I think we will soon see a huge upheaval in the health care system of the USA. Basically, we are rapidly advancing from a health insurance system with low deductibles to one of high deductibles. This means that the frills are going to disappear and 65% of the doctors, nurses, and hospitals (or any part thereof) that are doing something other than emergency medicine or general medicine will be obsolete.

      As a nation we produce not very much, and we are very close to our credit limit (see the story on ‘Belgium’ buying our debt). Therefore, we cannot afford top notch health care, except for the wealthiest top 10%. ObamaCare is a patch, but it won’t work, because you cannot make something out of nothing. And 75% of Americans produce nothing of value.

      The only thing that could possibly avert complete disaster is if they used the tax code or other extreme measures to force the American people to get healthy. There would still be a huge decimation of health care jobs, but not nearly as many people would be thrown into b.k. due to heath care costs.

  • RapidRay01 .

    Must be Stock Options time for the Upper Management and the numbers don’t look too good ! Gotta get the stock price up !

  • eugene12

    Comments are interesting. Just like the health care industry, same old shit, 100th time around. Too bad people don’t spend some of their bitching to educate themselves but that won’t happen either.

  • MacFly1

    Insurance is over rated anyway. I just hope this won’t stop the Fed from giving the banks even more money!

  • prattner

    Diabolical, cruel, ironic…what’s not to like about this? The insurance industry wins a major political victory which forces people to buy their outrageously overpriced product, and insurance companies are dropping their own employee’s coverage to avoid paying for their own product, which is overpriced due to said political victories. Oh, and that bit about the insurance company reminding its employees of the tax penalties it helped put into place is pure comedic genius.

    But what is really going to be funny is the backlash coming soon to the insurance and medical industries. There is no way on God’s green Earth an impoverished middle class is going to cough up thousands of extra dollars a year to pay for the insurance, or the tax. They don’t have the money, they won’t buy it, and they also won’t pay the tax penalty when that bill arrives, either. America was founded on tax evasion, as the masters of the universe in D.C. are about to relearn.

    I predict patients and doctors dropping out of the system all over, and a secondary, cash only medical system arising that actually delivers care for a price people can afford. The insurance companies and lawyers will continue to pass papers back and forth, file suits, and pretend they still matter, but more and more, people will just start to ignore them.

    • stevesully

      Hancock dropping their sponsor ship of coverage on their reps is NOT an employer dropping coverage on their employees, but more like a McDonalds not sponsoring coverage for their franchisees. As a Hancock rep, I consider myself self employed (file a schedule C for my Hancock income). The employees of Signator/Hancock are still being covered; just not the reps. This move by Hancock was NOT done lightly because it does put them in a competitive disadvantage in being attractive to the financial advisors they would like to work with them.
      With respect to America’s health system, as a health insurance broker, I see the part of the problem that the people who can afford coverage, don’t like the restrictions put in place by the carriers (networks, referrals and such) that are used to limit costs. Those restrictions are done in the rest of the world but Americans, at least those who can afford it, are fighting against those restrictions. My clients who are getting subsidized plans (due to income) are not too happy with the size of the new networks, but feel there’s not much that can be done about it.
      All over you hear of how much American spend on healthcare. Part of it is DEFINITELY prescriptions which cost much more in the US than outside; but, part of it is the flexibility of our system, the way the doctors are compensated and the doctors fear of lawsuits.
      Flexibility-you have a choice of doctors in your network that you can see; you hear something you don’t like, you can get that second opinion for nothing or a reasonable amount of money. My relatives in Ireland do NOT have that readily at hand like my Medicaid clients do.
      Doctors compensation-they get paid, for the most part, per “procedure” so they do all they can reasonably be paid for. For example, every year I get a physical, they check my eyesight even though I see an optometrist for my eyeglass prescription.
      Lawsuits-Doctors cannot afford NOT to have all relevant tests done when you see them with some malady because if they don’t and that would have solved your condition, it leaves them open to a lawsuit. Malpractice costs in NY for OB-Gyns are driving them out of business in some situations.
      IMHO, the PPACA (aka Obamacare) didn’t do much to help control the costs of care, but was more a health insurance restructuring which cost me and fellow brokers greatly and hindered many consumers from getting the coverages they want or advice they need.


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