The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

HHS to Pay Brokers for Enrolling Consumers in Federal High Risk Pool

Posted by Alan on May 31, 2011


Should brokers be compensated for helping consumers to enroll in government programs like the Pre-Existing Condition Insurance Plan (PCIP) created by the new health care reform law? Until now, the federal government’s answer has been “no.” That changed today and a significant precedent is being set.

The National Association of Health Underwriters announced today that, beginning no later than October 1st, licensed agents and brokers will be paid a flat fee of $100 per enrolled applicant. (Payments could begin sooner if the changes to the application can be done more quickly).

This fee will only apply to the high risk pools set up by the federal government for the 23 states who declined or were unable to do so plus the District of Columbia. Many, if not most, state-run exchanges already pay brokers for assisting their citizens in enrolling in their pools. According to NAHU the average state-based fee is $85 per enrolled applicant.

In announcing the change, the Department of Health and Human Services noted the greater enrollment success achieved in states pools that compensate brokers for their work. As stated in the Department’s press release: “This step will help reach those who are eligible but un-enrolled. Several States have experimented with such payments with good success.,”

The decision to support and work with brokers is part of the Department’s efforts to increase enrollment in the PCIP high risk plans by removing administrative hurdles and lowering premiums. In fact,  in 18 of the states, premiums will be coming down as much as 40 percent according to a press release from HHS.

The PCIP was designed to provide coverage to individuals unable to obtain health insurance in the private market due to existing health conditions. 18,313 Americans have enrolled in the federal high risk pool through March 31st, a fraction of the 5 million consumers expected to enroll in the program (fraction as in “0.4%).

Progress usually comes in small steps, not giant leaps. The significance of HHS recognizing the value brokers bring to America’s health care system—and their willingness to pay for that value—should not be underestimated. For example, the House of Representatives will soon conduct a hearing on HR 1206, the legislation to remove broker compensation from the medical loss ratio calculations required by the Patient Protection and Affordable Care Act. Proponents of this law will be able to point to the recruitment efforts of HHS in support of the federal Pre-Existing Condition Insurance Plan to reinforce the need to keep brokers in their role as consumer counselors and advocates in the new health insurance world being created by the PPACA.

NAHU and other agent organizations worked hard to achieve this recognition. No doubt, however, some brokers will protest that the HHS program pays brokers only a one-time fee. This complaint is misplaced. Enrollment in the PCIP is fundamentally different than working with consumers shopping for coverage in the commercial market. The PCIP is, after all, a government health plan, more similar to Medicaid than to plans available on the open market. Further, enrollees in the high risk plan, by definition, cannot obtain traditional coverage. What’s significant is not the details of the compensation (although it is worth pointing out that HHS is setting the fee higher than the average paid by states), but the existence of compensation for enrolling Americans into a federal health plan.  When it comes to precedents, this is one that can aptly be described as “significant.”

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22 Responses to “HHS to Pay Brokers for Enrolling Consumers in Federal High Risk Pool”

  1. I don’t remember anyone from either political party making a fuss about seniors on medicare paying a 1% penalty for each month that they waited to enroll in a prescription plan if they decided that they didn’t want or need the coverage. How is this any different from the proposed so called Obama care?

  2. Brokers continue to lead the way in signing up new members of the PCIP in various states. The California pre-existing condition insurance plan has seen over 6000 new members signup so far. I know 6k sounds small and it’s mostly due to the lack of public awareness about this program.

  3. G Cox said

    Alan, is the blog Dead? No new posts from you now in over TWO MONTHS? I miss your insights. Guess there’s no new news?

    • Harald Schot said

      Yeah Alan !!

    • Jack said

      Its not dead but what is there left to say. I will get $100 for signing someone up with the government’s plan. I suppose this might be a model for the exchanges.

      I have to laugh at the articles in the industry mags talking about our new role. Or the recent push by the soon to be defunct NAHU to get members. Thanks for the magazine but how is that going to change things.

      I tell new agents that if they are planning to stay in the insurance business they need to be working on transitioning out of health insurance. Yet many of them are totally unaware of what is going on in their industry.

      So, I think it is safe to say that the lack of chatter in this blog is probably due to the fact that there is nothing to chatter about. We are all too busy planning our next move. Will someone please turn out the lights when they leave. Don’t bother to lock the door, there is nothing left to steal.

      • Jim said

        Jack

        I am in NH and about 70% of my book is Health Benefits. I do have my P&C license….should I start working more in that direction in the next 3 years?

        I think I was hoping for the best, but I think you are correct, we are living in a dream world currently and really need to get all of the facts.

        Thanks,

      • I’m not giving up! There is still a possible Supreme Court ruling and an election that could drastically change the entire situation. Plus, with the debt crisis, downgraded credit rating and the possibility of a double dip recession, states & employers are not able to fund this massive entitlement program. I am also diversifying my business by including voluntary worksite products that are not affected by the legislation. I have some accounts that I am making just as much or more than the group medical products. As brokers, we has always been innovative and responded well to change. We will still find a way to deliver products and services to our clients. It may not be the current offerings of today, but there will always be a need for employers to offer some additional benefits along with the salary to be competitive and attract/retain good employees. I hope there are others that agree with me.

        • Jack said

          I would be thrilled if the Supreme Court ruled in such a way that the bill would just die. I am not as optimistic as you are. The other disturbing thing is that both sides of the aisle seem to like insurance exchanges. They think that everybody will be able to buy cheap health insurance and the carriers will disregard their actuaries.

          The voluntary market is great. The companies offering these products are hitting the agents hard to come aboard. But many agents do not serve the group market. The competition in my area is cut-throat for groups and they change agents and plans like some people change their socks.

          But, I think that the health insurance business will be like the real estate business. In that the less serious agents and those without financial resources to hold them over while they reinvent themselves, will disappear. I often hear someone tell me, “I used to sell real estate.” Now it will be, “You sell health insurance? I used to sell health insurance.”

  4. Finally, progress will be felt on this matter. I really think that giving incentives to the brokers everytime they encourage people to enroll in federal high risk pool will have its advantage not just for the brokers themselves but also to the industry. The more people who are trying to convince people on the importance of having health care, the more insured people there will be.

    • Jack said

      I don’t think that anyone is still thinking that selling health insurance will be a viable way to earn a living. Perhaps the ability to enroll individuals into the exchanges will permit us to sell a supplement at the same time. We can talk about commissions, MLR, etc till we turn blue, but we all need to be thinking about what is next. What are you waiting for? The health care bill to be rescinded? That is not happening.

      Lots of people will lose their jobs. Lots of agents will not be agents any longer. Everyone and their uncle will be trying to sell supplements to individuals and the voluntary group market. It is already started. Good luck with that.

      So the government is going to realize that agents are wonderful and everyone needs help. Here is 100 bucks, go help someone. Can you say “offshore (and onshore) call centers that will assist with the exchanges”. Give them a small salary and a spiff if they help a certain number of people. The operator, with the help of huge telemarketing operations generates $1000 a day per operator and pays them $150 plus a $50 bonus (less offshore). License? I don’t need no stinking license. This is not the sale of health insurance. It is customer service. Can always have a licensed person walking the floor (it is done now).

      • The fees that the state exchanges since they are far below what the agent would earn in the past would not the agent be better off doing something else? The government created the exchanges let them run them. Why would a licensed agents expose themselves to an E&O suit for health programs designed for the insurers by the states? Are the programs not perfect since the all knowing state designed them? Any cooperation with the exchanges provided by the agents simply accelerates an almost transparent agenda that the DNCC had in the first place. Destroy the health agent distribution process, knee cap the weaker insurers and annoint the 20 largest insurers with all the servicing for health insurance nationwide. The model is similar to the Federal Reserve System of Banks. The leading10 banks nationwide control 85% of the banking business. We are the National Socialist State for Financial Services.

  5. Brad Snitzer said

    I think it is funny that the administration thinks the commissions that are paid to brokers is a significant part of the entire premium. If they lower or remove commissions, health insurance will still be as expensive and the costs with continue to raise. What they don’t realize is that they are getting our services at a bargain. They will probably find after the Exchanges are up and running, that we are a valuable part of the delivery system and play a vital role. In the end, they are only hurting the people they think they are helping; small businesses & individuals. They are going to be left on their own to pick their plans and deal problems on their own.

    • Regulators should compensate good insurance agents and producers for the knowledge and expertise it takes to direct a consumer towards a healthcare policy that is suitable for his or her needs. Why reduce commissions even more? We are lucky for a Major Medical Carrier to pay us on a as earned basis if and when the policy finally gets placed and issued. A $200 dollar policy now will get you 20 dollars if you are lucky.

  6. Marty said

    What this essentially means is that when the exchanges are fully implemented, you will not be able to make a living selling health insurance. On a good week I will make as much as my postman (without the paid benefits and pension).

    I am constantly amazed at the stream of articles in the industry publications telling us that we just need to adjust a bit to make up for the loss in commission and business. I guess they realize that any agent publication focused on health insurance agents, or any national organization that gets dues from health insurance agents and ad money from carriers are on the ropes and will eventually go down for the count. I would take a “Don’t worry, be happy” attitude as well.

  7. We’re already compensated in WA for our high risk pool. Unfortunately, it’s very expensive for those trying to access it. Maybe this will help those with pre-existing conditions. I certainly hope this isn’t the plan for the “navigator” commission structure. I’ve seen a 40% decrease in my revenue and a dramatic increase in customer service. Increase rate, decrease quality of plans and producer commissions hmmmm…. The math doesn’t seem to work

    • G Cox said

      Yes, I agree this is a double-edge sword. Looks to me like the government sees their plan to incorporate more people into a federally-run program isn’t working, so now we get to make a sixth of what we should to take on a new client, and only get paid one timer for it. I say, let the government continue its own success in enrolling people into government run optional plans– at least until we, as brokers received some type of compensation commensurate to the job we actually perform for those relying on us to advise and serve them.

  8. Paula Wilson said

    A typical client that ends up in a high risk pool was no easy enrollment and usually included a long drawn out research and underwriting process. Just because they ultimately end up in a government plan shouldn’t reduce my worth. I understand that States that ultimately allow the agent to certify the applicants insurability without having to go through the application/denial routine may pose a different worth.

    Nonetheless….it is progress.

  9. Hi Alan

    Ed H. here. As you said…a good start. The recognition of our services may be starting to become understood. Ultimately, I would like to see around 8% compensation or perhaps a flat $12 per month per person compensation.

    Are we worth it? You bet. I estimate that about 90% of my clients felt I helped them select the right plan, understand coverage and offer assistance after the health insurance policy was in effect. I assume other brokers can show similar results.

    • Kent K said

      Here in NC we where ours is run by the state, we get a flat $150 for the first 5 then $200 after that..whether it is the state plan or federal plan. But this is only one time. I would like to see it how Ed suggested either a % based or have the fee recurring for a couple years, even if its on a sliding scale. Say $200 year 1, $150 year 2, $100 year 3. We as brokers put a lot of work in helping individuals choose the plans and understand what they have. Also some work in assisting them after the fact.

      I honestly don’t see how it will stay afloat over the long term. The federal plan is very inexpensive and once these claims start pouring in I hate to think of the effects.

  10. Alan, this is indeed good news. Unfortunately, I am not convinced that even if insurance agent’s commissions are removed from the MLR,insurance companies will restore commissions to the level they were. I think the insurance companies were not that upset with commissions included in the MLR. It gave them the ability to lower expenses and blame someone else.

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