Reprinted from HEALTH PLAN WEEK, the most reliable source of
objective business, financial and regulatory news of the health insurance
industry.
By Patrick
Connole, Managing Editor
October 26,
2015 Volume 25 Issue 38
Health plan brokers anticipate a busy
start to Affordable Care Act (ACA) exchange open enrollment on Nov. 1. But they
prepare with some angst amid concerns about commission cuts by certain plans in
specific locales and sticker shock as consumers face higher premiums to help
insurers keep pace with the costs of exchange business.
These expectations vary by where
brokers operate, the insurance business climate in their states, and specific
carriers’ approaches to new plan designs on and off exchanges, premium rate
changes and competitive strategies. With so much money at stake, and billions
lost by carriers in the first two years of exchanges, it is apparent many
carriers are trying to recoup losses by skimping on commissions and raising
premiums.
In Georgia, a longtime player says
there are serious decisions to be made by brokers after the 2016 plan year as
some insurers’ changes to commission structure and an odd spate of alleged
client theft by carriers and Healthcare.gov have put a cloud over the
marketplaces.
Brokers Prep for Exchange Battles
Rick Bailey, president of Rick Bailey
& Company, Inc., based in Woodstock, Ga., tells HPW he sees plans
“dramatically lowering commissions. We just got a note [on Oct. 21] from Cigna
saying that for gold and silver [individual] plans there would be 0% commissions.”
This has prompted talks within Bailey’s business about how to approach such
news. In the first year of exchanges, the 2014 plan year, the commission was 5%
for sign-ups and renewals, but by the last half of 2015 for special enrollments
the commissions were zeroed out. He assumes Cigna will pay a commission on
bronze plans.
For Aetna Inc.’s Coventry plans,
on-exchange commissions have been $15 per month, with renewals at $8 per month.
Other insurers have higher commissions, but they may not operate in all
markets. For example, “United [UnitedHealth Group’s UnitedHealthcare] had a
good commission last year but they did not really have a competitive product
for metro Atlanta,” Bailey says.
The other issue that is just as concerning
is that some customers are moving to purchase coverage directly from insurers
or the exchange itself. In some cases, brokers are eliminated even though they
did the work such as making sure the consumer’s subsidy was correct and
deductibles were in line. Bailey says this is upsetting and he assumes that
someone is making some sort of compensation at the insurer or exchange. He has
taken the matter to his state insurance commissioner’s office to see what can
be done. “It just gets frustrating,” Bailey says.
Commissions have stayed steady on the
small-group side of the exchanges, since not much if any business is done on
the marketplaces, he adds.
Calif. Brokers Question Group Sizes
Craig Gussin, a principal at Auerbach
& Gussin Insurance and Financial Services in San Diego, tells HPW
that on or off exchange, the talk is focused on networks and how they relate to
premiums. “Health Net in Covered California is an example because there rates
were so low but the concern is what their network will look like. Last year it
started out very, very small but it did get bigger. We will have to wait and
see on that,” he says.
While many are focused on individual
sales, another important market to watch is group health since grandfathered
plans that were allowed to remain with pre-ACA benefits and premiums will now
have to switch over to ACA-compliant policies for 2016. “What we are seeing is
rate increases between 30% and 100%. I have a client who would have seen a 49%
increase, but we will move them from one plan to another one where the increase
will be very, very small,” Gussin says.
Unlike many states, California also
remains committed to expanding the definition of a small group to up to 100
employees for 2016. This action will come even though President Obama signed
H.R. 1624, the Protecting Affordable Coverage for Employees (PACE) Act, on Oct.
7. That law allows states to continue categorizing existing businesses with 51
to 100 employees as large employers rather than small employers.
“Groups of 50-plus to 100 means no
composite rate, but instead a per-person rate, which means a 30-year-old will
benefit but a 45-to-50-year-old will pay much higher. Before it was one rate
for everyone in the company and the younger people subsidized the older people
in the company. That will all change now,” Gussin says.
Plan Variety Grows, but Others Lament
Losses
What about competition in the states?
One state where a CO-OP failed, Kentucky, has brokers preparing for an
especially active open enrollment with consumers affected by the closure in
need of new coverage, according to Matt Schwartz, president of Schwartz
Employee Benefits in Louisville, Ky.
“The governor and kynect (state
marketplace) have touted an increase in competitive options (up from three at
the start of 2014 to as many as seven, depending on local area). The problem is
the plan, which was BY FAR, the most competitive and had the broadest network
(including outside the state) was the newly formed CO-OP (Kentucky Health
Cooperative),” he says. “It was one of the first to announce closure. They were
slated to receive only 12% of their ‘risk corridor’ reimbursement, which
amounted to about $10 million out of $77 million expected.” The CO-OP had
51,000 members.
Schwartz says the state marketplace has
experienced 25% rate increases two years in a row. “So, while we may have more
competition, the citizens of Kentucky will clearly be paying significantly more
than they were and more than was expected. This also creates a huge burden for
the roughly 75% (and their brokers) who must change plans by 1/1/2016,” he
adds.
As for new products for 2016, they will
feature “greater flexibility” with networks. “Initial options from most
carriers were HMO-style plans with limited networks, primary care physician
referral requirements and no coverage outside of Kentucky. Now, carriers are
offering more flexibility, albeit at higher prices,” Schwartz says.
Brokers in Kentucky, unlike in some of
the states HPW surveyed, have not seen much change in their commission
structure. “I am not aware of any significant changes. Most commissions today
are per member per month so our interest is aligned with customers (increased
pricing does not mean increased comp). The challenge is that there is little or
no ‘inflationary’ consideration as time goes by,” he explains.
Frank Nolimal, employee benefits
adviser for Assurance Ltd. in Las Vegas, says his state’s ACA exchange will see
only minor changes to copays, deductibles or out-of-pocket limits. But off the
exchange, he shares that Aetna Inc. and Anthem, Inc. are selling only higher
deductible plans at the silver and bronze levels with Anthem using a
slimmed-down local network called the Pathway PPO.
On commissions, Nolimal tells HPW,
“our big local providers owned by UnitedHealthcare, Sierra and Health Plan of
Nevada [HPN] have gone to a level 8% on new and renewal business versus 15% new
and 5% renewal on their individual policies.”
A big issue this time around is the
loss of both the Nevada CO-OP and veteran carrier Assurant Health (HPW
6/15/15, p. 8).
“The Affordable Care Act ended the life
of Assurant Health. This was a sad day for me, since I have represented them
for 30 years. The Nevada CO-OP will shut down after 12/31/15 due to excessive
losses and adverse risk selection taken by some bad marketing strategies,” he
explains. “I predicted this would happen two years ago as I observed a marginal
selection of insurance professionals selected to run the marketing and
back-office administration.”
Rates are trending higher in the 9% to
12% range on most small group and individual products. “Sierra and HPN are the
best value throughout Las Vegas,” Nolimal adds.
Texas ID’s Network Changes for 2016
Danny O’Connell, a partner in
family-owned broker BRG in Dallas, tells HPW that in Texas the theme is
for insurers to offer smaller regional-based provider networks for individual
products for 2016. Some carriers are even going as far as to make networks
specific to a city, “like an Austin-only or Dallas-only network,” he says.
There has also been a proliferation of
hospital system networks, “like Baylor or Methodist, which can be regional as
well but are specifically tied to that PPO or HMO inside that system. We are
seeing that even on the small-group plans.”
Another trend is that fewer doctors are
accepting on-exchange individual plans. “On the individual side there is almost
nobody left offering PPOs. On the group side you see a combination of networks,
PPOs, EPOs and hospital system-only HMOs,” O’Connell says.
Commissions also are getting tricky in
Texas as there are some carriers offering 0% commissions for individual
coverage. Small groups off exchange have seen some insurers net the commission
on top of the premium, building in a consulting fee that the employer must
cover. For groups of around 100 it can run into the tens of thousands of
dollars and is not making businesses happy.
“As we have seen internationally in
Australia and England, smaller groups and individuals cannot afford to pay a
fee on top of premiums. Only the well-off and larger groups will be able to pay
additional fees to a broker to help them get the plan they want,” he adds.
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