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April 1, 2013 It's a deal

State's health insurance exchange OKs role for independent brokers

Photo | Pablo Robles John Calkins, president of Watertown's Bozzuto Associates, said he is pleased brokers will be eligible to earn commissions through the state's health insurance exchange.
By Greg Bordonaro

Brokers concerned about whether or not they'll be able to make money off Connecticut's health insurance exchange can breathe a bit easier.

With federal health care reform fully kicking in next year, The Hartford Business Journal will be highlighting many of the changes to the state's healthcare industry in the months ahead, as part of a series of 'Health Check' stories.

Exchange officials say insurance brokers and agents will be able to collect commissions for bringing individual clients to the exchange once it gets up and running this fall.

The commissions, officials say, will be paid out by insurance carriers and not the exchange itself, essentially leaving in place the current business model for insurance agents.

The news will be well received by the brokerage community, whose representatives say they still have more questions than answers on how the state's insurance exchange will operate and what role they will play in it.

"The brokerage community has said that we'll do whatever we can to assist clients to get the best insurance coverage possible," said John Calkins, a director of the Connecticut Benefit Brokers chapter of the National Association of Health Underwriters. "But there is still a lot to be learned about the exchange. Most agents need far more information."

Insurance exchanges are a key part of the federal health care reform law, and will essentially serve as online marketplaces where people can buy insurance. The federal government will also offer subsidies through the exchange to certain qualifying individuals to make health care coverage more affordable.

Connecticut is one of a handful of states rushing to get its exchange up and running by a Jan. 1, 2014, deadline. In reality, the exchange must be ready by October, when open enrollment season begins.

The decision to allow insurance agents to earn commissions for bringing customers to the exchange was left to individual states. Connecticut insurance brokers have been on edge, wondering if the state's 14-member exchange board would allow them to participate or leave them out in the cold.

The exchange board has elected to allow brokers to collect commissions from insurance carriers. Those commissions are negotiated between brokers and insurers and can range anywhere from $10 to $20 per member per month, to 2 percent to 4 percent of annual premiums, industry officials say.

Calkins, who is also president of Watertown brokerage firm Bozzuto Associates Inc., said the Affordable Care Act has already caused insurers to reduce broker commissions over the past few years because of new medical loss ratio restrictions, so being able to participate in the exchange is important.

The federal law requires insurers to spend at least 80 percent of individual and small group premiums and 85 percent of large group premiums on medical costs. Brokerage fees, however, are considered administrative expenses and can't be counted as medical costs, which has forced insurers to rein in commission fees.

Calkins said his firm has lost 33 percent of its commission revenue since the federal health care law went into place.

Jason Madrak, the chief marketing officer of Access Health CT, said the board actually sees brokers playing a key role in what will likely be one of the biggest challenges for the exchange: getting the targeted customer case of uninsured or underinsured people to understand and use it.

Some small businesses with fewer than 50 employees also will likely stop offering coverage and make their workers purchase insurance through the exchange instead.

Madrak said the goal in year one is to get around 200,000 of the state's approximately 344,000 uninsured residents signed up for insurance through the exchange. Many of those individuals will obtain coverage through private carriers that will sell qualified health plans through the exchange. Others will be eligible for the state's expanded Medicaid program.

The exchange will identify what plans and federal subsidies individuals are eligible for based on their income levels and other personal information.

But the task of getting people to use the exchange won't be easy, especially when much of the targeted customer base is individuals who have never purchased insurance before.

Madrak said Access Health CT is developing a balanced marketing strategy that will utilize the exchange website and call center as well as in-person channels, including insurance brokers, community organizations and "navigators" to help educate the public.

The exchange will spend $6 million on an aggressive marketing campaign, which will be funded through federal grants. Southport marketing firm Pappas MacDonnell has been hired to help with the communications strategy that will include traditional TV, radio and online ads that will appear most aggressively during the fall open enrollment season.

The marketing strategy will also lean on grass roots efforts by community groups and faith-based organizations in poorer urban centers, which have some of highest numbers of uninsured residents who will be the most difficult to reach, Madrak said.

It's part of a bottom-up approach that will include getting active in community events like street fairs and even doing door-to-door canvassing to get the word out, Madrak said.

"We have to bring the message directly to the street and people and then use traditional media outlets like TV, radio, online ads and direct mail." Madrak said. "Health insurance is not usually a topic that is top of mind for most people. We have to pique their interest and get their attention. This is a category of people who have had little involvement with buying health insurance in the past."

As part of the outreach campaign, the Affordable Care Act requires states to establish a navigator program, which will consist of individuals and organizations that receive grants to provide education and enrollment support for the exchange. The goal of navigators, Madrak said, will be to provide fair and impartial information, and to make sure that all information and services are performed in a culturally and linguistically appropriate way.

The navigators will be required to take training courses and could include faith-based organizations, community health centers, churches or even small businesses.

Meanwhile, brokers will also have to take training courses and be certified to sell insurance products offered through the exchange, Madrak said.

Access Health CT will begin an outreach campaign in April to educate the brokerage community on how the exchange will operate.

Calkins, the Watertown insurance broker, said besides lack of clarity about the exchange, affordability is another major concern. He questions whether insurance plans sold through the exchange, which will be required to meet minimum essential benefit standards, will be affordable. It's a concern shared by many stakeholders, who fear that small businesses and individuals will experience sticker shock once insurers reveal plan rates in the coming months.

Still, with tens of thousands of residents potentially seeking coverage through the exchange, the brokerage community sees it as an opportunity, Calkins said.

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