HHS to Pay Brokers for Enrolling Consumers in Federal High Risk Pool

Should brokers be compensated for helping consumers to enroll in government programs like the Pre-Existing Condition Insurance Plan (PCIP) created by the new health care reform law? Until now, the federal government’s answer has been “no.” That changed today and a significant precedent is being set.

The National Association of Health Underwriters announced today that, beginning no later than October 1st, licensed agents and brokers will be paid a flat fee of $100 per enrolled applicant. (Payments could begin sooner if the changes to the application can be done more quickly).

This fee will only apply to the high risk pools set up by the federal government for the 23 states who declined or were unable to do so plus the District of Columbia. Many, if not most, state-run exchanges already pay brokers for assisting their citizens in enrolling in their pools. According to NAHU the average state-based fee is $85 per enrolled applicant.

In announcing the change, the Department of Health and Human Services noted the greater enrollment success achieved in states pools that compensate brokers for their work. As stated in the Department’s press release: “This step will help reach those who are eligible but un-enrolled. Several States have experimented with such payments with good success.,”

The decision to support and work with brokers is part of the Department’s efforts to increase enrollment in the PCIP high risk plans by removing administrative hurdles and lowering premiums. In fact,  in 18 of the states, premiums will be coming down as much as 40 percent according to a press release from HHS.

The PCIP was designed to provide coverage to individuals unable to obtain health insurance in the private market due to existing health conditions. 18,313 Americans have enrolled in the federal high risk pool through March 31st, a fraction of the 5 million consumers expected to enroll in the program (fraction as in “0.4%).

Progress usually comes in small steps, not giant leaps. The significance of HHS recognizing the value brokers bring to America’s health care system—and their willingness to pay for that value—should not be underestimated. For example, the House of Representatives will soon conduct a hearing on HR 1206, the legislation to remove broker compensation from the medical loss ratio calculations required by the Patient Protection and Affordable Care Act. Proponents of this law will be able to point to the recruitment efforts of HHS in support of the federal Pre-Existing Condition Insurance Plan to reinforce the need to keep brokers in their role as consumer counselors and advocates in the new health insurance world being created by the PPACA.

NAHU and other agent organizations worked hard to achieve this recognition. No doubt, however, some brokers will protest that the HHS program pays brokers only a one-time fee. This complaint is misplaced. Enrollment in the PCIP is fundamentally different than working with consumers shopping for coverage in the commercial market. The PCIP is, after all, a government health plan, more similar to Medicaid than to plans available on the open market. Further, enrollees in the high risk plan, by definition, cannot obtain traditional coverage. What’s significant is not the details of the compensation (although it is worth pointing out that HHS is setting the fee higher than the average paid by states), but the existence of compensation for enrolling Americans into a federal health plan.  When it comes to precedents, this is one that can aptly be described as “significant.”

When It Comes To Health Care Reform, Nothing Is Easy

One of the most welcome elements of the health care reform package signed into law by President Barack Obama concerns the creation of high risk pools. For Americans with pre-existing condition who are unable to obtain insurance from the private sector and do not qualify for government programs like Medicaid, these pools are their only source for health insurance coverage.

According to an article by Sean Carr for A.M. Best Company, in 2009 35 states offered high risk pools enrolling roughly 200,000 people. To qualify for these pools, applicants have to first be rejected by commercial carriers on medical grounds. The coverage is more expensive than in the private market (not surprising since, by definition, the pool is made up of individuals with much higher than average usage and claims) and the benefits are leaner than generally available (to help keep the programs affordable). The Patient Protection and Affordable Care Act set aside $5 billion to establish new ones in states currently without them and to supplement existing programs. This aspect of health care reform is to take effect July 1st.

A safety net for those unable to get traditional coverage providing a bridge until exchanges are established in 2014. Whether you approve of the overall health care reform bill or not, this might seem like a good deal for $5 billion.

Well, not necessarily. For example, if you’re running for high office high risk pools can be an opportunity to score political points. And if you’re one of those 200,000 consumers already enrolled in a high risk pool, you might feel as if you’ve entered the Twilight Zone. And what if $5 billion isn’t enough?

There’s an underlying assumption, but not a requirement, that it would be state governments which establish these new high risk pools. But state governments are political beasts, so nothing is ever simple. So perhaps it’s not surprising that, as Mr. Carr reports, Georgia Insurance Commissioner and candidate for Governor, John Oxendine, has announced his state will not participate in the program in a letter, dated April 12th, to Health and Human Services Secretary Kathleen Sebelius.

Most “business mail” between government officials are boring, straight-to-the-point, well, business letters. This one is different. Commissioner Oxendine’s letter begins “I am in receipt of your April 2, 2010 letter detailing the first step in the recently enacted federal takeover of the United States health care system.” Not your typical opening for a formal inter-governmental missive. The letter then goes on to attack the Patient Protection and Affordable Care Act as a hastily drafted “government takeover of 17 percent of the United States economy, for being unconstitutional, and for eventually imposing an additional $1 billion burden on Georgia for Medicaid spending.

Commissioner Oxendine then questions whether the high risk pools, which are supposed to go away when carriers are obliged to accept all applicants regardless of their existing medical conditions will really be a temporary program. Consequently, he writes, “I cannot commit the State of Georgia to implement a federal high risk pool program that is part of a broader insurance scheme which I believe the Supreme Court will hold to be unconstitutional, leads to the further expansion of the federal government, undermines the financial security of our nation, and potentially commits the state of Georgia to future financial obligations.” He then ends his political attack on the health care reform plan Secretary Sebelius worked hard to enact as only politicians can: “With kindest personal regards ….”

My point for going into all this is not to comment on the merits of Commissioner Oxendine’s position (some of his arguments are overblown; some legitimate). Rather the letter strikes me as evidence that implementing health care reform – even the so-called “easy parts” – is going to be an extremely rocky road.

Keep in mind, Commissioner Oxendine’s letter does not mean Georgians in need will be denied access to a high risk pool. As Mr. Sean reports, the law allows HHS to contract with a qualified non-profit entity to run the pool if the state declines to do so. In this regard, Commissioner Oxendine is playing the equivalent of a candidate’s free card. He gets to use his state office to attack the federal government and the Administration’s health care reform plan without doing anything more than inconveniencing that federal government and some of his state’s citizens. What’s not to like?

Then there’s the coming Twilight Zone episode: Those enrolled in state high risk pools will be ineligible to participate in the new federally-funded program even though the coverage will be better than what they currently receive and less expensive than what they currently pay.

The reason, as reported by the Associated Press, is that only individuals who have gone at least six months without health insurance coverage are eligible for the federally subsidized high-risk coverage. Allowing the 200,000 individuals with coverage through state pools to move to the federal program would dramatically increase the cost of the new high risk pools. So unless they’re willing to drop their current coverage for six months (unlikely given that the high risk pool coverage is generally desperately needed to pay existing medical costs) current high-risk enrollees are “locked in” to their current coverage.

The good news, of course, if for the 375,000 people the Associated Press reports are expected to sign up for the new high risk insurance program. For them, the program could well be a lifeline that gets them to 2014 (when such programs will presumably be unnecessary) with their finances intact.

But will the $5 billion be enough to fund the program to 2014? Not likely. The federal pool will operate alongside existing state pools while HHS will create a national program to serve residents of states with no existing pools or who opt out of the program. Funding the program for nearly four years may prove a more extensive task than Congress has budgeted. The Associated Press article describes a letter from Medicare economists warning that “the program could go through $4 billion in its first year and run out of money as early as 2011.”

If correct there are three likely alternatives. Starting with the least likely:

  1. Require the states to pony up money (making Commissioner Oxendine a prophet).
  2. Reduce the benefits provided to enrollees and increase their premiums, making the federal high risk pool look more like the state versions.
  3. Pump more federal dollars into the program.

There are numerous moving pieces in the new health care reform legislation. High risk pools should be one of the easy ones. After all, high risk pools are a generally accepted, reasonably popular approach to reducing the number of uninsured Americans. As Commissioner Oxendine’s letter, the disappointment those in current state pools will feel, and the inadequate funding allocated to creating the new federal program all indicate, when it comes to health care reform, nothing seems to be easy.