The Small Business Health Options Program (SHOP) exchange in California wants to pay health insurance agents commissions comparable to the commissions individual commercial health plans in the state are paying.
Michael Lujan, director of the SHOP division at California’s “Covered California” exchange program, talked about Covered California compensation policies recently during an agent webinar.
The old Health Insurance Plan of California (HIPC), a failed state-based exchange that California started in 1993, charged customers higher rates when they worked with agents, and that approach might have contributed to the HIPC’s lack of success, Lujan recalled.
“We have absolutely nothing like that approach on our minds,” Lujan said.
Health insurers that sell individual policies through Covered California will negotiat
e commission rates directly with producers and pay commissions directly to products, just as they do today, Lujan said.
The Covered California board decided in the summer neither to try to prop up individual commission rates nor push insurers to cut the commission rates, Lujan said.
If commission rates change when the exchange programs come online, “that’s something that might be a market factor that happens on its own,” Lujan said. “If you want to know what commissions will be, you might want to ask the carriers if they have any plans to change agent commissions.”
In the SHOP exchange, which will serve employers with fewer than 50 employees, Covered California will take over payment of exchanges, because it wants to encourage producers to offer employers multi-carrier coverage menus.
To free the producers from the need to worry about six or seven separate commission payments, the exchange will take over the job of paying the “market-competitive” commissions, Lujan said.
“What does ‘market-competitive’ mean?” Lujan asked.
Today, he said, the typical carrier pays small-group commission rates that amount to similar percentages of small-group premium revenue.