Hello. Dr. Keith Smith with you – Surgery Center of Oklahoma. Thank you for joining me in this video blog series.

I have an employee here at the Surgery Center who used to work at an insurance brokerage and she told me the following story:

A man came in and expressed a desire to buy a certain type of insurance and the broker recommended a policy for him and he wrote out his check, paid and left. Following his departure, there was much laughter and high fives in the insurance agency. She asked, because she was new, “what was that all about?”

It turns out the policy that was recommended, which the customer bought, was not the best thing for the customer. But it was darn sure the best thing for the broker and the brokerage, as the commissions paid on this particular policy were higher than any other recommendation that could’ve been made – recommendations that would have been much more of a value.

This goes on in healthcare all the time. I’ve been told by people who refer to themselves as ‘recovering brokers’ that one of the things they consider when they advise a client on which insurance to buy – say, a self-funded health plan – one of the things they consider is what are called overrides. Overrides are basically undisclosed commissions that the big carriers pay to the brokerages for pedaling these products.

The client, the self-funded health plan, for instance, has no idea what these amounts are. But they turn out to be huge amounts, very significant amounts. And they are complete undisclosed.

Are all brokers bad guys? No. There are good buy brokers. But there are bad guy brokers too. And in healthcare, the bad guy brokers predominate.

So, is the broker working for his client? Yes. But his client is not the self-funded health plan or the purchaser of the policy many times. His client is really the big carrier. That’s who he’s working for and that’s who’s paying him the most money.

I’m going to talk a little bit more about the brokers as time goes on because I’ve found they’ve been the biggest obstacles to the flowering of this free market movement. I’ve not talked about the way these brokerage houses work up to this point, but I’m going to talk about it some more.

These are not my opinions. These are things that brokerages and brokers who have had a crisis of conscience and have moved on to do business in more honest ways, these are confessions that they have made to me and some of them are just so incredible that I felt like I ought to pass them on.

We’ll talk more about this in weeks to come. Thank you for joining us. We’ll see you next time.