By Katie Kerwin McCrimmon
Health insurance brokers will get referrals and be able to sell plans to individual and business clients of Colorado’s new health exchange. But they won’t earn money directly from the exchange and won’t have to abide by a strict conflict of interest policy that Colorado’s exchange board passed Monday to govern new “health guides.”
Instead, insurance companies will continue to pay commissions to brokers as they currently do. And Colorado’s Division of Insurance will continue to license and monitor brokers.
It’s unclear how an estimated 150,000 Colorado exchange customers, many of whom will be low-income people who never before have had health insurance, will understand if they are getting advice from a broker — who will make more money if the customer buys a more expensive health plan — or a “guide” who will not earn a commission.
The “guides,” who are also called “navigators” and “assisters,” will work directly for the exchange through a network of phone and in-person customer service centers around the state. Setting up the assistance system is expected to cost about $20 million from July 2013 until June 2014. Colorado’s exchange board is applying for a $17.9 million federal grant and a $2.1 million grant from the Colorado Health Foundation to cover costs of the “assistance network.” (Click here to view details about the grants.)
Exchange managers say the $20 million figure is preliminary and they don’t know yet what the total costs for 2013 and 2014 will be. So far, federal grants totaling $62 million have funded start-up costs for Colorado’s exchange. Beginning in 2015, Colorado’s health exchange must pay for itself and managers have projected that running it will cost $22 million to $26 million a year.
Health guides are expected to spend as long as 90 minutes with each customer, but will be barred from recommending specific health plans. If an exchange customer remains confused about options after meeting with a guide, that adviser will then refer the customer to a broker. Brokers will also be free to market directly to individuals or businesses, and names of brokers will be listed on the health exchange website.
On Monday, Colorado’s health exchange board accepted a staff recommendation not to have broker commissions “flow through the exchange,” but rather to have insurance companies pay brokers directly. Insurance companies will have to pay brokers the same commission whether they sell a product to an exchange client or through the private market.
Exchange managers say they will “monitor brokers who are part of our customer service network,” but since the exchange will neither pay nor license brokers, it’s unclear how consumers will understand the complex financial arrangements that could affect the choices they make.
Colorado’s health exchange hired Jim Sugden, a former broker and health insurance industry lobbyist, in August. He’s managing the small business portion of the health exchange and wrote memos on policies relating to brokers that the exchange board has adopted.
Exchange spokeswoman Myung Oak Kim said brokers are essential.
“Brokers are an important partner for the exchange because of their expertise, experience and strong history of serving businesses in Colorado. Brokers are also licensed to provide professional advice to customers that ‘coverage guides’ won’t be able to provide,” Kim said in a written statement.
“COHBE (the Colorado Health Benefit Exchange) will require brokers to be certified and undergo extensive training prior to working with customers of our new marketplace. We will monitor brokers who are part of our customer service network to ensure that they will strive to find the right plan to fit their client’s needs,” she said.
Kim did not say whether the exchange board will eventually consider a conflict of interest policy for brokers. But, under Colorado law, she said brokers are required to disclose their commissions to customers. And, she said their disclosure requirements are more rigorous for health insurance than other types of insurance such as policies for homes, cars or life insurance.
The exchange board approved the conflict of interest policy for health guides on Monday. It bars health insurance companies or their employees from serving as health guides and requires guides to disclose potential conflicts of interest to both clients and exchange managers. Guides will be required to provide impartial information about all plans offered on the exchange and will not be allowed to “persuade customers to enroll in any specific health insurance plan” or select a particular provider.
Because Colorado’s exchange workers anticipate signing up so many people for health insurance so quickly, many board members think they have to adopt an “all hands on deck” approach.
“We need a lot of people throughout the state helping us get people covered,” said Patty Fontneau, executive director and CEO for the exchange.
Colorado Insurance Commissioner Jim Riesberg is a non-voting member of Colorado’s exchange board. He has been calculating what it will take to sign up the estimated 150,000 customers in the first six months.
“If we have an enrollment period of Oct. 1 to March 1, that’s roughly 800 people a day, seven days a week for six months. We’re going to need everybody we can get,” Riesberg said after Monday’s exchange meeting.
He said it’s appropriate for Colorado’s exchange to tap brokers, whom the state refers to as “producers,” and that his department will monitor their work.
“If brokers have the opportunity to bring people in in larger numbers, that’s very, very important. And DOI (Colorado’s Division of Insurance) does have some power over them because they are licensed through us,” he said. “They’re the ones, we hope, with the greatest knowledge about health insurance.”
Altogether, he said there are 120,000 producers licensed in Colorado for all types of insurance, 80 percent of whom are located out of state. Nationally, health insurance brokers are fighting in Congress to have their fees exempted from the costs that are considered administrative. Under the Affordable Care Act, insurance companies now must spend at least 80 percent of money they bring in on claims and no more than 20 percent on administrative costs. Currently brokers’ fees fall under the 20 percent umbrella and brokers worry that as insurance companies are forced to cut operating costs, they will reduce broker fees or axe them altogether.
Riesberg said it will be important for both brokers and guides to show customers some sort of license or certification document so customers understand who is giving them advice.
“They could be upsold,” he said. The best protection against that is to have multiple offerings from insurance companies on the exchange website that all offer very similar packages of benefits that the federal government has determined are “essential.”
Then, Riesberg said the process would be fairly simple. Customers would identify providers they want to see and find out which insurance plans include their doctors.
“The key is to deal with someone who has some knowledge,” Riesberg said. He said all groups that work with consumers should be beefing up their outreach efforts so consumers are much better educated on their health care options.
“We will have the opportunity to work with a lot of people who don’t have good insurance backgrounds and may not even know the right questions to ask. So there’s going to be (a need) for a lot of information to be shared.”
Mary Heidbrier is an independent broker and owner of MLJ Insurance Services who attended Monday’s health exchange meeting. She said brokers are vital to making the system work and that those with licenses are required to take 24 hours of continuing education courses on health insurance policy every two years, including three hours of training that specifically focuses on ethics.
“Independent brokers help people find what really meets their needs,” Heidbrier said in an interview.
She said clients will be protected from buying more expensive plans than they need because brokers want to have an ongoing relationship with them. Heidbrier said she sells primarily to individuals.
“I care what happens to my clients. My goal as an independent, local broker is to keep people as clients, to find out what meets their needs and to look after their interests.”
Heidbrier said she regularly fields calls from clients who are having trouble with an insurance company and she runs interference for them.
“I’m there as their resource,” she said. “When they need help with claims, they’re not stuck on hold. They know who they can call.”