JEC Issues Brief finding Insurance Broker Costs Rising Rapidly, especially in Medicare Advantage Plans

WASHINGTON, DC – Today, the Joint Economic Committee released a brief entitled Right Plans or Wrong Incentives? How Broker Payments May Raise Federal Spending which outlines the rise in spending by the federal government on insurance brokers. While brokers serve a useful role in theory, the brief finds that current incentive structures may undermine their effectiveness and contribute to higher system costs.

“Broker spending is sharply rising in Medicare Advantage and the Affordable Care Act, and we need to ask whether that growth is delivering real value, or just higher costs to the federal government,” said Chairman Schweikert. “Brokers can help people navigate a complex system, but current incentives may also be driving inflated costs and improper enrollments. This should concern anyone focused on providing the best health insurance options for the American people while protecting taxpayer dollars.”

Health insurance markets like Medicare Advantage and the Affordable Care Act (ACA) are complex, leading many people to rely on brokers to help select the best plan to fit their needs. While brokers are intended to improve decision-making, their insurer-paid commissions can create misaligned incentives, potentially resulting in higher costs and inefficient plan choices rather than better outcomes. As reliance on brokers has increased, data shows broker compensation has surged, especially after 2020, raising concerns about market inefficiency and federal spending leakage.

Key findings include:

• Broker spending is large and rising. Across Medicare Advantage, Part D, and Affordable Care Act-regulated individual, small-group, and large-group markets, annual broker spending now exceeds $25 billion, with Medicare Advantage accounting for the largest share.

• Agents and brokers therefore play a rapidly growing role in federally subsidized health insurance markets. Despite this, relatively little is known about the effects of this spending or how policymakers should respond. On one hand, agents and brokers may help consumers compare plans and make more informed choices, which could be valuable given the resources spent on health insurance. On the other hand, insurers generally pay broker commissions, creating incentives that may not always align with consumers’ interests.

• ACA Marketplace broker spending rose sharply after 2020. This increase coincided with rapid enrollment growth and expanded premium subsidies, raising questions about whether higher commissions reflect improved consumer assistance or subsidized enrollment growth in a market with documented program integrity concerns.

• The Joint Economic Committee finds that Medicare Advantage insurers spent an average of $234 per member per year on brokers in 2023. That exceeds the amount spent on vision, hearing, dental, transportation, fitness benefits, meals, routine foot care, personal emergency response systems, acupuncture, chiropractic care, health education, and smoking-cessation counseling combined, and it amounts to about one-third of total reported spending on supplemental benefits.

• Higher broker spending is associated with higher overpayments from coding intensity, especially among the largest insurers. The positive relationship is driven by the ten largest Medicare Advantage insurers, suggesting that scale may matter in the broker-overpayment association.

Joint Economic Committee Chairman David Schweikert is also holding a hearing Wednesday, June 24, entitled “Protecting Patients and Taxpayers: Combating Healthcare Fraud and Leakage to Strengthen Program Integrity” to address both explicit fraud such as home health fraud as well as “leakage” in which healthcare programs are not being used as intended for example Medicare Advantage overpayments. It is expected that the topic of this latest brief will also be discussed.

Read the full brief here.

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