Broker Commissions for Mid-Year Enrollment in the Marketplaces: Options for State Marketplaces and Insurance Regulators to Prevent Discrimination
Justin Giovannelli, Georgetown Center on Health Insurance Reforms
Following the end of the federal public health emergency (PHE), which is likely sometime this year, states will no longer be required to provide continuous coverage for Medicaid enrollees in exchange for enhanced federal funding, and will begin assessing whether enrollees are still eligible for the program. This redetermination process is expected to result in the disenrollment of somewhere between 14.4 to 15.8 million people, who will become uninsured if they cannot secure an alternate source of coverage. Some are likely to obtain job-based coverage or have aged into Medicare; many children will be eligible for the Children’s Health Insurance Program (CHIP). Roughly five million people in the disenrolled population will be eligible for federally subsidized coverage through the Affordable Care Act (ACA) marketplaces.
As state insurance regulators and marketplace officials prepare for the substantial transitions in coverage that will occur in the wake of the PHE, there is much to consider. One element of many states’ strategies will be to ensure that brokers and enrollment assisters are doing all they can to help new marketplace consumers understand their coverage options and enroll in a plan that suits them. The ability of state officials and stakeholders—brokers, assisters, and insurers themselves—to facilitate smooth transitions from Medicaid to the marketplaces will have direct consequences for the well-being and security of the transitioning population. It will also have significant ramifications for health equity. People of color and individuals with limited English proficiency are disproportionately represented in Medicaid and likely are at greater risk of losing coverage during the PHE unwinding; failure to address and mitigate this risk would worsen existing disparities in coverage and care.
Reducing Commissions Increases the Risks for Consumers Who Lose Coverage After the PHE
Yet despite the clear need for robust enrollment assistance, there are warning signs suggesting consumers in some states will find help harder to come by. Recently, several insurers that use the marketplaces eliminated commissions for mid-year marketplace enrollment. These carriers compensated brokers for their work during the open enrollment period, but will not pay them to sign-up consumers via special enrollment. These decisions will suppress enrollment. Faced with fewer opportunities for compensation and a much greater risk of working for free, brokers affected by commission cuts will provide services to fewer marketplace consumers than they would otherwise. The millions of individuals soon expected to leave Medicaid will need to figure out if they are eligible for subsidized marketplace coverage and, if so, begin sorting through numerous new plan options with benefits, cost-sharing designs, and provider networks different from their old coverage. With less support available to navigate these tasks, fewer individuals will complete the enrollment process. More people will fall through the cracks and become uninsured.
Commission Structures That Shortchange Special Enrollments Are Likely Discriminatory
Commission structures that reward brokers for enrolling people in marketplace plans at a certain time of year, but pay nothing for enrollments at other times, “induce the sale of those plans for which the carrier will pay commissions, while discouraging the sale of those plans for which no commission is paid.” Carriers have claimed, in prior years, that consumers who access marketplace coverage via special enrollment are sicker, and costlier to insure, than those who sign-up during open enrollment. There is some reason to believe, therefore, that the insurers that compensated brokers during open season, but that are now refusing to pay commissions for special enrollments, may be doing so to avoid taking on enrollees that they believe are relatively high risk.
This practice is at odds with federal regulations that prohibit insurers from marketing in ways that discriminate against individuals with significant health needs. Federal regulators have recognized that because “issuers commonly use agents and brokers as an important part of their marketing and sales distribution channels, and the way an issuer structures its compensation to agents and brokers influences the enrollment and retention of consumers,” broker commission arrangements must adhere to nondiscrimination protections. Arrangements that, for example, provide less compensation for enrolling people in higher metal level plans, “which are associated with higher utilization,” and more compensation for enrollments in low metal tiers, are prohibited. For exactly the same reason, commission structures that pay more for sign-ups mediated during open enrollment, which are thought to be of comparatively low-risk, and less (or nothing) for enrolling people mid-year who may be associated with higher utilization, violates the nondiscrimination rules.
Commission Cuts May Weaken the Individual Market Risk Pool
Barriers to enrollment deter sign-ups, but the impacts are likely to vary across populations. Though cutting SEP commissions is intended to limit a carrier’s exposure to risk by reducing enrollment by consumers who are sick, it may have the opposite effect for the market as a whole. On average, individuals with significant health needs are likely to understand and value comprehensive coverage, and be more motivated to obtain it, than people who are healthy and have low care utilization. Thus, an enrollment process that requires considerable time and effort to navigate may serve as a greater deterrent to the healthy than it does the sick, who need and want the coverage more. Furthermore, a deteriorating risk pool could create a “race to the bottom,” as participating insurers that did not eliminate commissions will face pressure to pursue their own commission cuts.
States Have Options for Protecting Consumers
States should continue to keep a close eye on how their carriers structure broker commission arrangements, and consider acting to head-off compensation schemes that discourage mid-year enrollment, including by the many Americans who will soon be searching for new coverage at the end of the PHE. State-run marketplaces can require participating insurers to pay the same commission for special enrollments as they do for sign-ups during the open enrollment period, as Covered California does. Meanwhile, insurance regulators in states that are enforcing the market reform provisions of the ACA—and this includes nearly every state—can enforce its nondiscrimination rules to prohibit carriers from reducing or eliminating broker compensation for special enrollments. In addition, most states have authority under their own laws to intercede, in the best interest of consumers, to prevent or seek remediation of these practices. For example, New Mexico recently notified its carriers that a broker compensation structure that pays differing commissions for open and special enrollments violates state nondiscrimination provisions and constitutes an unfair or deceptive practice under the state’s unfair trade practices statute. These arrangements are subject to enforcement actions and could result in administrative penalties and the suspension of an insurer’s license.
Within the next year or so, roughly five million people will lose Medicaid coverage and gain eligibility for a subsidized health plan on the marketplaces. Nearly everyone in this group is likely to benefit from assistance as they navigate their new coverage options and the marketplace sign-up process; for many, the availability, or absence, of such help will determine whether they get covered or go uninsured. As state officials continue to prepare for the PHE’s end, they should carefully consider what actions they can take to ensure that stakeholders, including insurers, are facilitating these critical transitions.
 If Congress does not extend the availability of enhanced federal premium tax credits, currently provided under the American Rescue Plan Act through 2022, the share of the disenrolled population that is eligible for subsidized marketplace coverage will be lower.
 45 C.F.R. § 156.225(b) requires qualified health plan (QHP) issuers and their officials, employees, agents, and representatives, to comply with any applicable state laws and regulations governing health plan marketing and prohibits “marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs in QHPs.” 45 C.F.R. § 147.104(e) establishes these requirements for all individual market issuers and also prohibits discrimination based on, inter alia, an individual’s health condition.
 New Mexico’s guidance also makes clear that additional types of commissions structures that “discourag[e] the sale of those plans for which no commission is paid” are illegal, including arrangements that vary commissions based on the metal tier of the plan sold.