Insurers Can’t Vary Commissions Based On Enrollment Timing; Idaho, Minnesota Waiver Requests


On June 7, 2022, the Centers for Medicare and Medicaid Services (CMS) issued new guidance confirming that insurers cannot vary compensation for agents or brokers based on whether the person they are helping enrolls during the open enrollment period (OEP) or a special enrollment period (SEP). Arrangements that reduce or eliminate commissions (and other forms of compensation) for agents and brokers for SEP enrollment violate the Affordable Care Act’s (ACA’s) guaranteed issue requirement under Section 2702 of the Public Health Service Act. Insurers might additionally violate federal nondiscrimination standards if these arrangements discourage agents and brokers from marketing to and enrolling consumers with significant health needs.

CMS issued the new guidance in response to reports that some insurers in the individual market were reducing or eliminating commissions for agents and brokers that help consumers take advantage of a SEP. Insurers appear to be doing so even while earning significant profits and receiving enhanced marketplace subsidies under the American Rescue Plan Act.

Unfortunately, it is not new for insurers to use commissions to discourage enrollment: media documented a similar trend in 2016 when insurers thought they were losing money on ACA plans in the individual market. And insurers have long supported policies that make it harder for consumers to enroll using SEPs, asserting that those who enroll during a SEP have a worse risk profile than those who enroll during the OEP. While some early data suggested this could be the case, more recent analyses show that making it easier (not harder) to enroll in health insurance improves (not worsens) the risk pool.


This is also not the first time that CMS has weighed in on this issue. In 1998, the Health Care Financing Administration interpreted guaranteed issue requirements in a similar manner under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), concluding that it violated HIPAA for insurers to pay agents and brokers less for high-risk individuals. This guidance was issued in response to concerns that insurers were attempting to discourage enrollment by HIPAA-eligible individuals into individual market policies by refusing to pay or reducing commissions or bonuses. The 1998 guidance was reiterated in the preamble to an early ACA market reforms rule from 2012. And CMS issued further guidance in 2016, affirming that any compensation arrangements that discourage agents and brokers from marketing to and enrolling consumers with a significant health need qualify as a discriminatory marketing practice.

The new 2022 guidance confirms that, under guaranteed issue requirements, insurers in the individual market must maintain typical enrollment conduits for both OEPs and SEPs. Compensation policies that eliminate or reduce agent or broker compensation for SEPs relative to OEPs in the same benefit year discourage agents or brokers from marketing to and enrolling SEP-eligible individuals (which violates this standard). The only noted exception is when state regulators recommend that an insurer not enroll more people due to solvency concerns or financial limitations.

This guidance is good for consumers, agents and brokers who want to help consumers enroll in marketplace plans, and marketplace enrollment. Agents and brokers continue to enroll, renew, and otherwise assist a significant number of consumers in marketplace coverage. For the 2020 plan year, nearly half of all enrollees were assisted by an agent or broker. If there are no or fewer incentives for agents and brokers to assist with marketplace enrollment during SEPs, fewer people are likely to enroll. This is true even with the Biden administration’s efforts to increase access to navigators and certified application counselors.

Those who believe that an insurer has violated these requirements should contact their state insurance department (or federal officials in the four states where CMS enforces the ACA). Agents and brokers can also contact the federally facilitated marketplace and are encouraged to provide documentation of the insurer’s compensation structure or practice. Consumers can submit complaints about marketing practices by insurers, agents, brokers, and web-brokers to the marketplace call center.

Waiver Applications For Idaho And Minnesota Deemed Complete

On June 3, CMS and the Department of the Treasury notified Idaho that its application for a state-based reinsurance program under Section 1332 of the ACA was complete. Comments on the application can be made through July 3. Following the comment process, the agencies will approve or deny the application within 180 days.

Idaho’s five-year reinsurance program would be overseen by the Idaho Individual High Risk Reinsurance Pool, an entity established in 2000. The program would begin in the 2023 plan year and is projected to reduce premiums by 7 to 10 percent each year (relative to what premiums would have been in the absence of the waiver). Enrollment in the individual market in 2023 would increase by up to 1,600 people.

Although the Pool has long been in existence, legislation passed in 2022 makes future reinsurance payments for claims in the individual market contingent on approval of a Section 1332 waiver and authorized the Idaho Department of Insurance to apply for a waiver.

It is not clear how large the Pool will be. For a 7 percent reduction in premiums, Idaho would have a $41 million reinsurance program for 2023. For a 10 to 11 percent reduction in premiums, the program would need about $59 million in total funding (assuming American Rescue Plan Act subsidies do not extend through 2023). Much of the program would be funded through federal pass-through funding while Idaho’s contributions would include 1) ceded reinsurance premiums from insurers; 2) other state funds (including an up-front investment of $25 million from the Department of Insurance, existing reinsurance funds, and an annual premium tax allotment of about $16 million for 2023); and 3) an assessment on insurers if needed.

Idaho intends to use both a condition-based list (which builds off prior legislation from 2017) and an overall attachment point model with parameters set annually. The parameters will be set in the Pool’s plan of operation, although updates can be approved by the director of the Department of Insurance.

Also on June 3, federal officials deemed complete Minnesota’s request to extend its current Section 1332 waiver for a state-based reinsurance program. Minnesota’s application was deemed complete after state officials submitted a revised extension application; the revisions were made in response to a January 2022 letter from federal officials asking for more information. If approved, Minnesota would operate its program through the end of 2017. Comments are due on July 3.

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