Stung by losses under the federal health law, major insurers are seeking to sharply limit how policies are sold to individuals in ways that consumer advocates say seem to discriminate against the sickest and could hold down future enrollment.
In recent days Anthem, Aetna and Cigna, all among the top five health insurers, told brokers they will stop paying them sales commissions to sign up most customers who qualify for new coverage outside the normal enrollment period, according to the companies and broker documents.
The health law allows people who lose other coverage, families with new children and others in certain circumstances to buy insurance after enrollment season ends. In most states the deadline for 2016 coverage was Jan. 31.
Last year, these “special enrollment” clients were much more expensive than expected because lax enforcement allowed many who didn’t qualify to sign up, insurers said. Nearly a million special-enrollment customers selected plans in the first half of 2015, half of them after losing previous coverage.
In addition, Cigna and Humana, another big health insurer, have ceased paying brokers to sell many higher-benefit “gold” marketplace plans for individuals and families while continuing to pay commissions on more-profitable, lower-benefit “bronze” plans, according to documents and interviews.
Gold plans typically enroll sicker members than do less comprehensive policies, say insurance experts. As of June, more than 695,000 people had enrolled in gold plans.
Those who want to buy individual and family plans can still do so directly through the Affordable Care Act’s online marketplaces or via navigators working for nonprofit groups.
But the retreat from broker sales, which includes last year’s decision by No. 1 carrier UnitedHealthcare to suspend almost any commissions for such business, erodes a pillar of the health law: that insurers must sell to all customers no matter how sick, consumer advocates say.
By inducing brokers to avoid high-cost members — whether in gold plans or special enrollment — the moves limit access to coverage and discriminate against those with greater medical needs, said Timothy Jost, a law professor at Washington and Lee University and an authority on the health law.
“The only explanation I can see for them doing this is risk avoidance — and that is discriminatory marketing and not permitted,” he said. “When people wonder why we’re not getting millions more enrollees in Affordable Care Act health plans, one reason is, the carriers are discouraging it.”
The insurance industry says it is not discriminating but adjusting to market realities including higher-than-expected medical claims and the failure of a government risk-adjustment program called “risk corridors” to cover much of that cost.
“Without making necessary changes to coverage and benefits, there was no way for health plans to remain in the market or to offer the kind of coverage as they had in the past without sustaining huge losses,” said Clare Krusing, spokeswoman for America’s Health Insurance Plans, an industry lobby.
The adjustments are critical to keeping coverage affordable and sustainable, said individual insurers contacted by a reporter.
“When people wonder why we’re not getting millions more enrollees in Affordable Care Act health plans, one reason is, the carriers are discouraging it.”
If insurers are telling brokers they won’t be paid for enrolling people in gold plans, “that to me is pretty discriminatory,” said Sabrina Corlette, research professor at Georgetown University’s Center on Health Insurance Reforms.
The changes don’t affect job-based insurance or the government’s Medicaid and Medicare programs.
The nonpartisan Congressional Budget Office estimated as recently as last March that 21 million consumers would be enrolled by now in private health insurance plans sold through online marketplaces. Now CBO forecasts 13 million will sign up this year.
Brokers are critical to sign-ups and the success of the health law. For 2014, 44 percent of Kentucky enrollees bought through brokers. So did 39 percent of the California enrollees. No similar figures are available for the marketplace that serves most states, healthcare.gov.
Brokers are a “very important” part of enrollment for individuals and families despite alternatives provided by the health law, said Robert Laszewski, an insurance consultant. “They’re still big.”
With varying commissions, brokers will be tempted to promote only plans they make money on, even if those aren’t the best for some customers, said John Jaggi, an Illinois broker and consultant.
“Now they’re really forcing the agent to think only of the plan that he gets compensated for,” he said.
The race to lower commissions began last year with United’s move along with decisions by several, smaller insurance co-ops to suspend sales fees shortly before they failed, brokers said. Other insurers feared they might end up getting their competitors’ unprofitable business, so they too adjusted fees.
Last week, BlueCross BlueShield of North Carolina also told brokers it would stop paying commissions for special enrollment starting April 1, reported The News and Observer of Raleigh.
“We expect that at some point in time all of these companies will continue to reduce commissions where we’re not able to be compensated in a way that we can continue to run our businesses,” said Kelly Fristoe, who sells health insurance in Wichita Falls, Texas.
Regulators in at least two states, Kentucky and Colorado, have already warned insurers that altering broker commissions violates “fair marketing” rules or the terms approved rate filings.
Federal regulations prohibit insurers from marketing practices that “have the effect of discouraging the enrollment of individuals with significant health needs.” Violations can bring penalties of up to $100 a day for each adversely affected person.
The Department of Health and Human Services did not respond to requests for comment on the practices.
Insurers “can’t market their plans in ways that discriminate,” said Sarah Lueck, a policy analyst at the Center on Budget and Policy Priorities, a left-leaning think tank. “It’s going to take some more statements from regulators to make sure insurers get the message.”
What’s unclear is whether insurers intend to resume paying full commissions when open enrollment begins for 2017.
In its Monday letter to brokers, Anthem said it “remains committed” to individual and family insurance. United, however, said last year it might leave that business altogether — a drastic move because under federal law it couldn’t reenter for five years.
Few if any carriers want to go that far, said Laszewski.
“They can’t withdraw from the market,” he said. But by adjusting commissions, “they’re doing everything they can to slow it down until it gets fixed.”
Special-enrollment business is typically costlier than average because sick people are more motivated to sign up outside the normal marketing season, insurance experts say.
But last year’s special enrollments were especially unprofitable because regulators did little to ensure that consumers followed the rules — that they had lost previous coverage, gotten married, moved or otherwise qualified for off-season sign-ups, insurers say. As a result, any consumer could wait until he or she needed care to enroll, they say.
Aetna told HHS that a fourth of all its marketplace members joined through special enrollment last year and that many dropped out soon after receiving expensive care. Special-enrollment members used as much as 50 percent more care than those who sign up before the deadline, said the Blue Cross and Blue Shield Association.
Of the top seven health insurers, only Kaiser Permanente and Health Care Service Corp., which owns Blues plans in Illinois, Texas and elsewhere, haven’t changed commissions recently for gold plans or special enrollment, brokers say.
“Kaiser Permanente won’t be making any broker commission changes,” said spokeswoman Amy Packard Ferro. “It’s business as normal but we are always evaluating our commission structure,” said HCSC spokesman Greg Thompson.
The risk corridor program was supposed to reimburse insurers with sicker-than-average members. In November, however, HHS said it had only enough money to pay 13 percentof what it owed under the program for 2014.
The result for gold plans is that “the risk adjustment system does not work at all,” said Ana Gupte, a health insurance analyst at Leerink Partners. “So it’s impossible to make money.”
Analysis by Standard and Poor’s shows Humana, which is owed $243 million for 2014, as the biggest risk-corridor loser. United, Anthem, Aetna and Cigna, however, aren’t in the top 20.
For most of the largest insurers, blaming risk corridors for cutting broker fees “seems more like an excuse than a reason,” said Jost.
–Julie Appleby, Kaiser Health News
Amom says
We need a single payer system… No need for the greed when dealing with healthcare!
Tired of it says
Those of us that have worked hard, saved our money and retired with a modest pension and access to health benefits are getting the royal shaft from the Obama Care mess. Since Obama Care went into effect my premiums have risen over $100 a month, my copays are higher and so is my out of pocket deductibles. I just hope and pray we don’t get a Dem elected to continue this screwing of the working class just to benefit the lazy asses that don’t work and live off the system.
groot says
Obamacare is a failure. Blow it up, start over. Our health care costs are now prohibitive. Private payers like my wife have been hit the hardest. Her monthly premium is $400, $5000 deductive and $5000 out of pocket. What we now have is basically, expensive major medical insurance.
Anon says
Amom a single payer run by the government does not work just look at the va. It would also cost more and have less coverage instead of paying premiums to health insurers we would be paying more taxes so they could pay the insurers. It needs to be a competitive free market.
tulip says
Well Hillary wants to continue Obama’s legacy AND keep Obama care so I don’t think she would be a good choice to vote for if insurance is a major issue for you, as it is with many people that aren’t 65 or older.
Have you inquired with someone like Blue Cross Blue Shield or Florida Blue as it is now known, about getting your own private insurance? They have many plans to choose from and you have a chance to look them over and decide what’s best for your particular needs.
Most doctors accept BC BS so you aren’t limited to who you can go to.
KB63 says
This discrimination is already happening in Flagler County. I work in Volusia County. I can’t get the same gold plan from Humana that my co-workers have. I even said I would go to Volusia county doctors, after all it’s only 30 minutes away, but no, because of my Flagler County address I can’t have it. Humana said we would rather you have a Silver plan with a $6,450 deductible to pay out of pocket instead of only a $1250 deductible to be sure we don’t pay anything. Why is this? The only thing I can think of is the age group of Flagler & the poverty level and the people that are hurting from this are private payers who are middle class & getting poorer by the year.
Rick G says
Oh booh hoo… The health insurance companies are crying because they haven’t been able to rip off the public at the same rate they used to do so. My insurance rates 10 years ago went up 5 straight years and there wasn’t any Obama around to blame… A public option would strip down the arrogance of these so called “insurers of health”. Should have been part of the ACA in the beginning. Single payer does work and it would provide at least some health care for those who can’t afford to pay the usury prices health insurance companies charge.
Mark says
We are saved, we are saved! Thank you Obama, we are saved!
Samuel L. Bronkowitz says
Tired of it, you are absolutely right. If we get a solid Republican in office he or she will get rid of these ridiculous social programs like obamacare, welfare, Medicare, Medicaid, and social security. I’m sick and tired of subsidizing people who want to sit around and do nothing.
Obama 2016 says
So insurance companies are ripping us off for 40+ years and it’s Obama’s fault?
Health care costs have slowed down.
Healthcare plan increases before Obamacare were about 5% a year up until 2009 where now the increases are now at 2.8%. And that is with more people in the system.
These companies make billions off you and I in unpaid claims and loopholes and they are crying poor because they have to provide better service..
Say that to all the people that lost all their life savings because they had a pre existing condition and got cancer.
Honestly I hope they all go out of business and a single payer system is set up. I rather deal with that knowing I will always have coverage and it will not cost my my house, my job and my future.
thank your state says
It’s the fault of your state goverments and now the industry itself. You can’t have a state goverment do everything in its power to make something fail and then blame the creator’s. I guess shame on Obama for having hope that elected officials would do what’s good for their people. A Republican run state hurting it’s very own people and the people blaming the ones who try to help them. It’s classic.
Outsider says
How is the state making the program fail? The program is insolvent, as predicted by many. The only thing the state did was not accept federal money to expand Medicaid. Now many of you can’t comprehend why this was done, so let me help you out. Eventually the federal money will be cut off, because you can’t run trillions of dollars in deficits forever. At that point, the entire burden will fall onto the taxpayers of Florida, which is exactly what Obamacare intended. It’s a backhanded way of coercing the states to pay for Medicaid. I would add that Obamacare dictated that states set up insurance exchanges, and if they didn’t then the federal government would. So, that’s what happened in Florida, and if it’s not working, it’s another example of the ineptitude of the federal government, and should be a lesson as to why the government should not be in charge of things the private sector can do better.
Geezer says
I want to see Medicare for all, with the private insurers
optionally providing Medigap. I paid into the system for
many years via paycheck deductions, and when I needed it,
Medicare was there and it saved my life and my home.
Why is that “ridiculous?”
The other day we read about dangerous pit-bulls, and many of
you weighed in and declared how dangerous they are.
After reading a couple of comments about Obama and the
Affordable Care Act, I conclude that a rabid pit-bull is kinder and
gentler than any vicious, obnoxious right-winger.
Talk about “sick and tired.”
I’d rather my taxes go to helping those who are sick, than subsidizing
imperialist, and unnecessary wars, and bloodshed.
Healthcare shouldn’t be a luxury in the United States.
confidential says
Hooray Geezer!
Sandra Reynolds says
KB, not sure who you spoke to but we had a choice of plans.
Sandra Reynolds says
Greedy bastards! Boo-hoo, the CEO of United Health Care had to take a cut in pay from $110 million down to $66 Million. And you greedy nasty selfish people want to deny a needy person a chance for affordable health care? Shame on you.
Sherry says
Right On, as usual Geezer!
This is NOT about the failure of the ACA! This is all about the insurance industry doing everything they can to go back to the BAD ole days. . . and manipulate their marketing and plans in a way that minimizes their coverage to those who need it the most. It’s about MAXIMIZING PROFITS instead of providing good health care services!!!!
I, too, would prefer that we just have a single payer system similar to Medicare. One where the private insurance companies are not in the middle, and gaming the system looking for loop holes! Yes, the ACA can and should be improved but throwing it out would leave us right back where we were before. . . with ALL the power left to the insurance companies to “cherry pick” only the most healthy to insure. BECAUSE the Republicans DO NOT care about health care for every citizen. They have NO real plan at all! Hot Air is not going to provide health care for anyone!