If you build it, will they come? Millions more uninsured lives in the past two years says no, for many individual people and small group employers not chased by agents.
Radically lower, or non-existent, commissions on individual and small group sales mean agents must think strategically to thrive or survive. One possibility: Medicare for All.
There are at least two main versions of Medicare for All.
Progressives define the term to mean a complete takeover of health care, but they fail to pay for it, in light of trillion-dollar deficits, or to acknowledge that converting all coverages to a Medicare authorized reimbursement that would threaten hospital solvency.
Conservatives believe a one-payer system is completely misdirected. They ignore record numbers of closures of small hospital that treat large numbers of poor patients, millions more uninsured, and the worsening Marketplace underwriting. All these problems are signs of an underwriting death spiral, and medical cost inflation causing unaffordable insurance that, ultimately, will lead to official action to guarantee patients access to health care.
Current Medicare Advantage and Medicare supplemental plans are managed by commercial carriers, not the federal government. The “freer-market” middle ground solution is available now, and it does not require a complete takeover of choices. Commercial Medicare plans, networks, and pricing are already in place.
For us, “Medicare for All” should mean offering consumers a choice of buying less expensive plans that insure the Medicare authorized amount for people under 65, with the consumer’s premiums offset by the premium tax credit already authorized by the Affordable Care Act. This Medicare for All program would not be a government one-payer system takeover. It is not a question of if that kind of Medicare-type plan will become available to people under 65; the question is simply when.
Medicare Advantage Plans and Medicare Supplemental Plans
Extending access to Medicare-type plans to people under 65 is in our national interest, and that approach preserves choice.
Most importantly, the cost of providing these plans would be significantly less than the cost of implementing competing proposals.
Current Medicare Advantage and supplemental plans insure the “Medicare authorized” amount, not the usual, customary and reasonable (UCR) charge that a typical commercial plan covers. Currently offered Medicare Advantage HMO plans offer in-network only insurance.
Medicare supplemental plans cover care from any provider, but they cost more and expose the patient to the risk of balance billing above the Medicare authorized amount.
The result: Medicare Advantage and Medicare supplemental plans provide more choices for people that can afford it — if you can find an agent to explain the enrollment procedure, tax credits, and help after the sale.
Medicare Advantage and supplemental plans are not run by the government now, nor would they be in the future. They are managed by commercial carriers. Offering Medicare Advantage and supplemental plan designs is part of a free-market solution to a growing problem causing hospital insolvencies, especially in rural communities. The bigger point is that these solutions are practically turn-key to implement.
Offering Medicare plan designs to a people under 65 means two primary things.
Short-term, this type of Medicare for All approach would mean giving consumers more choice of less expensive insurance, with access to much bigger networks of providers.
Long-term, this approach would mean that the higher-priced plans with UCR-based reimbursement formulas would will struggle to compete against less expensive Medicare plans with bigger provider networks.
All of the Medicare plans could be ACA-compliant, guaranteeing access to quality and affordable health care, which is a long-standing federal health care goal that has little chance of undergoing radical change.
Medicare Plans for All and Agents
Any business whose costs exceed its revenue becomes unviable. Carriers are scrambling to replace agents with less expensive sales distribution. There is no less expensive way to distribute a plan than through agents who only get paid when they sell, and back-charged for mid-year cancellations. Costs to find, hire, insure, train, equip, house, supervise, pay, and manage sales people are massively more.
Members of the public who are under 65 must try to enroll with help from an unlicensed Marketplace Navigator whose job ends after open enrollment, or find a licensed agent who is still employed after the sale to service complex insurance and tax credit issues.
I, for example, live in Florida. In Florida, state law allows agents to charge the clients for health insurance sales and support services, but collecting a service charge requires a contract, and willing customers who understand that service is not free.
Deciding to sell individual and small group insurance has become a difficult decision for conscientious agents who care about servicing their clients after the 45-day open enrollment period — a concern for which Navigators, who typically are employed only for the 45 days of the open enrollment period, are not usually responsible.
The $18 to $20 per month individual Marketplace commission sharply limits what used to be a reasonable level of health insurance agent compensation.
Marketplace individual and small group plan service from Navigators is essentially nonexistent. What used to be considered standard agent professional service has changed by federal design.
According to HealthCare.gov, over 8.3 million Marketplace lives were enrolled for 2020, with renewals being down about 1 million lives from the 2019 total.
Many consumers who enrolled without help from a licensed agent found themselves overwhelmed dealing with complicated Marketplace issues surrounding: eligibility changes, network changes, mid-year formulary changes, billing disputes, tax credit issues, and enrollment period worries.
The Agents’ Situation
Not much has been written about agents fleeing products whose sale means a loss.
Agents who sell individual insurance, by necessity, usually sell Medicare and small group plans. Commissions for groups under four lives run about $3.50 per employee per month at many carriers. That means: $3.50 x 3 = $10.50 commission per month for a group of three.
In many markets, Small Business Health Options Program (SHOP) plans were never offered through the Marketplace in most states, thereby defeating the purpose of the ACA from the start.
Adverse selection in small group is well-known to carriers. Carriers continue to move aggressively to limit their exposure to very small plans.
For larger small group plans, with more than four employee enrollments, the medical sales commission is about $32 to $35 per employee per month, offering modest compensation.
Very few agents selling large group touch individual and small group, because of the extremely low commissions, separate appointment requirements, separate Marketplace certification exams, selling rules, and Marketplace-to-carrier communication failures that cause cancellations and other problems.
Meanwhile, selling individual plans typically means selling Medicare Advantage and Medicare supplemental plans for most agents still in the business. Today, the typical Medicare Advantage plan sales commission is about $550 per year for first-time enrollees, and $225 per year, or $18.75 per month, for renewing enrollees.
However, current Medicare Advantage selling rules make a typical Medicare Advantage plan sale significantly more expensive than a Marketplace plan sale. The feds mandate a face-to-face meeting, and an agent must pass annual exams to sell Medicare Advantage plans. An agent can make a Medicare Advantage plan sale only after setting up a “signed” appointment 24 hours in advance.
Selling a Medicare supplemental plan also requires separate appointments. Selling to a very elderly population with memory issues is more than a challenge, and it requires several visits.
The rules that have eliminated a living commission wage for agents have caused a service gap for the insureds. The insureds often must get through the coverage maze on their own, or try calling the carrier, or try reaching a former Navigator, who is now unemployed.
Uninsured patients show up in the hospital ER and pay nothing.
Hospitals are required by federal law to treat patients who need emergency care, regardless of those patients’ ability to pay. That mandate leads many hospitals to insolvency, especially in rural areas. Record-setting hospital closures and credit downgrades tell the story: More than 120 hospitals have closed in the past 10 years, according to the January issue of Becker Hospital Review.
Recent research funded by The Commonwealth Fund shows that hospitals charge commercial patients 240% of what Medicare pays for the same services.
Where Agents Fit In
Agents accounted for 44% of Marketplace enrollments, according to figures from the Center for Consumer Information and Insurance Oversight. We are well past the tipping point where individuals, small groups, and many large carriers have abandoned the Marketplace, causing an even faster increase in the number of uninsured people, and worsening of the underwriting death spiral trend few acknowledge.
The public is discovering that losing their agent means fixing their own problems without an after-enrollment-advocate, or finding an agent willing to work for practically nothing.
Professional service is not free.
Savvy hospitals and regulators will find new love for agents offering real solutions to their growing bad debt burden.
Savvy ERISA self-funded employers may find new love for agents offering direct contracts with local hospital and physician providers offering discounts for cost-effective solutions.
There is little question the information revolution is changing how insurance is administered, and medical care is delivered. Extending access to Medicare Advantage plans and Medicare supplemental plans to all could ease some of the most severe strain. Savvy agents will then find new venues to add value to thrive in tomorrow’s quasi-free-market health care system.
Stephen George is the chief executive officer of Provider Risk LLC in Miami.