After the Affordable Care (ACA) was adopted, many policy experts warned that Brokers were going to take a hit. These predictions have come true in particular for individual and non-group policies in particular. Late last year, we reported on a number of health plans that are cutting Broker commissions, including Aetna, United, and Oscar Health Plans.
The Trend Continues
Earlier this week, Blue Cross Blue Shield of Texas (BCBSTX), announced the elimination of Broker commissions for new individual health insurance policies for the under 65 market, which applies to both the Exchange and non-Exchange market starting in April. The plan notes that this “commission change does not affect in force under 65 individual major medical renewal policies, retail ancillary products, or new or renewal sales in the group market or in the Medicare market.” In a recent email, BCBSTX added:
We value our producer relationships and they continue to be vital to our business. As always, we assess and evaluate our commission structure on an ongoing basis and will make adjustments as appropriate. We plan to re-evaluate producer commissions for the sale of new individual under 65 major medical policies with Jan. 1, 2017, effective dates. As we approach the next open enrollment period, we will update our producers on commission rates.
For additional information on BCBSTX new policy, see a recent Q&A that was published on the subject.
Avoiding Bad Risk Selection
The question here is what is going on? Many reports have surfaced since the ACA was adopted emphasizing how brokers remain a valued expert for its clients, both employers and individual policy holders, in helping select the right health insurance coverage. It turns out that some health plans are implementing specific strategies to avoid adverse risk selection in a post ACA-environment by steering coverage to more profitable plans through the reduction of commission payments. In part, this is the result of healthcare reform requirements that now limit what many insurers have done in the past through traditional underwriting techniques.
According to one news report, “Cigna and Humana have ceased paying brokers to sell many higher-benefit ‘gold’ marketplace plans for individuals and families while continuing to pay commissions on more-profitable, lower-benefit “bronze” plans.” In addition, United Healthcare announced plans to reduce offering ACA qualified “gold” and “silver” plans.
In response, Tim Jost, JD, a consumer advocate and nationally known ACA expert, notes “By inducing brokers to avoid high-cost members — whether in gold plans or special enrollment — the moves limit access to coverage and discriminate against those with greater medical needs.” “The only explanation I can see for them doing this is risk avoidance — and that is discriminatory marketing and not permitted,” he said. “When people wonder why we’re not getting millions more enrollees in Affordable Care Act health plans, one reason is, the carriers are discouraging it.”
In response, insurance industry representatives retort that health plans are not discriminating per se but adjusting to the new ACA market realities, especially higher-than-expected medical claims and the failure of a government risk-adjustment programs to cover much of that cost.
Many of the large health plan executives have gone on record stating they are taking a wait and see attitude. “It’s way too early to call it quits on the ACA and on the exchanges,” Aetna CEO Mark Bertolini said last fall. “We view it still as a big opportunity for the company.”
Importance of Brokers
Notwithstanding the reduction of Broker commissions by BCBSTX and other health plans in the non-group market, there does appear to be some good news. Specifically, employer-based coverage and government’s Medicaid and Medicare programs have not impacted by these new commission reduction policies.
Brokers remain an essential part of the process to maintain a healthy and vibrant insurance marketplace. For example in 2014, 44 percent of Kentucky enrollees bought through brokers. So did 39 percent of the California enrollees. As once expert recently put it: “Brokers are a ‘very important’ part of enrollment for individuals and families despite alternatives provided by the health law….They’re still big.”
Stay tuned as BenefitMall will continue to keep you informed on how health plan commission payments are changing for exchange and non-exchange plans.
The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.