PPACA regulators tackle broker compensation

HHS Secretary Kathleen Sebelius, center, with various state insurance commissioners and insurance industry executives at the White House in 2010. (AP Photo/Gerald Herbert) HHS Secretary Kathleen Sebelius, center, with various state insurance commissioners and insurance industry executives at the White House in 2010. (AP Photo/Gerald Herbert)

Agents and brokers who want to help their clients enroll in coverage through one of the coming federal health insurance exchanges will be able to do so once they register with regulators and will get paid according to what the market will bear.

On the other hand, state-based exchanges, or “marketplaces” as the government is now calling them, will have the power to set their own compensation standards, including deciding whether they or issuers pay broker commissions.

Either way, in the latest effort to clear up haziness on the question, the government is now once more officially on record as saying that it believes brokers will continue to play an important role in health care and that they should indeed get paid for their expertise.  

Whether doing so will help mend fences with the industry seemed unlikely.  

The guidance on the role of brokers and their compensation under the Patient Protection and Affordable Care Act was issued May 1 by the Center for Consumer Information and Insurance Oversight. A draft had been produced in March. CCIIO is a part of the Centers for Medicare and Medicaid Services and is helping to set up the federal exchanges.

The agency said it hopes 250,000 producers will register to sell plans through the federally facilitated exchanges.

The role of brokers in the exchanges has been subject to much dispute. In April, the administration drew brokers’ ire when it released rules for exchange navigators, essentially neutral parties who will help consumers shop for health insurance in the new exchanges. Many brokers were angered by the new rules, primarily because navigators won’t need to be licensed. They also won't be paid by carriers. HHS has said that exchanges will also need “in-person assisters” and possibly other types of registered intermediaries. All of these additional bodies, brokers say, will make it much more difficult for them to make a living.

Given the sensitivity surrounding the issue, CCIIO seemed to take extra care to acknowledge how critical brokers are to the benefits world.

“Consumers who access health insurance coverage through an Affordable Insurance Exchange, or Health Insurance Marketplace, will be able to receive assistance in a variety of ways, including in-person, online, and through telephone support. Agents and brokers, including web-brokers, are among those who will play a role in educating consumers about Marketplaces and insurance affordability programs, and in helping consumers receive eligibility determinations, compare plans, and enroll in coverage. In particular, CMS anticipates that agents and brokers will play a critical role in helping qualified employers and employees enroll in coverage through the Small Business Health Options Programs (SHOPs),” it said.

Insurers that sell "qualified health plans" through the federal exchanges will have to pay the same producer compensation for coverage sold through the exchanges that they pay for similar plans sold outside the exchange system, CCIIO said.

The federal marketplaces, including state partnership marketplaces, “will not establish commission schedules or pay commissions directly to brokers and agents,” the guidance said. “As is the case in the market today, we expect that the amount and terms of any commission would be negotiated by the issuer and the agent or broker.”

Its 12-page guidance, however, included language that gave states a good measure of latitude on the compensation question.

“State-based marketplaces (SBMs) may establish parameters for compensating agents and brokers, by direct compensation from the marketplace, or by having issuers pay commissions,” CCIIO said in the document.

At the moment, 33 states are expected to have federally facility marketplaces or state partnership marketplaces, while 17 states and the District of Columbia have received conditional approval from HHS to operate their own state-based marketplaces. The marketplaces, being created under the PPACA, will open for enrollment Oct. 1. Moderate or low-income people must apply through the marketplaces to receive tax credit subsidies or enroll in Medicaid, and small businesses must apply for tax credits through the marketplaces.

Agents and brokers who work with consumers in the federally-run and state partnership marketplaces will be able to assist their clients in two ways: through an issuer’s website or through the marketplace website.

Brokers will have to register with CMS in a process that will include a “marketplace-specific” online training course. Once they do so, they will receive a national producer number that they can use to receive compensation from an issuer.

None of this settles another area of high anxiety for brokers: the PPACA’s minimum medical loss ratio provision, requiring insurers to spend at least 85 percent of large-group revenue and 80 percent of individual and small-group revenue on health care or quality improvement efforts. The remainder is spent on administrative costs, including commissions. Since the MLR provision went into effect in 2011, carriers have slashed commissions, some by as much as 50 percent. Brokers want Congress to exclude producer compensation from the MLR calculations.

John Cerasani, the founder of Northwest Comprehensive, a Chicago brokerage, expressed a lot of the anger those in the business have been feeling.

"The idea of an 80-85% loss ratio that includes broker compensation is counter-intuitive of the idea that the feds want brokers to be a part of this process. You can't have it both ways," he said.

"Most consultants and brokers are not against PPACA due to it potentially hurting our revenue; we are against it because it's a terrible law that didn't do what it was allegedly set out to do. Additionally, it has caused an administrative burden to human resource professionals everywhere and has done absolutely nothing to reduce the cost of health insurance. The sad truth is that those who passed it more than likely already knew this."

Dwight D. Menke, the owner of a Topeka, Kan., brokerage, voiced another concern shared by many in the industry:

"There is an underlying message (in PPACA) that health insurance is a product that can be purchased over the internet with a complete and full understanding from the consumer of what they purchased. ... I strongly believe anyone being allowed to work with consumers ... should be held to the same education and licensing standards of insurance agents/brokers," he said. 

CCIIO produced a Q&A with additional detail to clarify the role brokers in the exchanges. Here’s an excerpt of the question addressing compensation:

1. Can a state-based marketplace establish a commission schedule or pay commissions? How will federally-facilitated marketplaces, including state partnership marketplaces, address compensation?

“Nothing in the exchange final rule prohibits a state from establishing laws, regulations and standards for issuer compensation of agents or brokers, including for enrolling individuals through that state’s Marketplace. Accordingly, State-based Marketplaces may establish parameters for compensating agents and brokers, by direct compensation from the Marketplace, or by having issuers pay commissions. If issuers will be paying commissions to agents or brokers, we encourage State-based Marketplaces to consider providing information to issuers to facilitate these transactions (e.g., by providing the agent or broker’s national producer number or state license number).

“Federally-facilitated Marketplaces, including State Partnership Marketplaces, will not establish a commission schedule or pay commissions directly to agents or brokers. As is the case in the market today, we expect that the amount and terms of any commission would be negotiated by the issuer and the agent or broker. However, we note that HHS has established a QHP certification standard for issuers seeking certification in Federally-facilitated Marketplaces and Federally-facilitated SHOPs (FF-SHOPs) that would require QHP issuers to pay the same agent and broker compensation for enrollment through the Federally-facilitated Marketplaces and FF-SHOPs and for enrollment in similar health plans offered outside the Federally-facilitated Marketplaces and FF-SHOPs.” 

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