When Congress refused to provide health insurers with $2.5 billion as part of the Affordable Care Act's risk corridor program, they ended up taking money right out of health insurance agents' pockets.
Many of the nation's major health insurers said they are losing money from their ACA exchange business. In December, Congress refused an administration request to provide insurers with $2.5 billion in bailout money to help cover their 2014 losses. Because these payments, part of the ACA’s risk corridor program, haven’t been paid to the insurers, the insurers in turn are reducing or eliminating agent commissions.
Under the risk corridor provision of the ACA, insurers whose profits exceed expectations must subsidize their competitors whose margins disappoint. In theory, the federal government was supposed to transfer the “excess” profits of successful insurers to companies that suffered “excess” losses. But because most companies lost money, excess losses surpassed excess profits by $2.5 billion in 2014.
This tug of war over the risk corridor program means that the most recent ACA open enrollment season will go down in history as the Season of the Vanishing Commission.
The third ACA open enrollment period ended on Jan. 31 with sign-ups living up to the low expectations that the Obama administration had when the season began on Nov. 1. The 12.7 million who signed up for coverage fell right in the middle of the administration's projection of 11 million to 14 million initial enrollments through the federal and state exchanges.
However, for agents serving the individual health insurance market, this most recent sign-up season hit them right in the wallet.
“Open enrollment season started out like gangbusters and then a week into open enrollment, some carriers announced that they were cutting their commissions to zero,” said Ronnell Nolan, president and CEO of Health Agents for America (HAFA), an association representing individual health insurance agents. “Prior to this open enrollment season, agents had spent tens of thousands of dollars thinking they were going to do some good business this time around. They were buying advertising, doing marketing, hiring people. And then with the cut in commissions, it hurt a lot of people.”
But it was not all doom-and-gloom for open enrollment season, Nolan added. For agents who serve the small group market, business improved as the increasing cost of individual coverage made small group coverage more attractive.
Carriers bleeding red ink over ACA
A number of the major players in health insurance have reported losses from their ACA business, with detrimental results for those who sell their products under the health law. United Healthcare led the charge when it announced it would stop paying sales commissions to agents who sell the company's health policies under the ACA. That announcement made in December, came three weeks after the company said it would slash agent commissions by 80 percent. United Healthcare officials projected the company would lose $500 million on its ACA business in 2016.
In Pennsylvania, Highmark eliminated broker commissions in the northeast part of the state and slashed commissions elsewhere to $6 from $15- to $25 per-member-per-month. UPMC Health Plan cut broker commissions on individual policies by one-third.
Anthem announced its fourth-quarter profits tumbled by 64 percent as a result of climbing expenses. Aetna reported that is lost more than $100 million last year on its exchange business, and in North Carolina, Blue Cross Blue Shield said that it may leave the ACA market in that state after suffering $400 million in losses. All three insurers on the federal insurance exchange have eliminated agent commissions for selling individual policies under the ACA in North Carolina. This situation led North Carolina’s insurance commissioner, Wayne Goodwin, to write a letter to Health and Human Services Secretary Sylvia Burwell, outlining his concerns about the future of the health law in his state.
Other carrier woes
Compounding the situation for agents and carriers is the number of people who sign up for coverage outside of the open enrollment period – in what is known as special enrollment periods or SEPs – according to Marcy Buckner, vice president of government affairs for the National Association of Health Underwriters (NAHU).
Carriers have complained that consumers who sign up for coverage outside the ACA's annual enrollment window frequently drop their coverage after using a lot of care. This dumps claims on the insurer without providing enough premium revenue to counter those costs.
As a result, agent compensation for policies sold during the SEPs also has been slashed, Buckner said.
Carriers also are changing their plan designs after they were approved, Buckner said. NAHU is concerned about this, she added, “not just because (carriers) are eliminating commissions and compensation, but we are worried that this may open the door to other midyear changes in plans that could be really detrimental to consumers. This could end up discouraging people from using agents and brokers. Consumers could end up in plans that aren’t right for them and they could end up dropping coverage down the road.”
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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