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Paul Zimmerman

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Covered California Approves New Agent Compensation Standards

Covered California, the state’s Patient Protection and Affordable Care Act (PPACA) public exchange program, will now include greater detail with respect to payments made to insurance agents. The board of Covered California has voted to approve a new health plan contract that includes agent compensation standards. The contract will apply to health insurers and managed care companies that intend to sell qualified health plan (QHP) coverage through Covered California in 2017, 2018 and 2019.

Among other things, the new contract requires a QHP issuer to:

• Pay the same level of agent compensation for applications taken during the regular open enrollment period and applications taken from consumers who qualify for special enrollment period (SEP) treatment during other times of the year.

• Pay the same level of compensation for different "metal levels" of the same product. That means an issuer will have to pay the same level of commission for budget-priced, bronze-level coverage that it pays for high-end platinum coverage.

• Participate in an agent appointment reporting and agent appointment error correction system.

• Let Covered California post the agent support grade the issuer gets from its agents on the Covered California agent website.

The decision to set minimum agent compensation standards comes on the heels of reports that some individual health coverage issuers are responding to high claim costs by reducing or eliminating commissions for SEP applications. Consequently, as noted above, the contract includes an "incentive compensation program" provision that requires an issuer to pay the same commissions throughout the year. An issuer could not, for example, pay one commission during the regular open enrollment period and a lower commission to agents who help consumers who apply for coverage at other times of the year.

Three of the largest insurance companies in the country (Anthem, Aetna and Cigna), in order to deter people from signing up for their individual marketplace plans outside of the designated open enrollment periods, have recently informed agents that they will not pay commissions for post-deadline customers. By taking this incentive away from agents, the insurance companies are hopeful that they will see less of what they consider to be “abuse” by agents of the special enrollment period option.

It remains unclear how the government will respond to the practice of agents targeting special enrollment customers. Thus far, the Centers for Medicare and Medicaid Services has conceded that there has been some abuse, and has eliminated a number of special enrollment periods and pledged to more carefully vet applications for special enrollment in the future.

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.