As commissions on ACA plans vanish, some brokers stop selling them

Each year since the launch of HealthCare.gov, Salt Lake City insurance broker Craig Paulson has faced a difficult question: Should he continue to sell individual-market plans even though insurers increasingly refuse to pay him commissions?

In the past year, Aetna announced it would stop paying commissions for new individual members who enroll in any Affordable Care Act-compliant plans. Molina Healthcare later announced that it wouldn't pay commissions for sign-ups during special enrollment periods outside the annual open enrollment.

At least partly as a result of such moves by insurers, there was a nearly 35% drop in the number of registered brokers for HealthCare.gov between 2015 and 2017, according to CMS data. The number dropped from more than 103,000 to just over 67,000.

Paulson worries that if his brokerage firm, Altura Benefits, stops selling exchange plans, his customers may be left with lower quality coverage or none at all. “It's created a moral conflict,” Paulson said. “We want to do what's right for the client, but if you're not getting paid for your services you can't remain in business.”

As insurers face losses in the ACA's individual market, more insurers around the country are refusing to pay broker commissions, particularly on higher-tier exchange plans or special enrollment period sales, said Ronnell Nolan, CEO of Health Agents for America, which represents independent brokers.

She and other experts say insurers are doing this to discourage enrollment of people needing costly medical services, who tend to select platinum or gold plans with low cost-sharing or who sign up through special enrollment periods.

Selectively paying commissions based on tier level is happening even though the CMS issued a guidance in December instructing health plans to be consistent in how they pay commissions across all metal tiers. The policy is effective Jan. 1, 2018, giving plans time to factor commission payments into premiums, said Kevin Counihan, who was CEO of HealthCare.gov under President Barack Obama.

The guidance did not address payment of commissions for special enrollment period sign-ups. “It's the Wild West out here and companies are doing what they can to survive,” Nolan said.

Such no-commission policies have led to an exodus of brokers from the ACA's federal marketplace. And that could undermine enrollment and retention efforts, since brokers historically sign up at least 50% of exchange enrollees, Counihan said. Brokers help consumers navigate coverage options.

This is especially important in recent years when insurers have changed benefits to help curb the impact of their financial losses. Once consumers sign up, brokers advocate for their customers if claims get denied. Indeed, the exit of brokers due to nonpayment of commissions likely is one factor in the decline of marketplace enrollment this year, down about 4% from 12.7 million last year to 12.2 million.

Before the ACA, insurance companies on average paid brokers a 5% commission based on monthly premiums for plans sold in the individual market. Insurance companies increasingly are not paying that fee, or are paying it only for bronze plans, which have higher deductibles and tend to attract people who don't think they need medical care. The strategy is necessary for them to remain financially viable, insurance executives say.

“Like any business, we encourage the sale of products that aren't as likely to lose money for the company,” said Mary Ann Tournoux, a senior vice president at Health Alliance Plan, which offers exchange coverage in Michigan.

The number of individuals selecting bronze plans during open enrollment on the federal marketplace increased 6% between 2015 and 2017. During that same period, 47% fewer people chose more-robust gold plans and 90% fewer consumers chose platinum plans, according to the CMS. Under the ACA, insurers must pay commissions for exchange plans if they also pay commissions for similar plans sold outside the exchanges.

Despite years of complaints from groups such as Health Agents for America and the National Association of Health Underwriters, the CMS was unwilling to enforce rules requiring insurers to be consistent in paying commissions across metal tiers or to pay them for special enrollment sign-ups, Nolan said. The agency feared that would discourage insurer participation in the federal marketplace, she added.

Counihan said the CMS simply didn't want to interfere with insurers' business decisions, “We didn't want to be overly prescriptive in telling private companies the details in how they are going to run their strategies. They're big boys that can figure that out for themselves.”

The CMS stepped in after receiving reports of insurers paying commissions for lower-tier plans and not for platinum or gold plans, in violation of federal law. But brokers say nothing has changed since the CMS' December guidance came out requiring consistency across metal tiers. They doubt it will have much impact because there's no enforcement mechanism.

Covered California, the state-run health insurance marketplace that relies on brokers for nearly half of its business, last year considered requiring that insurers pay broker commissions for all new customers, including the high-cost ones. That was in response to some insurers saying they would not pay commissions for customers who sign up for plans outside of their open enrollment period.

Pennsylvania-based Highmark de-fended its decision not to pay broker fees for special enrollment period sign-ups, arguing there are deficiencies in the eligibility verification process. Anthem addressed the broker fee rules last year by announcing it wouldn't pay commissions for any new individuals enrolled in its individual-market plans, on or off the exchange.

The CMS is working with Health Agents for America to survey its members and determine the prevalence and impact of nonpayment of broker commissions.

The National Association of Health Underwriters met with HHS Secretary Tom Price last month to discuss whether broker commissions could be carved out before a health plan calculates its medical loss ratio.

Under the ACA, broker commissions are included in a plan's administrative costs and profits, which cannot exceed a certain percentage of premium revenue. Insurers say this makes it financially difficult to pay commissions.

Despite the trend away from paying commissions, Rick Notter, director of individual business at Blue Cross and Blue Shield of Michigan, said his plan continues to pay the fees because brokers are vital in educating consumers.

“The worst thing that can happen is a person picks a plan that's not the right fit, they end up with more out-of-pocket costs than anticipated, and they cancel their coverage,” Notter said.