Health Insurer Changes Agent Commission Policy

Oct. 27--Consumers shopping for health insurance in the federal government's online marketplace will likely have fewer people to turn to with questions this year, following a Highmark decision to stop paying insurance agents for providing the help.

Health insurer Highmark said Wednesday that it will stop paying commissions to insurance agents and brokers in Pittsburgh and in central parts of Pennsylvania for government-subsidized plans, joining Blues plans in Harrisburg and Philadelphia in throttling back commissions for 2017. Some agents will continue helping people enroll for exchange coverage as part of a full-service brokerage, but experts say that ending the commissions will discourage sales of the government marketplace plans.

"Unsustainable financial losses" in the Affordable Care Act market prompted the change, according to a letter sent to brokers Wednesday by Alexis Miller, senior vice president, government markets at Highmark.

"These changes are often difficult for us to make as we recognize the impact they can have on the producer community," Ms. Miller wrote. "But we believe they are necessary to achieving our goal of ensuring a sustainable ACA individual market that will continue to provide access and options in the future."

The Affordable Care Act was enacted in 2010 and required everyone to have health insurance. As of March, more than 400,000 Pennsylvanians had health care coverage through the government marketplace, with 78 percent receiving subsidies, according to Healthinsurance.org llc, an independent St. Louis Park, Minn.-based health insurance guide.

But offering the new line of health insurance has proved too costly for some carriers. Mounting losses forced United Healthcare and Aetna to pull out of the Pennsylvania exchange market this year, leaving only Highmark and UPMC Health Plan, which said Wednesday that it will continue paying broker commissions. UPMC did not disclose the amount of those commissions.

Earlier this month, the state Insurance Department approved rate hikes averaging 32.5 percent for exchange coverage in 2017 for the 10 health insurers selling on the exchange.

Highmark's rate hike requests included commissions for brokers, according to department spokeswoman Ali Fogarty. For one individual marketplace plan, Highmark sought a 48.1 percent increase and the state granted a 55.07 percent hike instead.

The Pittsburgh insurer reported losing $590 million on government exchange policies in 2015, the equivalent of $1.6 million a day or $1.20 in cost for every premium dollar received.

Consumers can still turn to health insurance navigators for free help in getting insurance. Navigators are nurses, social workers and others who have special training in health insurance matters, but the fact that there will be fewer people available to help overall may cause problems when enrollment opens Nov. 1.

"For the consumer, it's going to be a nightmare," said Deb Wilkinson, vice president health plan options at URL Insurance Group in Harrisburg. "My biggest producers say they're not writing this stuff this year. It's a real mess."

"These consumers are going to be left hanging out there."

URL is especially vulnerable to Highmark's decision because the Harrisburg-based company has been the leading broker for individual coverage for many years, Ms. Wilkinson said. It was a business built on volume, but "volume doesn't matter anymore," she said because of the lost commissions.

Harrisburg-based Capital BlueCross and Independence Blue Cross of Philadelphia will each stop paying broker commissions on new individual plans sold through the government marketplace in 2017, but continue paying commissions for policy renewals, spokeswomen for the carriers said. Ms. Wilkinson said brokers will receive $4.80 per member per month for new members served by Highmark affiliate Blue Cross of Northeast Pennsylvania -- well short of the costs involved.

The end of government exchange commissions comes as Highmark and other carriers have been cutting pay for other kinds of policies in recent years, creating a double whammy for people who make a living from selling health insurance, according to Rick Galardini, chairman and CEO, JRG Advisors, a Wexford brokerage.

"We're not losing the clients, the employer customer, we're just getting a lower payday on that customer," Mr. Galardini said. "And the work that has to be done has grown exponentially."

Shrinking commissions overall have cost JRG in excess of $500,000 annually in recent years, Mr. Galardini said at a time when the brokerage has added office space and staff. "Never would I guess that I would get zero," he said about the latest cut.

Ending broker commissions will discourage sales of government-subsidized plans, which are the only ones eligible for consumer tax credits, said Antoinette Kraus, director of the Pennsylvania Health Access Network, a Philadelphia-based advocacy group.

Without commissions, brokers are not "going to have the incentive to steer people to marketplace plans," she said. Brokers and agents are "trusted partners" for consumers "and that's where a lot of folks go to shop for health insurance."

Expansion of Medicaid has been among the biggest benefits of the Affordable Care Act, which resulted in many people getting health care services for the first time, said Kenneth Thompson, a psychiatrist and advisory board member of the Consumer Health Coalition, a North Side advocacy group. But many health insurers badly misjudged the costs of providing that care, driving up losses.

"They totally misunderstood the people who have not had insurance and how sick they were," he said.

Kris B. Mamula:[email protected], or 412-263-1699

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