A Place for Agents and Brokers to Share Their Opinions

States Leave Federal Exchange in Hands of the Government

States had until Friday December 14 to decide whether they will be implementing their own health care exchange.  After this passing deadline, 25 states did not submit a blueprint for their state run exchange.  By default, these states will be allowing their health care exchanges to be run and implemented by the federal government in a federal health care exchange.  The Obama administration will be responsible for setting up these exchanges and providing coverage to the uninsured.  There are seven states that have decided to implement a federal-state partnership.  This partnership permits states to share the administrative burden of building and implementing a federal exchange with the federal government.

The statewide exchanges will be operated on a website designed to help the uninsured become insured with ease of access.  Consumers will be able to compare the costs and benefits of health insurance plans provided by different companies in an internet based marketplace similar to comparing the price and amenities of a hotel room.  Enrollment for these exchanges will begin October 1, 2013.  The federal government will be responsible for building a federal exchange in each of the 25 states without current state-run exchanges.  The Obama administration will also be responsible for the development of a data center in order to verify a person’s eligibility for certain health programs, tax credits, subsidies, etc.

For more information on the state and federal exchanges being implemented by the new health care reform, click here.

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Covered California

The federal health care reform law requires states to submit their decision on whether they will be developing a state health care exchange, a partnered health care exchange with the government, or a completely federal health care exchange.  California Health Benefit Exchange Board has been planning a state exchange also referred to as Covered California.  California has created a blueprint for Covered California which will take effect January 1, 2014.  Covered California is expected to cover approximately 3 million uninsured Californians according to Peter Lee, the Executive Board Director.

Open enrollment for Covered California will begin October 2013, and until then the Board will increase efforts to educate California on the changes made by the state’s newly developed exchange plan.  The Board is in the process of hiring staff to inform individuals, families, and employers the effects of Covered California and the different plans that will be offered through the exchange.  The overall mission of Covered California is to expand coverage by making it more affordable.

In addition, California will no longer allow the denial of coverage by health care providers to children with a pre-existing condition.  Young adults will also be allowed to remain on their parent’s health plan until they reach age 26.  California has applied for a federal grant to establish and implement Covered California for the initial two years and the California Health Benefit Exchange Board predicts that the state will be fully self sufficient by January 2015.

For more information on Covered California, click here.

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Effects of Covered California

Beginning in 2014, Covered California will be the main source of health insurance in the market.  Covered California will offer qualified health plans to individuals and families.  It will provide ease of access to receive health plans and it will participate in programs to publicly reveal availability of health coverage options.  More importantly Covered California will determine who is eligible for premium subsidies and cost sharing reductions.

Premium Subsidies are eligible to taxpayers whose household income “is between 133 percent and 400 percent of the federal poverty level (FPL) for the approximate family size” (California Health Benefit Advisers).  One challenge under Covered California is that about 2 million people between 2014 and 2015 will purchase premium subsidies. Furthermore, approximately 3 million people will be enrolled in Medi-Cal amongst those who are eligible for it.  This vast increase in people enrolled and eligible for health coverage creates many unique problems under Covered California.

For more information on the effects of the Covered California program, click here.

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Aetna Reduces Commission

Aetna recently sent a letter to all Small Group insurance providers regardeing commission reduction.  Beginning January 1, 2013, Aetna will be reducing commissions for insurance brokers each year to maintain their budget allocated under the Affordable Care Act (ACA).  They have introduced a schedule to decrease the commissions for brokers of Small Group businesses with 2-50 eligible employees.  It will be continuously updated, however, the changes for the first 6 years are revealed below.

  • 1st year- 6.5%
  • 2nd year (at renewal) – 6.2%
  • 3rd year (at renewal) – 5.9%
  • 4th year (at renewal) – 5.6%
  • 5th year(at renewal) – 5.3%
  • 6th and subsequent years (at renewal) – 5%

This reduction in commissions is meant to balance and counteract the effects of inflation, taxes, and fees occurring in the upcoming future.  Small Group business brokers should be aware of these changes that will be effective January 1, 2013.  However, these changes will not affect Small Group businesses sold prior to January 1, 2013 and the payment schedule will remain the same at this time.

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Senate MLR Bill Aims to Give Agents Some Relief

By Elizabeth Festa

U.S. Senator Mary L. Landrieu, D-La., chair of the Senate Committee on Small Business and Entrepreneurship, and Sen. Johnny Isakson, R-Ga., have introduced S. 2068, the Access to Independent Health Insurance Advisors Act, a companion bill and a shot in the arm for a medical loss ratio bill in the House that has many supporters but has gained no traction.

This legislation addresses that provision of the Affordable Care Act (ACA) known as the medical loss ratio (MLR) that many feel has squeezed the livelihood of agents and brokers by excluding their commissions from the healthcare, quality and care portion of the ratio.

The MLR rule, which went into effect on Jan. 1, 2011, mandates that at least 80% (individual and small group) or 85% (large group) of premiums collected by the carrier must be spent on “health care quality improvement.”  

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Despite Supreme Court appeal, will states meet Obamacare deadlines?

By Tony Ondrusek

Posted: 11:56 am, October 3, 2011

The U.S. Supreme Court convenes this week, and the Obama Administration has signaled that it will likely ask the nation’s highest court to weigh in on the president’s landmark health reform law, which is facing no fewer than 20 state challenges. Most recently, the 11th Circuit Court of Appeals found the requirement that all citizens must purchase health insurance unconstitutional. Instead, Mr. Obama and his advisors believe it is prudent to have the legality of the legislation debated before the nation smack dab in the middle of a presidential campaign. Regardless, by law states must continue to move forward unless and until a ruling is reached, spending untold tens of millions of dollars implementing the unwieldy legislation, not to mention the untold hundreds of millions of dollars (if not billions) in costs to employers, insurance carriers, brokers and agents, and individuals who are trying to not only comply with the law, but trying to find out HOW to comply with the law. What progress are the states making in their required compliance to help President Obama turn his philosophy into a workable government oversight and management system run ostensibly by those very states? Are the states moving forward, or muddling through the weeds? Over the past few weeks, I have spoken with and/or had the opportunity to listen to a number of state government officials and associated individuals involved in implementing the super-size health reform law. These include state insurance commission officials, directors of state Medicaid offices, and others in the health insurance industry who either work directly with state agencies on health insurance exchanges or help brokers and agents navigate their way through the behemoth legislation. To a person, there is consensus that meeting deadlines imposed by the law will be nearly impossible – if not absolutely impossible – and that consumers will end up paying more for their health care than they currently budget. Neither is desirable, but both were known when the law was passed by royal fiat 18 months ago. The Administration has posted an Obamacare timeline on one of new federal websites in a dumbed-down version for us common folk, which, while it was written to give everyone the warm fuzzies about all the wonderful things the law will do, it also shows that there is one heck of a lot to do in a relatively short period of time. The “biggie” in the timeline that agents, brokers, state agencies and ultimately consumers care about is the year 2014. That’s when employers will face stiff fines if they don’t offer health insurance, when individuals will be fined if they don’t have health insurance, and when state-run exchanges are to be up and running fully and effectively. Officials fear that these major guidelines will not be met for several reasons:

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Health Insurance Brokers Fight For Relevance

by Michelle Andrews

Will health insurance agents and brokers face a fate similar to that of travel agents, whose role in travel planning has dwindled as people book their own trips online?

There’s no telling exactly what will happen in coming years as states set up online exchanges where consumers can shop for health insurance policies starting in 2014, but brokers aren’t going down without a fight.

Right now, they’re waging a campaign to exclude the sales commissions insurers pay them from the insurers’ administrative expenses. Under the federal law overhauling health care, insurers can spend no more than 20 percent of the premium dollars they collect on administrative expenses and profits. At least 80 percent must go toward paying for medical care and quality improvement efforts. This is the medical loss ratio in insurance parlance, medical claims paid are considered losses. 

Insurers that don’t meet the target of 80 percent for individual and small group policies and 85 percent for large groups have to issue rebates to consumers. Continue reading

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Tougher regulation of health insurance rates wins in California Assembly

June 2, 2011 

California lawmakers are taking another stab at tougher regulation of health insurance rates.

The state Assembly has approved a bill that would require health insurers to get approval from state regulators to raise insurance premiums despite a determined effort by the insurance industry to kill the measure.

The Assembly passed AB 52, which would give the state’s elected insurance commissioner and a second regulator, the Department of Managed Health Care, under Gov. Jerry Brown, authority to reject increases they deem excessive. The regulators also could modify rate increases.

This is the fourth attempt by Assembly Democrats to enact tough rate regulation. The bill goes next to the state Senate.

Insurance Commissioner Dave Jones, who as an assemblyman failed three times to pass a similar measure, applauded the vote, saying it would protect consumers.

“Since I took office [in January], Californians have made it exceedingly clear that they want me to reject excessive rate increases, but I do not have this authority,” Jones said.

He said the need for the legislation “has only grown as health insurance continues to become unaffordable for more and more Californians and businesses.”

– Duke Helfand

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How Brokers Can Find Opportunities in the Health Care Reform Era

The Patient Protection and Affordable Care Act (PPACA) is designed to bring benefits to millions of uninsured Americans by decreasing health care costs and premiums.

More than a year since the federal legislation was signed into law, the PPACA has yet to exert downward pressure on these costs and premiums. In fact, the latest reports show an opposite effect. Employers are expected to pay nearly 9 percent more for health care costs for their workers in 2011, the highest level in five years. And employers will more than likely ask their workers to absorb 12 percent of these costs.

The future savings predicted by the government also have been questioned because of the sheer cost of the health care reform package—an estimated $940 billion during the next 10 years—and uncertainty about how it’ll be funded.

For the most part, medical insurers, pharmaceutical manufacturers, medical device makers and even affluent Americans are designated to collectively foot the bill. But some predict these new financial burdens may be passed down and produce cost repercussions for Americans. And both employers and their workers believe health care reform will bring higher costs for both employer-sponsored benefit programs and health care services overall.

That’s why voluntary benefits present a clear opportunity for brokers during this time of change. Both real and anticipated medical cost increases and the associated shift to less rich medical plans will make voluntary benefits very attractive to both businesses and employees. Continue reading

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Where Do Brokers Fit in New Health Insurance Picture?

California’s health insurance regulations — aligned this year with federal guidelines — include a requirement that insurers spend at least 80% of their premium revenue on direct patient care. However, efforts to change provisions of the federal Patient Protection and Affordable Care Act could have an effect on how California insurers balance their books — and on how consumers pay for health coverage. 

Previously operating on a 70-30 split, California adopted the 80-20 ratio in January to be in line with new federal guidelines. But precisely what is contained in the two portions is being contested. The 20% not used for direct medical care includes profit and administrative costs — including insurance broker fees.

The House is considering a bill (HR 1206) that would exempt insurance brokers’ fees from being classified as administrative costs. After it was introduced by Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.), the bill attracted more than 50 co-sponsors.


Some consumer advocates argue that the ACA is already a boon to the insurance industry, bringing in millions of new policy buyers. They say not counting broker commissions as part of administrative costs in the medical loss ratio could take the financial teeth out of reform.


Even using the term “medical loss ratio” could be construed as an indication the ACA is written from an insurer’s — rather than a consumer’s — point of view, according to some. The term suggests that 80 cents of every dollar spent on medical care for a patient is considered a “loss” by the insurance industry.


The National Association of Insurance Commissioners voted to postpone taking a position on the bill. Some state commissioners support the bill, and some oppose it.


In California, a related effort is under way: AB 736, by Assembly member Chuck Calderon (D-Montebello), would allow health insurance agents to also be licensed health insurance brokers.


We asked experts and stake holders: How should Congress handle the issue? What is the potential effect on California if HR 1206 passes? What are the potential effects if HR 1206 fails? Continue reading

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