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Industry Spotlight > Broker Dealers

PPACA exchange wrestles with producer comp strategy

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Brokers, insurers and public exchange managers in Colorado are talking about whether, and how, a public exchange can use broker rewards programs to promote sales of exchange plans.

Members of the board policy committee at Connect for Health Colorado (C4HCO) discussed exchange plan producer incentive program principles Monday during a meeting, according to a meeting packet posted on the exchange website.

The state-based Patient Protection and Affordable Care Act (PPACA) exchange increased enrollment in Small Business Health Options Program (SHOP) plans to 2,797 covered lives this year, up 50 percent from the 2014 SHOP covered-life total. The exchange has been trying to push for much higher SHOP enrollment for 2016 and 2017.

Originally, the Colorado exchange board agreed not to have the exchange pay broker commissions. The board wanted the participating plan issuers to take responsibility for paying the commissions.

But, this past summer, several carriers announced an incentive program aimed only at brokers who sold off-exchange group plans. 

One carrier stopped paying broker commissions in the fourth quarter, and another carrier stopped paying broker commissions on sales of gold plans.

“The forces of a very competitive insurance market are resulting in the marketplace being driven by carrier compensation decisions,” the exchange managers say in the slidedeck. “C4HCO does not wish or aspire to pay commissions, but felt it does need tools in the sales toolkit to focus sales efforts and attention.”

See also: Assisters, brokers fight for credit in Colorado

In the summer, exchange managers developed a “non-incentive, non-commission” awards program that rewards brokers for meeting sales and retention goals.

“Now that some carriers are opting out of paying commissions to brokers… does the [exchange] have a duty to create an appropriate and acceptable ‘financial award’ mechanism?” the exchange managers ask.

The exchange managers also ask the board for help with determining whether the current award program, which involves no financial incentives, is compliant with all regulatory, accounting, operational and audit standards.

See also: Small-group exchange sales drift

Byron McCurdy, chairman of the board of the Colorado State Association of Health Underwriters (CSAHU), and Tammy Niederman, CSAHU legislative chair, wrote to Kevin Patterson, chief executive officer (CEO) of the Colorado exchange, which they call “C4,” to say they believe creating an exchange broker bonus program would be inappropriate.

“CSAHU feels strongly that brokers will use SHOP once they perceive it provides value to their clients,” the CSAHU reps write. “We feel that it would be more productive for C4 to use this money for further development of infrastructure and support tools, thus creating value that will naturally incentivize brokers to use the system. We strongly recommend that the money allocated for broker bonuses should be used instead to enhance C4 and make the option that brokers want to use, rather than something they are paid to use.”

Charlie Sheffield, executive director of the Colorado Association of Health Plans, a carrier group, has written to say few carriers support the idea of offering a SHOP broker incentive program.

Colorado carriers like the current C4HCO board position that compensation should be comparable inside and outside the exchange, Sheffield says.

“Carriers do not offer incentives to move away from the exchange shop direct,” Sheffield says. “C4 should not incentivize customers to move away from direct purchase and instead purchase through the exchange.”

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