The year in commentary: Broker commission losses and the future of healthcare

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Through high-profile business acquisitions, growing regulatory activity and changing carrier relations, advisers had their hands full with business-altering activity in 2016. EBA’s most-viewed blogs of the year reflect this reality, covering the impact of the Department of Labor stepping up compliance measures and a range of ways the Affordable Care Act continues to affect adviser commissions.

Listed below in order of most viewed, these EBA commentators analyzed how the evolving landscape of employee benefits is impacting advisers and their livelihood.

1) CMS looks for violations
In “Beware of CMS data match letters,” David C. Smith, vice president at Ebenconcepts, warned fellow advisers to be on the lookout for letters from the Centers for Medicare and Medicaid Services, Social Security Administration and Internal Revenue Service being sent to employers. These letters are looking for violation of the Medicare Secondary Payer rules that prohibit employers from offering incentives to Medicare-eligible employees to enroll in Medicare instead of the employer’s plan.

“While there are fines that can be assessed for encouraging or enticing the employee to take Medicare ($5,000 per situation), the bigger ‘hit’ is the bill for claims that Medicare paid as primary versus what they should have paid as secondary,” Smith says in the blog. “This claim can typically be for a scary big amount; representing what the carrier (if fully-insured) or employer (if self-funded) must repay Medicare for the discovered individuals.”

2) Breaking down DOL overtime rule
Although currently blocked in federal court, the Department of Labor’s new overtime rule that was originally set to go into effect Dec. 1 sparked many questions from advisers and employers anxious about compliance. Archana Acharya, litigation associate with Foley & Lardner LLP, aimed to answer those questions in “9 FAQs about the DOL’s overtime rule.”

“As with any new rule, it is important for employers to evaluate their wage practices and policies, and contact their employment counsel for assistance complying with the DOL’s final rule,” Acharya says.

Two types of stories dominated the attention of the Employee Benefit Adviser's audience in 2016: the details hidden inside benefit plans and how to implement them.
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3) The MLR’s ongoing impact
“The Medical Loss Ratio provision of the ACA has put benefit brokers in a dangerous place,” Guy Furay, president of The Insurance Source, says in “MLR: An existential threat to benefit brokers.”

Furay cites the ACA’s MLR provision as the reason behind Aetna, Anthem, Humana, United Healthcare, Healthspan, and BlueCross BlueShield of North Carolina and other carriers’ decisions to cancel broker commissions on individual products.

“The MLR provision is the very worst part of the ACA, and it places constant pressure on the insurance companies’ bottom lines. The rules of the game are these: You can’t make much money, but you can lose a whole lot if things don’t go your way,” he says.

4) Aon builds voluntary business
When Aon announced this spring it was acquiring benefit enrollment and communication firm Univers, it was a surprise to columnist Nelson Griswold, agency growth consultant, Bottom Line Solutions, but not shocking, considering the growing role of voluntary benefits in the workplace.

Griswold calls it “a major sign of the ascendance of enhanced benefits in “Aon’s acquisition of Univers shows the importance of enhanced benefits.”

“And this is just the latest indication of the rapid move of enhanced benefits from the margins of the industry into the mainstream. National benefits firms including Mercer, Brown & Brown, Arthur J. Gallagher & Co. and Aon in recent years have launched major initiatives to cross-sell these supplemental benefits,” he says.

5) Donald Trump is headed to Washington
Without too many details to go on, advisers clamored for information on how Donald Trump plans to shape health policy in the days after the presidential election. In “Trumpcare: A new reality for U.S. healthcare,” Dan Kuperstein, senior vice president of compliance for Corporate Synergies, breaks down the substance of Trumpcare.

“The policies that make up Trumpcare will require substantial changes to U.S. healthcare’s current legal and regulatory structure, and to U.S. tax law,” Kuperstein says in the blog. “Economists and lawmakers that have been deeply involved in U.S. healthcare policy have noted that repealing the ACA will be an extremely difficult task.”

He notes that Republicans have not explained exactly how they will fulfil promises to replace the ACA, but that Trump has mentioned the following policy positions:
· Modify laws that inhibit the sale of health insurance across state lines.
· Allow individuals to fully deduct health insurance premium payments from their tax returns.
· Increase access to health savings accounts.

6) A path to single-payer?
In “Has the single-payer era arrived?” adviser Vinnie Daboul, partner, Sage Benefit Advisers, says many politicians have been pushing for such a system, and sees the ACA’s exchanges as an indication of how the U.S. system is headed.

“Do we really have an exchange if we have only one manufacturer? Nope, if it looks like a single-payer system and it works like a single-payer system, it must be a single-payer system,” Daboul says. “What is now happening is the last carrier standing will adjust the pricing accordingly, to price for the risk and profit. This carrier is now in a position where competition is eliminated; they will set the price for care and we will all pay.”

7) Risky risk pools
Brokers and insurance companies have been advocating risk pools as a way to manage health costs for more than two decades now. But in “Is the health insurance balloon about to pop?” Joe Markland, President, HR Technology Advisors, points out such an approach can be akin to a death spiral.

“By segregating their risks eventually, the smart companies or individuals will find a way to get into a better risk pool, leaving the bad risks in another pool,” Markland says. “It is my belief that the government (and maybe society in general) will not let this persist.

“There are already complaints about the ‘game being rigged,’ resulting in income disparity. In some ways, the health insurance game is heading in the same direction too, with different groups of people having much different experiences. I will not get into risk and underwriting here, because it really doesn’t matter. If a large part of society can’t get affordable health insurance it is everyone’s problem.”

8) Commission woes
In “Why some insurance carriers are no longer paying brokers’ commissions,” Don Goldmann, vice president, Word & Brown, suggests carriers’ desire to end special enrollment periods is directly related to broker commission changes.

“[M]any states have affirmative marketing rules that require a carrier to offer certain types policies or leave the state. Rather than leave, many carriers simply make it more difficult to purchase their money losing plans,” Goldman says in the blog. “To discourage sales of Special Enrollment Period policies, in particular, three major carriers have eliminated broker commissions. Clients must now wade through the labyrinth of policy offerings by themselves. This hasn’t happened because the carriers fail to recognize the value of their brokers, but just the opposite: Carriers are cutting out their brokers because they don’t want to sell their policies.”

9) ACA making brokers broke?
Sally C. Pipes, president and CEO, Pacific Research Institute, breaks down the connection between ACA costs and carrier decisions to end individual product commissions in “How the ACA is squeezing benefit brokers.”

“The ACA's problems stem from wishful thinking. The law's architects sought to cover the generally costlier care of the elderly by requiring the young and healthy to buy insurance,” she says. “The premiums from the latter, who don't consume much care, were supposed to offset the cost of treating the former, who do tend to visit the doctor more frequently. But fewer young people — and more older and sicker people — have enrolled than expected.”

Pipes calls on the next president to repeal and replace the ACA “with healthcare reform that relies on market competition, not government fiat, to deliver accessible, affordable, high-quality care.”

10) Clinton admits ACA shortcomings
Although not as relevant since her loss in the presidential election, it was big news when leaked Clinton emails revealed her campaign acknowledged problems with the ACA. In “WikiLeaks gives an inside view of Clinton’s healthcare thinking,” adviser Craig Hasday, president, Frenkel Benefits, shared shortcomings listed in a Clinton campaign memorandum:

· Penalties that are insufficient to draw in young, healthy Americans
· Disappointing enrollment at less than half of the Obama administration’s projections primarily due to the lack of affordability for people earning greater than 250% of the federal poverty level
· Higher adverse selection than anticipated
· Higher cost-sharing contributing to poor participation because of perceived “lack of value”
· Insufficiency in the risk-protection mechanisms intended to insulate insurers from the impact of the prior four point.

“I strongly advocate a private-sector solution. The ACA has set the framework; I will once again call for the government to step aside and let the free market work,” Hasday says.

Other top-viewed commentary in 2016 included:
· 7 technology trends affecting benefits
· Fidelity enters benefits business: Others will follow
· Top 3 trends in the benefits industry this year (so far)
· IRS releases proposed ACA coverage affordability calculation regs
· Who are the most stressed workers in the American workforce?
· Aetna’s broker meeting previews ‘innovative’ changes to delivery system
· How does the ACA apply to LTD and STD recipients?
· Fidelity enters benefits business: Why many others will follow
· This is only the beginning for Zenefits-style brokerages

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Healthcare benefits Employee benefits ACA reporting Obamacare Overtime rule Law and regulation Voluntary benefits Healthcare costs Practice management Non-insurance benefits Advisor strategies Donald Trump Hillary Clinton CMS Aon Hewitt