Enclosed in the 279 pages of proposed rules released Friday by the Department of Health and Human Services for the public health insurance exchanges is an answer, sort of, to a question brokers have raised for more than a year — who will be liable for navigators’ mistakes?

In the section of the rules discussing navigators, the Obama administration’s document says “a state or an exchange must not require that all navigators be agents or brokers or carry errors and omissions coverage.” Further, the rule says that if navigators were to be required to carry E&O insurance, this would disqualify them from being considered a “community and consumer-focused nonprofit group.” Federal law requires that at least one such group be listed as a navigator.

The rule is largely a directive to states, so they do not begin any sort of E&O requirement, but Peter Marathas, partner at Proskauer Rose LLP specializing in employee benefits, executive compensation and ERISA litigation, says that brokers should be watching navigator regulations closely.

“The whole concept of the navigator is to be education-based and not pushing consumers toward any result, so [this rule] is a reminder to keep that in mind,” he says. “Now, human nature being what it is, there will be a demand if someone’s using a navigator to say, ‘What do you mean you can’t tell me what to do? You’re taken me to the well and you can’t tell me what well to drink from?’ Human nature being what it is, [the navigator] might step over some lines there.”

So, in that case, who is liable if a consumer feels they’ve been misinformed? Marathas says that part is still a “mystery.” The Centers for Medicaid and Medicare Services did not respond to a question Monday on how they will monitor to ensure navigators are not giving advice. The federal government was closed due to a snow storm in Washington.

Craig Hasday, COO at Frenkel Benefits LLC in New York City, says the fact that navigators don’t have E&O insurance ultimately hurts the consumer, who ends up more confused when receiving information on insurance plans by someone essentially brand new to the industry.

“The best way to fix [exchange confusion] is to get the people who know what they’re doing to work with plans,” he says. “The assisters and navigators … don’t have the perspective and the licensing and the E&O to give proper advice. They’re saying they don’t give advice and that’s absurd because people are going to give advice.” Hasday says the burden will fall on brokers. When navigators make mistakes, since there’s nowhere else to go, consumers will seek a broker — who won’t be compensated for their time — to get that person into a more suitable plan.

More fallout

Friday’s regulations also included a formal directive to the states preventing them from passing any laws requiring a navigator to refer a consumer to an agent of broker for any reason. The language says, “Non-federal laws or regulations that require referrals to sources that are not required to provide impartial advice would, on their face, make it impossible for these assisters to comply with existing federal statutory and regulatory duties and standards.”

Broker lobbying group Health Agents for America on Monday afternoon took this as another blow from the government to the broker and agent community. “Call your U.S. senators and U.S. representatives,” an email from the group read. “CMS has gone too far.”

Marathas agrees that the overall concept of navigators infringes on the entire broker industry. “Why even have in this federal law the whole concept of navigators?” he says. “Why not find a way to invite a whole group of people who have been hard-working members of the industry for years, compared to hours. Why create a whole new niche industry?”

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