Open Enrollment: Commissions Down, Premiums Up

In her Baton Rouge office, Ronnell Nolan hears the stories from health insurance agents. Premiums are going up and agent commissions are going down; health provider networks are getting smaller and so are the benefits covered in health plans.

Welcome to the third open enrollment season for health insurance under the Affordable Care Act (ACA), which begins Monday.

Nolan is president/CEO of Health Agents For America (HAFA), whose members are among those health insurance agents on the front lines of getting individuals and groups enrolled in coverage.

“Agents are trying to work within the box we were given with the ACA,” she said.

Nolan said that HAFA members are reporting that carriers are cutting commissions across the board. “At first the insurance companies said it was because of the medical loss ratio (MLR) and now I’m hearing it’s because companies are losing money in the individual market,” she said.

When the ACA first took effect, agent commissions were cut by an average of 50 percent across the board, Nolan said. Now, she is hearing from agents who tell her that their commissions on individual policies have been cut again and that some carriers have abandoned commissions on individual policies in favor of flat fees of anywhere between $8 and $15 per policy.

“I just spoke to one of our members who told me she is losing $2,500 a month in commissions,” Nolan said. “Some of our members are diversifying out of the individual market and into the group market, but we have members who serve communities where there isn’t much of a group market to go into.”

She said HAFA is surveying its members to learn more about how they are dealing with the loss of commission, and that the details will be released soon.

In addition to shrinking commissions, agents and their clients are dealing with premiums continuing their upward spiral.

“I’m definitely seeing bigger premium increases for 2016,” said Susan Combs of Combs & Co., New York. “I’m seeing bronze plans in particular taking a significant jump.”

How high will premiums go?

As far as premiums are concerned, the U.S. Department of Health and Human Services (HHS) announced that the cost of a benchmark plan on HealthCare.gov will increase 7.5 percent for 2016 coverage, although most people will still be able to buy a plan for less than $100 a month, after tax credits. But those increases vary greatly depending upon where enrollees live. For example, a Kaiser Family Foundation analysis said among major cities, the percent change from last year in the benchmark premium ranges from a drop of 10.6 percent in Seattle to an increase of 38.4 percent in Nashville. For a 40-year-old making $30,000 per year, the premium paid by the consumer after the tax credit would range from $163 per month in Anchorage to $206 per month in most of the country, Kaiser researchers said.

Premiums don’t tell the entire story when it comes to affordability of coverage. Consumers could be left with hefty medical bills if their health care providers aren’t part of the network covered by their health plan. Kaiser researchers said that a growing number of plans available through the health marketplace will cover only doctors or hospitals in their provider networks.

Aside from premium costs, a number of other factors will influence this year’s enrollment season. Those factors include the increased penalty for those who do not have health coverage, the reporting requirements for employer groups, and the shrinking number of people who still need to buy health insurance.

First, the penalty

In 2016, the penalty for being uninsured will rise to either $695 or 2.5 percent of household taxable income — whichever is greater — for someone who goes without coverage for a full 12 months. This year the comparable numbers are $325 or 2 percent of income. Although the penalty is going up significantly, it poses an opportunity for those who sell health insurance.

“This penalty increase should hopefully motivate those who have resisted buying coverage up until now to go out and get coverage,” said Sally Poblete, CEO of Wellthie, a company that provides online support for the health insurance industry.

Employer groups are facing their own set of issues this enrollment period.

In January 2016, companies with more than 100 employees will need to show they offered their full-time employees, and their dependents, affordable health care coverage that meets a minimum standard.

But for employers, the process isn’t as simple as checking off a couple of boxes in a form. The process will work similarly to W2 reporting. Employers will complete forms stating they offered each full-time employee affordable health care benefits that met the minimum coverage, and file those forms with the IRS.

Helping their group employer clients understand and comply with these requirements is keeping advisors busy, Combs said.

“Companies will have to file 1094-C and 1095-C forms with information on every employee such as name and address, dates of employment and Social Security numbers, salary information, eligibility information,” she said. “This is going to be a major burden for companies to file, and they will need someone to give them advice on how to do it.”

Finding the holdouts

As two waves of health care enrollees already have gone through the system and purchased health insurance, another challenge for the upcoming enrollment period is getting coverage for the holdouts.

The Obama administration predicted that the number of enrollees would hit a plateau this time around. HHS Secretary Sylvia M. Burwell set a target of 10 million people enrolled and paying their premiums by the end of next year. This target number is far below the 20 million enrollees that congressional budget analysts originally had estimated would obtain coverage during the same time period.

“It’s getting harder to reach these uninsured consumers,” Poblete said. “Either they are unaware of the opportunity to buy coverage or they are confused about the law or they are uninterested in buying. They need brokers to make them aware of the need to buy coverage.”

As for the role of brokers during enrollment season, Michael Capaldo, employee benefit consultant with Michael Capaldo Employee Benefits in Coram, N.Y., compared the broker to a coach. Capaldo’s practice centers on group health insurance and benefits for employee clients.

“As the ACA requires us to be moving more pieces around and having more players involved than ever before, the most important thing for brokers to do is to play the role of a coach,” he said. “Brokers must help a client define the proper solution for their situation and then help them implement it.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].