Consumers could lose out as insurers kill broker fees

Over the course of 11 years, Jason Bohmann guided 10,000-plus people, many with complicated medical needs, through a dizzying maze of health insurance options. The Houston agent found them the right coverage, which meant they got the right care.

In exchange, the insurance industry paid him a commission on each plan he sold. The matchmaking seemed to work for all, even after the Affordable Care Act went into effect and Bohmann could broker plans on or off the new federal exchange.

Then on Feb. 23, a notice from Blue Cross Blue Shield of Texas landed via email: "BCBSTX will eliminate (broker) commissions for new sales of individual Affordable Care Act plans effective April, 2016." With that, the state's largest insurer joined Cigna, United HealthCare, Aetna and Humana in eliminating or slashing payment to brokers writing such policies outside the regular enrollment period.

The industry has called it a difficult but necessary decision in a time when it's being hammered by losses in the individual market, especially during the "special enrollment periods" reserved for those who need new coverage because of a job loss or life change. Insurers allege many people are abusing the system by waiting until they are already sick to sign up.

Not all are buying that explanation, however, calling it one more covert way the industry has found to impede access to higher-benefit coverage and skirt the health care law's mandate to cover everyone regardless of medical needs.

"I absolutely think this is part of a pattern," said Valarie Blake, a West Virginia University law professor who specializes in the intersection of health care policy and ethics, citing other potentially obstructive measures such as rising premiums and the narrowing of networks, both of which can discourage people from getting or using their insurance.

"Before the ACA, it was all very cut and dried. If you had a chronic condition you just weren't allowed in the door. But now that everyone is in and you can't charge more based on your health, the alternative is avoiding their enrollment or reducing services if they are enrolled."

She and other legal experts and consumer advocates worry that if the financial incentive to brokers is lost, so, too, will be a specific expertise in navigating a complicated system, especially for those with expensive medical needs.

'Dissuading business'

Meanwhile, the insurance landscape is rapidly evolving.

Late last year tens of thousands of people in Houston learned that every major insurer had eliminated preferred provider organization plans, both on and off the exchange, that traditionally had offered wide networks of providers. People were shifted into health maintenance organization plans that exclude many of the city's top-tier hospitals and affiliated doctors. In December, Humana, which previously had withdrawn from Houston's PPO market, returned with a high-deductible PPO plan off the exchange.

"This is about dissuading business," Bohmann said. "They want to cut the flow of people."

Bonnie Mulkey, a 58-year-old mother and grandmother in Spring, was once extremely overweight and could not get health coverage because she was deemed too great a health risk. After the ACA passed she turned to Bohmann, who put her in a plan that covers her doctor and offers a subsidy to lower her premiums.

"Jason just finds something for me. I don't understand it," she said.

Jo Middleton, past president of the Houston Association of Health Underwriters, said the Centers for Medicare and Medicaid Services estimate that brokers have guided about 40 percent of policyholders who have signed up on the federal exchange. Her group represents about 400 members; the statewide association has about 1,800. Their commissions run on average 4 to 5 percent of the price of a premium.

Middleton said she works with clients even when they are using an exchange navigator to ensure they get the right coverage. Brokers like Middleton are skeptical it is a large cost savings.

"This is more about slowing down business," she said.

Mulkey said that, without the help provided by Bohmann, she would probably skip insurance altogether and pay the tax penalty that also is part of the federal health care law.

ACA violation?

Timothy Jost, a health law policy expert and professor at Washington and Lee University Law School, became concerned after learning insurers had told brokers they wouldn't pay commissions for customers who signed up during special enrollment because those customers were more costly.

"That's a prima facie admission of a violation of the Affordable Care Act," he said. "The idea behind the ACA was that the law was going to eliminate health status underwriting which had been the modus operandi for three-quarters of a century. The ACA said you can't do that anymore"

Aetna, the nation's third-largest insurer currently in the midst of acquiring Humana, confirmed in an email statement to the Chronicle that it was curbing broker commissions due to concern over costlier customers signing up during the special enrollment periods, or SEPs.

"Last year Aetna saw a quarter of all applications come through SEPs. We also saw that members with SEPs used more services and dropped coverage sooner than those who did not go through SEPs. As a result, we made the decision to align our incentives with those of our competitors, which included making changes to our broker commissions."

Humana emailed the Chronicle to say it recognizes the concerns but also to insist the change was not done to limit customers' coverage.

"On the contrary," the company said, "we had to make this business decision to ensure the future affordability and viability of our individual health plan offerings."

Cigna and Blue Cross and Blue Shield of Texas did not comment directly on the reduction or elimination of broker commissions, but in emailed statements said they "valued" their contribution. The companies also did not address allegations of cutting broker fees as a way to circumvent the ACA.

Houston brokers say Community Health Choice and Memorial Hermann Health System continue to pay commissions for the sale of their plans.

Special enrollment

It remains unclear whether broker commissions for individual market plans offered by major insurers will be restored for 2017 even during regular enrollment. In the notice to Bohmann, Blue Cross and Blue Shield said it would "re-evaluate" and let brokers know as the time nears.

Insurers say elimination of broker fees does not affect do-it-yourselfers who can still purchase plans online through the ACA's exchange or with the help of navigators or community groups as long as they qualify for the special enrollment period.

The industry turned to the U.S. Department of Health and Human Services to ask for a tightening of the rules governing the special enrollment period, usually February to November, because people were gaming the system by waiting until they were sick to sign up.

Earlier this month, the government issued new, tougher regulations that state a person can qualify only if she or he loses coverage due to events such as a job loss; a change in household or financial situation; proof of an error in an existing plan; or a move. For the latter, an enrollee must have had coverage for at least one day during the prior two months.

Health and Human Services spokesman Jonathan Gold said the department had no comment on the decision by insurers to eliminate broker fees.

A handful of states have cried foul. The Colorado Department of Regulatory Agencies issued a stern bulletin as it caught wind of coming changes to broker commissions, warning the new fee structures "appear to be an attempt, at a minimum, to avoid or reduce carrier risk by discouraging the sale of plans where a carrier is responsible for a greater portion of the health care costs incurred."

In Kentucky, the state challenged insurers by saying broker fees are part of a rate filing: "Failure to pay commissions in accordance with the rate filing will be considered a violation of the Insurance Code."

In California, insurers participating in the state exchange are required by contract to pay a commission.

But Texas has no prohibition against insurers dropping commissions. Texas Department of Insurance spokesman Ben Gonzalez said broker commissions and fees are "an assumption that is part of the rate filing."

If circumstances change for an insurer during the year, it does not affect the previous filing.

"If you miss your assumption we don't go back and say customers are owed a refund," he said.

Steering consumers

The insurance industry has made no secret of its dismay with the overall individual market, saying it continues to have difficulty pricing plans properly. Carriers have said they under-charged customers in the early days of the ACA and were blindsided by the price of covering customers who were sicker and used more health care than expected.

In April, UnitedHealthcare announced it was pulling out of the exchange for 2017 in Texas and most other states because of losses. Earlier this month, Humana said it would be making "course corrections" to compensate for losses.

Jost finds it all a bit counterintuitive. He thinks insurers complaining about skewed risk pools would want more business during special enrollment, not less. "They should be increasing commissions, not eliminating them," he said.

Bohmann realizes some might see this as merely a sign of the times, with brokers going the way of travel agents or other service people replaced by the Internet. But usually the elimination of a middleman translates to savings for the consumer. That's not so in this case.

"The price of premiums is exactly the same if you use a broker or do it yourself," he said.

Rather, he said he suspects eliminating commissions is about steering people in new directions.

"That is also why the insurance companies are desperately trying to push agents to sell life, disability, critical illness, dental and vision insurance," he said. "They make a much greater profit on those products."

For now, Bohmann will keep writing health insurance policies for clients even if it means working for free. Last month he wrote about 30 in the individual market, many for laid-off oil and gas workers who had lost employer-sponsored group coverage.

"I can do it for now," he said. "Can I do it 10 more months? I don't know."