On Jan. 1, 2014, it will become illegal for health insurance companies in Vermont to bake broker fees into their rates.
For years, health insurance premiums included fees for agents who sold health insurance, regardless of whether a given health insurance consumer used an agent. Insurance companies compensated agents based on commission, or the amount of insurance the broker sold. Act 171, which passed the Legislature in 2012, will do away with the practice for the state’s new health insurance exchange, Vermont Health Connect.
In 2014, the exchange will become the sole health insurance marketplace for about 118,000 Vermonters who purchase insurance individually or through a small business with 50 or fewer employees. In the exchange, brokers won’t sell insurance; they will advise customers. Instead of earning commissions, agents will receive a monthly fee set by the state. The agent’s customers will pay the fee.
The exact amount of that agent charge is the topic of debate.
“What we’re trying to do is find the sweet spot in the small employer and individual market,” said Mary Eversole, director of the Vermont Insurance Agents Association.
But the state’s recommended fee, which came out this week, was more bitter than sweet for Eversole.
Mark Larson, commissioner of the Department of Vermont Health Access, proposed a $15 per employee or individual monthly charge in 2014. That fee would then drop to $10 in 2015. He said the department arrived on that number after working with a focus group of 50 businesses.
Eversole said her association recommends a $22 flat monthly fee.
“We know we’re taking a huge cut in compensation, and we’re prepared to do that,” she said. “But we still need to be able to cover our costs.”
Larson said that he is willing to consider the association’s proposal, but he said that setting a fee is “a balancing act.”
“Small employers have told us very clearly that if the price is too high they won’t use a broker, and if the price is too low brokers won’t sign up to be certified to use the exchange,” he said. “So we’re trying to find something that maximizes the participation of brokers but doesn’t make it so high that employers don’t avail themselves.”
In addition to agents, there are three main sources of free information available to help consumers choose plans on Vermont Health Connect. The exchange is web-based and there is information on the website, healthconnect.vermont.gov. There will be a call center available to help Vermonters obtain information. And there will be so-called “navigators” to meet with people in person to help them assess different health insurance options.
Eversole said the main difference between navigators and agents is that agents can more directly guide customers.
“Navigators can help enroll people in the physical transaction and determine eligibility, but unlike agents, they cannot advise them on plan selection,” she said.
Larson said that brokers would serve a vital role in the exchange, especially in the first year.
“We know a lot of employers have relied heavily on their brokers in the past, and we’re interested in continuing that relationship, particularly for this year, where there’s a lot of transition going on,” he said.
Rep. Mike Fisher, who chairs the House Health Care Committee, said that shifting the payment mechanism for health insurance agents was not aimed at isolating them. It’s meant to provide consumers with more information and lower health insurance rates for those customers who don’t use brokers. He also said brokers can play a vital role in helping guide their long-term small-business customers on the exchange.
“Good brokers and good businesses will continue to contract with each other but with the transparency of knowing how much the services cost and how much the businesses have to pay,” he said.
If the state shifts to a single payer, publicly financed health care system, however, Larson said the need for brokers would be alleviated.
Updated at 9:17 a.m. on June 6, 2013 with additional information about the state’s recommended broker fees.
