The Raleigh, N.C., News & Observer is reporting that a large North Carolina health insurer may have lost as much as $400 million total on individual health insurance policies in 2014 and 2015.
An executive at Blue Cross and Blue Shield of North Carolina told agents and brokers participating in a webinar last week that the losses were responsible for the company’s previously announced decision to suspend payment of agent and broker commissions for individual major medical policies with start dates from April 1 through Dec. 1, according to John Murawski, a reporter at the paper.
In response to a question about the webinar, a company representative emailed a copy of the Jan. 28 press release announcing the change in the company’s compensation arrangements. The rep neither confirmed nor denied the News & Observer report.
U.S. Department of Health and Human Services (HHS) officials, state insurance regulators and insurers developed the Patient Protection and Affordable Care Act (PPACA) “open enrollment period” enrollment limits to discourage healthy consumers from seeing the PPACA medical underwriting limits as a chance to wait until they get sick to pay for coverage. The open enrollment period for 2016 ended Sunday.
Consumers who want to buy 2016 coverage now must show that they have a good excuse, such as the loss of existing coverage or a move to a new market, to qualify for a special enrollment period (SEP) coverage. Applicants for individual coverage must qualify for SEPs whether they buy their coverage through a PPACA exchange or outside the exchange system.
North Carolina uses the HHS HealthCare.gov system to provide PPACA exchange services for its residents.
SEP sales accounted for more than 10 percent of 2015 HealthCare.gov individual plan sales nationwide, according to HHS data for the first half of 2015.
North Carolina Blue itself has about 560,000 individual major medical enrollees, and it ended 2014 with about $2.3 billion in surplus and capital, according to data from Standard & Poor’s Rating Services and Consumers Union. If not offset by gains in other products, a $400 million loss could eat up about 15 percent of North Carolina Blue’s capital and surplus.
A National Association of Insurance Commissioners (NAIC) report shows that health insurers that filed the NAIC’s Supplemental Health Care Exhibit blank for 2014 suffered a total individual major medical underwriting loss of about $109 million on $2.4 billion in individual major medical premiums. The insurers paid about $136 million in agent and broker’s fees and commissions for that business.
The other carriers in North Carolina’s individual market have also announced plans to eliminate or sharply reduce 2016 SEP producer comp payments.
If SEP sales amount to about 10 percent of North Carolina’s individual market sales — and insurers eliminate most SEP producer comp payments — that could cut North Carolina producer comp by more than $10 million.
The insurance commissioner in Kentucky has raised questions about the status of mid-year producer comp cuts, by suggesting that, at least in Kentucky, mid-year producer comp cuts might violate state rate approval rules.
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