What a difference a bad year makes. President Joe Biden's last special enrollment period for the health insurance exchanges led to a flood of sick, costly customers signing up for coverage. Health plans aren't sure they want more of this type of member.
A potential new pool of enrollees is headed their way because of a second pandemic-related special enrollment period and because states are due to restart Medicaid eligibility redeterminations, which is likely to result in people transitioning to the individual market.
Some insurers that sell on the Affordable Care Act's marketplaces have responded by slashing or ending commissions to independent agents and brokers for directing customers their way.
Large carriers including Molina Healthcare, Anthem and some Blue Cross and Blue Shield companies, plus insurtechs Bright Health Group and Oscar Health, cut commissions in certain states at the start of April, said Ronnell Nolan, president and CEO of Health Agents for America, a trade group.
"They do not want that business," Nolan said.
None of the insurers identified in this article responded to interview requests.
Agents and brokers make their livings on commissions, so these decisions by carriers hit them in their wallets. "I'm getting agents and brokers reaching out and saying, 'I don't know what I'm going to do, it's my whole block of business,'" Nolan said.
There are other considerations, said Marcy Buckner, senior vice president of government affairs at the National Association of Health Underwriters.
"It's a concern for us not just because of workers not getting paid, but also because this could skew people going to specific carriers, which would skew the market and have adverse effects," Buckner said.
Regulators are watching, too. "We are concerned about the impact on consumers, particularly those consumers whose circumstances lead them to enroll midyear, and are actively investigating this matter," a Centers for Medicare and Medicaid Services spokesperson wrote in an email. In 2016, the agency cautioned insurers against cutting commissions during the plan year to avoid special enrollment customers and suggested it may constitute unlawful discriminatory marketing.
Open doors
The Affordable Care Act established annual enrollment periods during which eligible customers can choose policies and apply for financial assistance. These are limited to once a year to prevent consumers from waiting to get insured until they have medical needs. The law also provides for special enrollment periods that allow people to obtain coverage when they experience qualifying life events, such as losing job-based health benefits, marrying or moving to a different state.
Insurer concerns over adverse selection during special enrollment periods are as old as the health insurance marketplaces themselves. For instance, the per member, per month costs of individuals who enrolled during special enrollment periods when exchange coverage began in 2014 were 10% higher than those who signed up during open enrollment, according to an Oliver Wyman report commissioned by the insurance trade group AHIP.
The COVID-19 pandemic prompted the Biden administration to launch a six-month special enrollment period in 2021, which opened insurers' doors to new, potentially sicker patients more widely than ever. The Health and Human Services Department reported that 2.8 million people signed up, a record for special enrollments on the federal exchanges. State-run health insurance exchanges also essentially reopened enrollment in response to the pandemic.
In addition, the American Rescue Plan Act allows people with incomes up to 150% of the poverty level, which is $20,385 for a single person, to sign up for exchange plans year-round. Enrollments under this initiative began last month. This policy, which applies to federal exchanges and is optional for state-operated marketplaces, is set to expire at the end of 2022, along with the enhanced subsidies the same statute created.
"The people who are signing up now need the care right now," said Duane Wright, a senior research analyst at Bloomberg Intelligence. "They're not signing up because they might need care at some point in the next 12 months."
The administration also announced a policy to undo the ACA's so-called family glitch, which could enable another 2 million people to qualify for exchange plans.
Add the millions of people likely to lose Medicaid coverage and turn to the exchanges, and health insurance companies face the prospect of many new customers who could prove expensive.
Averse to adverse selection
At first blush, it might seem that insurers such as Anthem and Molina Healthcare that have large overlaps between their Medicaid and exchange businesses would want to pay brokers to help customers enroll when Medicaid redeterminations resume, Wright said. Regulators paused redeterminations during the pandemic but when they start again, an estimated 16 million people are expected to lose Medicaid coverage.
The insurers covering them under Medicaid managed care could transition these people to exchange plans, Wright said. About one-third of those set to leave Medicaid would qualify for exchanges subsidies, according to the Urban Institute.
But the threat of adverse selection may be dissuading some insurers from trying to attract these customers, Wright said.
Financial calculations
Molina Healthcare's recent experience reflects the industry's individual market enrollment gains, with the company's exchange base more than doubling to 728,000 members last year.
The insurer's strategy has always been to focus on Medicaid, and it was unprepared for the costly exchange customers it attracted during the special enrollment period last year, Molina Healthcare CEO Joseph Zubretsky said during an earnings call in February. The company cut broker commissions in every state except Utah, according to Nolan.
"We never intended to have 728,000 [exchange] members," Zubretsky said. "That was a function of the special enrollment period, which not only grew membership beyond what anybody expected, but added a significant element of adverse selection."
For every month that Medicaid redeterminations are delayed beyond April, the insurer will generate an extra $150 million in revenue, Zubretsky said. Once redeterminations occur, the insurer expects to lose about 200,000 Medicaid customers and $1.3 billion in revenue. Molina Healthcare wants to convert those who will be eligible for heavily subsidized "silver" exchange plans and avoid those shopping for low-cost, high-deductible "bronze" plans, he said.
Anthem, the nation's second-largest Medicaid carrier with 10.6 million members, has spent the last year acquiring local Medicaid plans. Once redeterminations begin again, the insurer expects 45% of its enrollees will no longer qualify for the program, Chief Financial Officer John Gallina said during an earnings call in October.
The company expects this to provide a "tailwind" to its group coverage business as former Medicaid beneficiaries sign up for employer-sponsored insurance, Gallina said. Twenty percent of Anthem's current Medicaid members will be eligible for subsidized exchange plans after redeterminations take place, he said.
Exchange plans offer insurers potentially higher profits than employer coverage, according to data compiled by the Kaiser Family Foundation.
But they also present greater risk, said Rick Kes, a healthcare partner at RSM. Rather than weather the uncertainty of another special enrollment period, Anthem may favor investment in a more stable line of business, he said. "In employer-sponsored care, oftentimes the health insurer is potentially just a [third-party administrator]. The employer's taking the risk of the claims," he said.
Insurtechs Oscar Health, which posted a $571.4 million net loss in 2021 and boasted that one in 15 exchange enrolles are enrolled in its plans, and Bright Health Group also cut payment to brokers April 1.
Bright Health Group explained to brokers that its $1.1 billion net loss last year stemmed from higher-than-expected exchange enrollment. "We are not asking our brokers to write our products without commissions," the company wrote in a notice to brokers. "We understand that they will write competitors' products and that's okay."
This article has been updated to clarify that some health insurance companies changed their commissions policies only in specific states, not nationwide.
