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Will PPACA exchanges bring new E&O headaches?

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The Patient Protection and Affordable Care Act of 2010 (PPACA) could create new opportunities for employers to get health insurers to compete for their business — and new opportunities for health insurance exchanges to mess up enrollment.

Summer Hamilton, an executive at BeneTrac, said benefits brokers should keep enrollment-related errors and omissions (E&O) challenges in mind when thinking about whether and how they might do business with either the new PPACA exchanges or the private exchanges that are popping up.

One challenge is that people are using the word “exchange” to refer to many different kinds of entities, Hamilton said.

The drafters of PPACA are hoping the Small Business Health Options Program (SHOP) exchanges will create a vehicle that small business owners can use to compare carefully vetted, largely standardized health plans from many different carriers.

Creators of exchanges that are forming outside the PPACA framework are applying the term to almost any kind of Web-based system that can give employers or individuals a chance to choose from a wide selection of health plans.

Either way, brokers have to think just as hard about how the enrollment process will work when they are placing business through an exchange as when they are dealing with one of the “back end” companies that handles enrollment data or send enrollment data directly to insurers, Hamilton said Thursday in an interview.

The idea of eliminating paper is great, but one challenge is that some of the companies that design online enrollment systems may not understand benefit plan quirks, Hamilton said.

In some cases, she said, an enrollment system may greatly increase the employer’s risk — and the broker’s E&O risk — by letting employees sign up for coverage they are not eligible to buy.

In other cases, Hamilton said, insurers may scramble the data when they suck the enrollment information into their own systems.

Even if the enrollment system works properly and the insurer brings the enrollment data in correctly, the insurer may fail to make requested corrections, such as corrections of incorrect Social Security numbers, or corrections of information about whether a particular employee has a particular benefit, Hamilton said.

When pay stubs show that employees have coverage that they’re not eligible for, and the employees file claims, the employer could end up being responsible for providing the benefits promised on the pay stub, and the employer may expect the benefits broker’s E&O insurance to cover the cost of providing those benefits, she said.

Given how quickly the new exchanges are being put together, it’s not entirely clear how they will handle enrollment data, Hamilton said

“I just don’t think it’s on people’s radar,” she said. “People are not considering the implications of what’s coming.”

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