Stung by the losses under the federal health law, huge insurers are finding ways to sharply restrict how policies are sold to individuals in ways that customers advocates say seem to illegally discriminate against the sickest and could hold down upcoming enrollment.
In recent days Anthem, Aetna and Cigna, all among the top 5 health insurers, informed brokers they will stop paying them sales commissions to sign up most clients who qualify for latest coverage outside the normal enrollment time, in accordance to the companies and broker documents.
The health law permits persons who lose other coverage, families with new kids and others in few circumstances to purchase insurance after enrollment season ends. In most states the target time for 2016 coverage was Jan. 31.
Previous year, these “special enrollment” customers were much more costly than expected because lax enforcement permitted many who did not qualify to sign up, insurers said. Almost a million special-enrollment consumers selected policies in the 1st half of 2015, half of them after losing previous coverage.
Additionally, Cigna and Humana, another major health insurer, have ceased paying brokers to sell various higher-benefit “gold” marketplace policies for individuals and families while sustaining to pay commissions on more-profitable, lower-benefit “bronze” plans, in accordance to documents and interviews.
Gold policies typically enroll sicker members than do less comprehensive policies, claim insurance experts. As of the month June, more than 695,000 persons had enrolled in gold plans.
Those who need to purchase individual and family policies can still do so straightly through the Affordable Care Act’s online marketplaces or through navigators working for nonprofit groups.
But the retreat from broker sales, which involves previous year’s decision by No. 1 carrier UnitedHealthcare to suspend nearly any commissions for such business, erodes a pillar of the health law: that insurers must sell to all clients no matter how sick, client advocates say.
By inducing brokers to ignore high-cost members — whether in gold policies or special enrollment — the moves limit approach to coverage and discriminate against those with higher medical requirements, stated Timothy Jost, a law professor at Washington and Lee University and an authority on the health law.
“The mere explanation I can analyze for them doing this is risk avoidance — and that is discriminatory marketing and not allowed,” he stated. “When individuals wonder why we are not acquiring millions more enrollees in Affordable Care Act health plans, 1 reason is, the carriers are discouraging it.”
The insurance industry claims it is not discriminating but adjusting to market realities involving greater-than-expected medical claims and the unsuccessfulness of a government risk-adjustment plan called “risk corridors” to cover much of that cost.
“Without making essential alterations to coverage and profits, there was no way for health policies to sustain in the market or to provide the kind of coverage as they had in the past without sustaining major losses,” claimed by Clare Krusing, spokeswoman for America’s Health Insurance Plans, an industry lobby.
The adjustments are serious to keeping coverage affordable and sustainable, stated individual insurers contacted by a reporter.
If insurers are telling brokers they will not be paid for enrolling persons in gold plans, “that to me is pretty discriminatory,” stated Sabrina Corlette, research professor at Georgetown University’s Center on Health Insurance Reforms.
The changes do not impact job-based insurance or the government’s Medicaid and Medicare programs.
The nonpartisan Congressional Budget Office assumed as recently as last March that twenty-one million clients would be enrolled by now in private health insurance policies sold through online marketplaces. Now CBO forecasts thirteen million will sign up this year.
Brokers are serious to sign-ups and the victory of the health law. For the year 2014, 44% of Kentucky enrollees bought through brokers. So did 39% of the California enrollees. No similar figures are present for the marketplace that facilitates most states, healthcare.gov.
Brokers are a “very significant” part of enrollment for people and families despite alternatives offered by the health law, stated Robert Laszewski, an insurance consultant. “They are still big.”
With varying commissions, brokers will be tempted to launch merely policies they make money on, even if those are not the best for some clients, stated John Jaggi, an Illinois broker and consultant.
“Now they are actually compelling the agent to wonder only of the policy that he gets compensated for,” he stated.
The race to lower commissions started previous year with United’s move along with decisions by various, smaller insurance co-ops to suspend sales fees shortly before they failed, brokers stated. Other insurers had a fear that they might end up gaining their competitors’ unbeneficial business, so they too adjusted fees.
Previous week, BlueCross BlueShield of North Carolina also told brokers it would prevent paying commissions for particular enrollment beginning on April 1, reported The News and Observer of Raleigh.
“We hope that at certain point in time all of these companies will sustain to decrease commissions where we are not capable to be compensated in a way that we can sustain to run our businesses,” stated Kelly Fristoe, who sells health insurance in Wichita Falls, Texas.
Regulators in nearly 2 states, Kentucky and Colorado, have already cautioned insurers that changing broker commissions violates “fair marketing” rules or the terms passed or approved rate filings.
Federal regulations prohibit insurers from marketing practices that “have the impact of disappointing the enrollment of people with key health requirements.” Violations can bring penalties of up to $100 per day for each adversely affected individual.
The Department of Health and Human Services did not react to the requests for comment on the practices.
Insurers “cannot market their policies in ways that discriminate,” stated Sarah Lueck, a policy analyst at the Center on Budget and Policy Priorities, a left-leaning think tank. “It is going to take some more statements from regulators to make certain insurers get the message.”
What is unclear is whether insurers intend to resume paying complete commissions when open enrollment starts for the year 2017.
In its Monday letter to brokers, Anthem stated it “remains committed” to person and family insurance. United, although, said previous year it might leave that business altogether — a drastic shift because under federal law it could not reenter for 5 years.
Few if any carriers desire to go that far, stated Laszewski.
“They cannot withdraw from the market,” he stated. But by adjusting commissions, “they’ are doing everything they can to make it slow down until it gets fixed.”
Special-enrollment business is generally expensive than average because ill persons are more encouraged to sign up outside the normal marketing season, insurance experts claim.
But previous year’s special enrollments were particularly unprofitable because regulators did little to make certain that customers followed the rules — that they had lost previous coverage, gotten married, shifted or otherwise qualified for off-season sign-ups, insurers claim. As a result, any customer could wait until he or she required care to enroll, they claim.
Aetna told HHS that a 4th of all its marketplace members joined through special enrollment previous year and that various dropped out soon after receiving costly care. Special-enrollment members utilized as much as 50% more care than those who sign up before the target time, stated the Blue Cross and Blue Shield Association.
Of the top 7 health insurers, merely Kaiser Permanente and Health Care Service Corp., which owns Blues policies in Illinois, Texas and elsewhere, have not changed commissions recently for gold plans or special enrollment, brokers claim.
“Kaiser Permanente will not be making any broker commission changes,” stated spokeswoman Amy Packard Ferro. “It is business as normal but we are always evaluating our commission structure,” stated HCSC spokesman Greg Thompson.
The risk corridor plan was supposed to compensate insurers with sicker-than-average members. In he month of November, although, HHS said it had merely sufficient money to pay 13% of what it owed under the program for the year 2014.
The outcome for gold plans is that “the risk adjustment system does not work at all,” stated Ana Gupte, a health insurance analyst at Leerink Partners. “So it is impossible to make money.”
Analysis by Standard and Poor’s indicates Humana, which is owed $243 million for the year 2014, as the major risk-corridor loser. United, Anthem, Aetna and Cigna, although, are not in the top 20.
For most of the major insurers, accusing risk corridors for cutting broker fees “appears more like an excuse than a reason,” stated Jost.
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