After months of delayed action, in late May a committee of the National Association of Insurance Commissioners affirmed the need for a key role for producers in the coming state health insurance exchanges and the appropriateness of compensating them in several ways for their services.
The positions are stated in a report, "The Comparative Roles of Navigators and Producers in an Exchange: What are the Issues?" that was slated to go before the full association for approval on June 22. It tackles 11 questions ranging from licensing requirements to how navigators might assist in enrollment and aims to help state officials resolve the major issues concerning the roles of navigators and producers in the state exchanges under health reform.
NAIFA President Terry K. Headley feels the white paper is helpful in the form of guidance, but "there was not a lot of definitive information that we didn't already know," he says. "It leaves so much to the discretion of the Secretary of Health and Human Services and to the states to work through."
Producers are "crucial players in the success or failure" of the exchanges, the report states, and determining their role is "a vital part of the implementation process" for an exchange. "Producers have a significant relationship of trust with the individuals covered by both the individual market and the small employer insurance market," it notes. In addition, it states that producers can increase public awareness of exchanges and drive consumer traffic to an exchange's website.
The report also acknowledges that including a role for producers will save the states money: "An exchange that uses the already established system of producers to market, advertise and assist with the exchanges can save on costly overhead and administrative expenses."
The first producer-specific item explores questions regarding compensation, starting with acknowledging PPACA's role in constraining commission revenue and accelerating the move toward fee-based compensation. Noting that many states prohibit producers from charging fees for service in certain circumstances, the report suggests that states should consider a remedy in the form of new legislation allowing "new compensation schemes," including allowing producers to charge for placing business in a exchange. As an alternative, state officials could consider allowing producers who are not receiving commissions to serve as navigators. "NAIFA members are anticipating this and starting to transition their practices to a fee-based arrangement, more of a consulting fee," Headley says. "But this does require a special license."
The report also raises the issue of an ongoing role for producers in the small-employer market - without suggesting an answer, however. "Producers form a working relationship with client employers groups, with the employer often utilizing the producer as an expert," the report notes. If a producer's small group sends its employees to an exchange, "how can the producer continue to assist the employer? In this instance, the producer (as opposed to a navigator) may be the individual with the best relationship and ties to these individuals," the report notes.
The second producer-specific item addresses conflicts of interest that could arise for producers who function as navigators. Without offering answers, the report outlines three potential conflicts when a producer is acting as a navigator:
1) if a producer receives commissions on unrelated blocks of business;
2) if a producer receives commissions with regard to large group products that cannot be offered through an exchange; and
3) if a producer receives trailer commissions from an insurer.
The report also recommends that state officials consider whether or not a producer who works solely in the self-funded market wishes to act as a navigator will face conflicts of interest.
For his part, Headley is concerned that navigators will add an element of confusion in the marketplace. "Unlicensed and uncertified people advising consumers in the exchanges - I can't imagine the outcome being particularly positive," he says.
The report also left numerous issues specific to navigators for individual states to resolve on their own, including certification, licensure and errors and omissions coverage. Headley does not believe there will be enough of an incentive to motivate navigators to get involved. "When you look at the type of entities they are looking at for navigators ... I just don't think they are going to have much of an appetite for that kind of equity."
Tom Schuetz, co-president of Group Service Inc. based in Bettendorf, Iowa, says that his state is gearing up for the exchange. He's heard insurance company executives speak at public hearings where they indicated that they are not sure if there is a need for agents in the state exchange setting. "I think many of us are preparing to move into a fee-based arrangement," he says. "You really start to look at the larger group market - there will be a lot more competition in the 50-and-above market and the 100-and-above market. For those of us who want to stay in the business and want to continue to thrive, that is where we are focusing our energy."
Headley says NAIFA continues to believe there should be a vibrant and healthy private health insurance market outside of the exchange. But one question remains, he believes: "What will the role be within the exchange? This is something that is yet to be defined."
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