J.B. Silvers, PhD, John R. Mannix Medical Mutual of Ohio Professor in Health Care Finance, revealed to us how the health insurance industry really works and what the Affordable Care Act can do to fix it. Plus: Find out Silvers' hidden connection to a popular seafood restaurant!
W: You ran a health insurance company called QualChoice. What is one thing people should understand about the insurance industry that we are unaware of?
JBS: When I became CEO of QualChoice, I didn’t really understand what the processes were behind the scenes in insurance. With a big business, it’s fairly straightforward; people are buying for their population, there’s a price, and you have a consultant to help. Small businesses and individuals use brokers. Brokers are independent agents and all sorts of businesses use them. I hire a stockbroker to help me decide which stocks to buy. I hire a real estate broker to negotiate for me. There’s a broker on the other side negotiating for the other person. In healthcare, it turns out the broker is not independent. The broker is dealing on both sides. I had no idea. And I’m supposed to know these things!
So Joe the small business guy goes into his favorite broker, a nice guy he’s worked with for years, and he trusts him. The broker collects bids from all the insurance companies and then arrays them for the small business person, recommending one policy over another. Seems straightforward--until I found out that the insurance company is also paying the broker. So if you bring in a lot of business to anybody--QualChoice, Medical Mutual, Aetna--they will pay you an additional commission on top of that.
W: So the broker assures the small business owner, “I’m representing you,” and at the same time the insurance company is paying the broker to bring them business?
JBS: During my first month at QualChoice I asked the simple question, “Why are we paying all this money to these brokers?” Well, they told me, if we don’t, we’ll lose a third of our business, because they’ll never present our bid to customers. It will never get past first base.
The broker for a typical small business takes more of the premium out than a primary care doctor. That makes no sense at all. On its face, that is wrong. And the healthcare reform bill will address that to some extent. There will be a much better market mechanism. There may still be a role for a broker, but not in that central, powerful position taking money from both sides.
W: If you had an hour or two to yourself with no classes to teach or prepare, no research to do, no board meetings, no media to talk to, what would you do with that time?
JBS: That’s totally hypothetical, right? That never happens. I would walk with my wife and dogs in the Rocky River MetroPark. We have Clumber Spaniels---big white, fluffy dogs. They’re wonderful, except they shed white hair on everything.
W: Finally, can you reveal what J.B. stands for?
JBS: Usually I ask people to guess. But it’s John Byron. But when you’re tall and skinny and your name is John Silvers, and there’s that restaurant...that’s not a good thing. My parents called me Byron. But I had an uncle who called me J.B. all the time, and that’s what stuck.
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