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GAO: Broker Incentives Could Help Replace PPACA Mandate

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Paying agents and brokers a flat fee per health plan enrollee – and extra for reeling in the uninsured – could help reduce the need for an Affordable Care Act individual health insurance ownership mandate.

A U.S. Government Accountability Office (GAO) official offers that suggestion in a discussion of experts’ ideas about how the health coverage access provisions of the Affordable Care Act – the package that includes the Patient Protection and Affordable Care Act (PPACA) — could make any kind of actuarial sense in the absence of an individual health coverage ownership mandate.

John Dicken, summarizes the GAO’s findings in a letter addressed to Sen. E. Benjamin Nelson, D-Neb., chairman of the Senate Appropriations Committee Legislative Branch subcommittee.

Nelson asked about strategies for controlling antiselection in a health coverage systemPPACA Compass in which carriers must sell health coverage even to people with serious health problems.

Some experts told the GAO that producers could reduce the risk of antiselection by encouraging many people, including uninsured people, to sign up for health coverage, including the new, subsidized health plans that are supposed to be sold through a new system of health insurance exchanges, Dicken says in the letter to Nelson.

“Developing appropriate compensation mechanisms is needed to provide incentives for the enrollment of individuals in the most appropriate plans,” Dicken says.

Another challenge, though, is that some of the experts surveyed disagree with the idea that agents and brokers can play an important role in guarding against antiselection, Dicken says.

The Mandate

Antiselection is the danger that consumers or others who are unusually high risk will choose to buy coverage from an insurer and throw off its underwriting.

Many Republicans and others are fighting to block implementation of parts or all of PPACA.

If PPACA takes effect as written, one section will require most individuals to own health coverage or else pay a penalty starting in 2014. The penalty will start at $95 per year per adult and is supposed to rise to $695 per year adult.

PPACA also would require carriers to sell health coverage on a guaranteed issue, mostly community-rated basis. Carriers could charge older insureds more than they charge younger insureds, but they could not base rates on an insured’s own health status.

Individuals and small groups could use a new system of tax credits to buy coverage through the health insurance exchanges.

Advocates of the individual coverage mandate say health insurers can sell coverage on a guaranteed issue basis, without adjusting rates for the insured’s health status, only if cover almost all U.S. residents.

Otherwise, provision advocates say, only older, sicker consumers who know they are likely to file claims will buy health coverage, and younger, healthier insureds will go bare and count on the kindness of strangers to save them when they break their legs while skiing and mountain biking.

Opponents say the U.S. Constitution gives Congress no authority to make individuals buy a commercial product from for-profit companies.

Republican governors are suing over the constitutionality of the individual coverage ownership mandate and trying to get that provision, or PPACA as a whole, to be declared unconstitutional, and a U.S. District Court judge in Pensacola, Fla., already has issued a ruling to that effect.

The GAO Study

GAO researchers interviewed 41 officials from 21 organizations – including groups such as America’s Health Insurance Plans, Washington, and the Blue Cross and Blue Shield Association, Chicago – to come up with ideas for reducing antiselection.

Even if PPACA and the individual coverage ownership provision take effect as written, the United States should probably try to implement many of antiselection prevention ideas, to guard against the possibility of antiselection taking place even if the individual coverage ownership provision is in place and works as expected, the experts told the GAO.

Dicken lists the following recommendations the GAO received for preventing antiselection:

  • Modify open enrollment periods and impose late enrollment penalties.
  • Expand employers’ roles in autoenrolling and facilitating employees’ health insurance enrollment.
  • Conduct a public education and outreach campaign.
  • Provide broad access to personalized assistance for health coverage enrollment.
  • Impose a tax to pay for uncompensated care.
  • Allow greater variation in premium rates based on enrollee age.
  • Condition the receipt of certain government services upon proof of health insurance coverage.
  • Require or encourage credit rating agencies to use health insurance status as a factor in determining credit ratings.
  • Use health insurance agents and brokers differently.

The Producer Idea

Today, Dicken says, insurers pay most health coverage producers commissions based on the price of the product sold.

“This may motivate them to sell higher cost products or products that may not best meet the needs of individuals,” Dicken says.

Meanwhile, the PPACA minimum medical loss ratio (MLR) provision – which requires carriers to spend 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts – is causing carriers to reduce producer compensation.

“Alternate ways could be developed to hire and compensate a workforce of agents and brokers and leverage their existing expertise to facilitate coverage through the exchanges,” Dicken says. “Exchanges or small employers that do not offer insurance could hire agents and brokers to assist

uninsured individuals or employees to select and enroll in appropriate plans.”

Congress also could change the PPACA MLR provision to let the “health care expense” category include payments to producers for “providing certain value-added services, such as identifying opportunities for explaining variations in plans through the exchanges for individuals as well as opportunities for premium tax credits and cost-sharing reductions,” Dicken says.

“Also, agents and brokers could be paid a flat fee for enrolling previously uninsured individuals in qualifying coverage in the exchanges, reducing any incentive to sell more expensive coverage that might not be appropriate for the consumer,” Dicken says.

Dicken says experts interviewed raised the following objections to the idea of using producers to fight antiselection:

  • Paying agents and brokers adds to the administrative costs and may be less cost effective than other means of encouraging enrollment.
  • Allowing agents to identify individuals without insurance could compromise the privacy of the uninsured.
  • Agents and brokers would need to have the cultural fluency relevant to uninsured populations.
  • Changing the MLR requirement could result in less premium revenue available to spend on health care or could result in premium increases.

Other individual mandate coverage from National Underwriter Life & Health:


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