Brokers and the ACA
As health care exchanges struggle to get more people covered under the Patient Protection and Affordable Care Act, at least one state is making a concerted push to enlist brokers to help.
While both the federal and state exchanges allow brokers to help individuals enroll in insurance policies since they opened for business in October, the Maryland Health Benefit Exchange last month launched a more formal initiative.
The Producer Referral Program is designed to boost sagging enrollment on the state’s exchange. About 55 brokers have volunteered thus far to help assist consumers in navigating the website, Maryland Health Connection, or enroll individuals directly with carriers.
As of Jan. 25, 26,832 people have enrolled through the website for private coverage, though the exchange did not say how many of those actually made their first policy payment.
To recruit more brokers to volunteer, the state exchange is working with three trade groups, National Association of Insurance & Financial Advisors of Maryland, the Maryland Association of Health Underwriters, and the Insurance Agents & Brokers Service Group.
“The people who will use this service are people who are determined to get insurance, but have been unsuccessful getting it on the exchange website,” said Bryson Popham, a partner in the Annapolis law firm, Popham & Andryszak, P.A. who represents brokers.
He said that one of the fundamental reasons trade group members are volunteering to help is their belief that uninsured individuals deserve access to health insurance.
Diane Boyle, vice president of federal government relations for the National Association of Insurance & Financial Advisors in Washington, D.C., said that its Maryland affiliate is on the forefront of formalizing a broker assistance program, but that other state affiliates are considering similar moves.
The decision for individual brokers to help consumers enroll on the health care exchanges depends a good deal on their own client make-up, Boyle said.
“If they have clients that are eligible for subsidies, they need to enroll through the exchanges, and that is really the only way that decision is going to make sense,” she said. “But if their client base is not eligible for subsidies, they can purchase policies outside the exchange. It really depends on who the broker wants to serve in their community.”
Many brokers, however, are shying away from helping consumers enroll through the exchanges, said Anne Sperling, employee benefits manager at Daniels Insurance Inc. in Santa Fe, N.M.
Sperling ticked off a number of reasons why she made “a professional decision” not to aid in the application process, including the lack of security associated with the healthcare.gov website, which she believes jeopardizes consumers’ protected health information and private financial information.
“I don’t want the communication liability … It could be construed as an error and omission, which obviously doesn’t help my practice; it hurts in a huge way.” —Anne Sperling, employee benefits manager, Daniels Insurance Inc.
She also noted that the labor-intensive application process is cost-prohibitive, as brokers do not receive commissions when they aid individuals to enroll via the public exchange; and that she is concerned the federal tax credit process will be improperly handled — to the point that she fears patients will be denied care should the carriers not receive their share of the government premium. All the premiums must be collected to put the policy in force, she said.
“Lastly, the public doesn’t understand that the tax credits are based on a last year tax return, which ultimately may be miscalculated and could result with the insured owing the government,” Sperling said.
“I don’t want the communication liability of all these points. It could be construed as an error and omission, which obviously doesn’t help my practice; it hurts in a huge way,” she said.
Sperling was one of the founders and the first executive director of the NM Health Insurance Alliance, a small group high-risk pool program for businesses with 50 or fewer employees, which was replaced by the NM Health Insurance Exchange. That exchange is accessed through the federal healthcare.gov website.
In Maryland, officials have given brokers permission to enroll individuals directly with carriers, if they have trouble completing enrollment applications on the state’s website, Popham said. However, only two of the four carriers on the Maryland exchange currently have the capability to allow for direct enrollment.
Moreover, individuals won’t receive federal subsidies to offset the cost of the health care policies unless they enroll through the exchange.
The Maryland Health Benefit Exchange also announced that, beginning in April, brokers can help eligible small businesses establish small group health insurance plans certified by the Small Business Health Options Program (SHOP) Exchange, as well as help them sign up for the corresponding federal tax credits.
Maryland is doing this because the state’s SHOP exchange is again being delayed until January 2015, in line with the delay of the federal SHOP exchange. Small businesses in Maryland can also establish such plans and apply for tax credits directly through carriers or third-party administrators.
A recent court decision provides some privacy protection for insurance brokers in their communications with clients.
The decision of the New York Supreme Court in TC Ravenswood LLC vs. National Union Fire Insurance, provides “useful guidance for policyholders who rely on brokers during litigation about insurance coverage,” wrote John Nevius, a New York-based Anderson Kill attorney who represented TC Ravenswood, a New York City unit of TransCanada Corp.
Nevius’ analysis appeared in an article in Insurance Coverage Law Report.
In the case, the court denied the insurance company’s motion to compel TC Ravenwood’s broker, Marsh Canada Ltd., to produce communications with TransCanada Energy USA Inc., Nevius wrote.
The court held that the broker “was specifically hired by TransCanada and its counsel to explain the complex insurance policies at issue for TransCanada and its counsel” and therefore had “a reasonable expectation of privacy.”
Thus, communications between Marsh and TransCanada were protected by the attorney-client privilege, the court determined.
Additionally, communications between the broker and TransCanada’s counsel were also protected, as were communications between TransCanada and its counsel that were forwarded to the broker, and instances where the broker was copied on original communications, Nevius wrote.
Moreover, communications between non-attorney employees of either the broker or TransCanada, which involved requests for information and advice from counsel, were also protected.
“It is also helpful when asserting privileges if the policyholder has retained the broker for its expertise in a particular area, as the courts have been more receptive to the policyholder’s claim of privilege where the broker’s particular expertise proved valuable or necessary,” Nevius wrote.
For example, the Southern District of New York ruled in ECDC Environmental vs. N.Y. General Insurance Co., that the broker was retained specifically for its expertise in maritime insurance, and as such, its communications were privileged.
“Whether a policyholder’s communications with a broker are privileged is a fact-intensive question which typically hinges on whether the policyholder retained the broker, at least in part, as its agent to help with claim adjustment or the formulation of litigation or settlement strategy,” Nevius wrote.
However, Louis A. Chiafullo, a partner at McCarter & English in Newark, N.J., noted that the New York ruling is not the absolute law of the land.
While an insurance broker can be an “incredibly helpful ally” when clients submit and negotiate claims with an insurance carrier, it’s important that in-house and coverage counsel be cognizant that in many jurisdictions, their conversations and communications with their insurance brokers may not be protected from disclosure if a coverage lawsuit develops.
“As a general rule, policyholder counsel should not share freely with their brokers any work product or legal analysis, even if the broker also happens to be a lawyer,” Chiafullo said.
“Where counsel for the policyholder feels that such conversations need to take place, counsel would be wise to enter into a confidentiality agreement with the broker and make clear in any communications relating to the disputed claim that the discussion falls under the attorney-client privilege.”
Benefiting the Bottom Line
Employee benefits consultants and property/casualty brokers could see substantial gains as they move to take advantage of private exchanges for health care and other employee benefits.
Jim Blaney, chief executive officer, Willis human capital practice, said that offering clients private exchanges provides consultants and brokers with “a huge opportunity. … However, it’s all about gaining market share and converting new revenues.”
Roughly 30 million workers are expected to enroll in health care plans via private exchanges by 2017, “but costs and inertia could slow the adoption rate,” according Morgan Stanley research analysts.
“We think there are substantial market share opportunities for P&C brokers but large economic benefits will take years to materialize as they have to invest heavily to gain share,” the analysts wrote in a March 13 report, Private Exchanges: Friend or Foe.
For example, Aon Hewitt — which was “one of the first movers and the most vocal in private exchange efforts” — has invested roughly $100 million in its initiatives “which have not yet broken even,” according to the analysts. The firm has enrolled more than 600,000 members on its multicarrier, fully insured active employees exchange.
Aon executives were not available for an interview.
At Morgan Stanley’s Private Exchange Conference earlier this year, Aon said that it can overcome the cost gap and deliver up to 2 percent total savings for self-insured clients converting to Aon exchange.
A report by Moody’s offered a more positive viewpoint, concluding that the creation of private health exchanges “are credit positive for leading benefit consultants and brokers.”
“We believe the most successful exchanges will be those that minimize growth (or generate savings) in overall health care costs, rather than simply shifting costs from employers to employees,” according to a March 3 report.
Keys to success, it said, include building strong insurance carrier networks, guiding employees to select appropriate insurance coverage, promoting employee wellness, streamlining plan administration and ensuring compliance with regulations.
Blaney, at Willis, said that discussing its insurance exchange with clients and prospects is “a way to open doors,” as most employers are interested to learn more about both private and public exchange models.
“This gives us an opportunity to meet with potential new clients, build rapport and provide thought leadership and consulting. We are seeing an increase in new clients independent of whether they choose to use the private exchange,” he said.
Last year, Willis partnered with Liazon to offer clients The Willis Advantage, a private label of that company’s platform. Liazon, which was bought last year by Towers Watson, operates a multicarrier exchange with both self-insured and fully insured products.
“The Willis Advantage,” Blaney said, “is designed to be a consultative approach to help mid-market and upper mid-market clients consider the opportunity of advancing consumerism and possibly, a defined-contribution approach.
“We think our differentiation lies in our integrated health management capability aimed at addressing medical utilization trends,” he said.
The exchange includes built-in features such as incentive-based wellness options, health coaching, and disease-management programs, to help employees and employers drive down health care costs and increase productivity.
Over the past two quarters, interest in the private exchange has “spiked,” with 600 employers — both existing clients and prospects — considering adoption, he said. Two clients are currently on the platform, and another five are “in the queue.”
“The adoption rates for the mid-market seems to be evolving slower than adoption rates for the larger market, but in the next five years, I believe we are going to see a sizable migration toward defined-contribution funding approaches as employers seek to cap benefits costs and push more responsibility and accountability to employees,” Blaney said.
At Mercer, the subsidiary of Marsh & McLennan Cos. launched its Mercer Marketplace in 2013. It currently works with 67 employers to provide medical and other benefits to 282,000 employees, retirees and family members.
The company recently expanded its service to offer access to individual medical plans via GetInsured, a California-based company whose technology platform powers state government exchanges.
Liazon, whose platform is used by more than 400 brokers — including Arthur J. Gallagher, Lockton and Brown & Brown — said larger brokers private label its platform, and can build in their own value-added support features, such as back-office capabilities, call centers, and employee assistance programs, said Managing Director Ashok Subramanian.
“This really enables brokers to leverage proven technology to wrap around their strategies, with a speed to market,” Subramanian said.
Smaller brokers use Liazon’s independent channel, Bright Choices, to save on costs, he said. Overall, Liazon has seen “an enormous uptick in usage over the past year, up 300 percent in 2013, from 2012.
“There is tremendous tailwind in the market for solutions like this among employers,” he said. “This happens to coincide with the opening of the public exchanges, but it’s not really related to that.”
Employers can also take advantage of private exchanges for retirees and older workers, such as Towers Watson’s OneExchange for Medicare-eligible individuals, said Bryce Williams, the consultancy’s managing director, Exchange Solutions.
“The Medicare market is so technical and highly regulated, that it’s less costly for them just to refer retirees to our exchange,” Williams said.
Currently, adoption rates are less than 5 percent, but Williams expects that in five to 10 years, adoption rates will rise to 50 percent, for employers who give their employees access to health care.