EUCLID MANAGERS®
has served the independent agent
since 1976, offering a portfolio
of group health, professional
liability, individual life, health,
annuity and long-term
care products.
We proudly represent many
fine carriers including
Group Products:
UnitedHealthcare of Illinois
Delta Dental of Illinois
MetLife
Individual Products:
American General Life Companies
AXA/Equitable
Banner Life
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Guarantee Trust Life
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John Hancock Life
Lincoln National Life
MetLife
Prudential Financial
Transamerica
West Coast Life
…and many more!
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Illinois’ Exchange - The Wakely Report
One of the requirements of federal health reform under PPACA is that each
state is to create a health benefits exchange to serve individual and small
group markets. This issue of Reflections provides an overview of Illinois’
efforts in this regard, with particular emphasis on a study commissioned by the
state recommending how Illinois should proceed.
Two questions of special interest and concern to insurance producers: the
relationship between brokers and navigators in the exchange, and how the
exchange will be financed once it is required to be self-sustaining. Other
issues of note include governance of the exchange and the scope of products
that will be included in the exchange, among others.
continued on page 2
A letter from Karen Knippen
Did you ever see a new business getting ready to open? You probably took
the opportunity to introduce yourself and offer to help the business owner
address his or her insurance needs? You were able to walk the prospect
through a needs assessment and then present alternatives that addressed them.
This is exactly what all of us need to do – NOW – with our State
Representatives and State Senators. Many of them aren’t experts in health
insurance and the implications of PPACA and exchanges. If we don’t seek
them out and “sell” them on our viewpoints – we’ll let someone else “sell”
them on theirs.
Get informed and get involved.
Sincerely yours,
234 Spring Lake Drive
Itasca, Illinois 60143
Phone: (630) 238-1900
Outside Chicagoland:
(800) 345-7868
Fax: (630) 773-8790
Visit us at:
www.euclidmanagers.com
Karen Knippen, RHU, REBC, CLTC
EUCLID MANAGERS® has been serving the independent agent since 1976 with a portfolio of group health, professional
liability and individual life and health, annuity and long-term care products. We proudly represent UnitedHealthcare,
Delta Dental of Illinois, MetLife and HumanaOne. We encourage your feedback and suggestions. Please call your
EUCLID MANAGERS® Marketing Representative or Marcy Graefen at (630) 238-2915 for more information. Outside
Chicagoland, call (800) 345-7868. Website: www.euclidmanagers.com
Illinois’ Progress to Date
Legislation passed during the spring 2011 session
that established a Legislative Study Committee. The
legislation also stated that it was the intent of the
state to establish a health benefits exchange to comply
with PPACA.
The Legislative Study committee was named during
the summer and held its first meeting at the end of
August. It has held meetings throughout September.
Testimony and written input has been offered by a
number of entities, including testimony by groups
representing health insurance brokers.
The committee has also been presented with reports
on the status of the insurance market in Illinois and
recommendations for the operational and strategic
issues Illinois faces in creating and operating an
exchange.
The notices, written testimony, committee members
and other information can be found on the website
for the Commission on Government Forecasting
and Accountability (COGFA) at
http://www.ilga.gov/commission/cgfa2006/home.aspx.
The Wakely Report on Brokers and
Navigators
The purpose of the report was stated as one to “inform
the process” of exchange planning in Illinois. It’s
important to understand that the leadership of the
Wakely Consulting Group was intimately involved
in the implementation and operation of the
Massachusetts Connector, Massachusetts’ health
exchange.
The report speaks to the Illinois exchange as a new
distribution channel. They estimate initial enrollment
of 486,000 individuals in 2014, the first year of
operation. Most of this enrollment will be individuals
(337,000). Almost three-quarters (3/4) of the individual
purchasers will receive a subsidy of some kind. They
project enrollment by 2016 to be more than 1 million.
The report acknowledges that the role of brokers can
be critical to the success of the exchange:
“If producers are hostile to the Exchange and have
incentives to avoid sending business to it, their
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Reflections
actions could threaten the success of the Exchange.
At the same time, producers play an important and
valued role in Illinois today for individuals and
small business purchasing insurance. Because
defining the role and compensation level of producers
in the Exchange is a complicated and potentially
controversial issue, we strongly recommend working
with all stakeholders, including the producer
community, to develop a policy and financial model
that seeks to smooth the inevitable tension between
an Exchange and producers.”
The report compares the role of brokers to that of the
All Kids Application Agents in examining the roles and
functions of brokers and navigators. They see the role
of navigators as being primarily that of “education and
outreach.” This is especially likely for populations that
are predominantly eligible for Medicaid or other state
programs, as they see it. “Effectively, Navigators are
the field sales force for the non-group, subsidized
market, which is likely to be the largest market
segment for the Exchange.”
The report also suggests that the network of
approximately 100 DHS Family Community Resource
Centers (FCRCs) can be helpful in reaching hard to
reach populations. These offices provide help for
enrolling in a variety of state programs. Wakely notes,
however, that these offices are unlikely to have staff to
spare for exchange purposes. Rather, these offices
could be a location for a kiosk for online access to the
exchange website.
In further exploration of the role of producers
(brokers) and navigators, the report notes:
“Understandably, producers are concerned about how
the Navigator program will affect their role and
about whether Navigators are being afforded an
unfair competitive advantage in assisting prospective
Exchange enrollees. Therefore, one of the first issues
for the Illinois Exchange to consider will be defining
the role of producers relative to that of its Navigator
program. Although under ACA a broker/producer
can be a Navigator, there are some practical
differences in the role of each. For example:
a. Navigators are required to be funded from the
operations of the Exchange, while producer
commissions are paid by health plans, employers,
or consumers.
b. Navigators are not allowed to receive compensation,
either directly or indirectly from health insurance
issuers, for enrolling individuals or employers in a
health plan.
c. Producers are required to have state licenses,
while any certification or licensure requirement for
Navigators is to be decided by Illinois.”
There is also considerable discussion about how producers
should be paid for business written through the
exchange. Similarly, payment for navigators is to be
determined by the exchange with the caveat that
navigators may not be paid “directly or indirectly”
by an insurer.
The Wakely report questions whether producer
commission should be on a percentage of premium
basis or a PMPM (per member per month) basis.
They reflect that percentage based commissions
“reward producers from one year to the next, not on
the basis of greater productivity or better service, but
on the annual increase in the cost of health care.”
They note further that, “Such built in “pay raises” are
not sustainable over time and merely serve to escalate
premium costs needlessly.”
The report discusses a number of considerations for
commission payments and notes that this is likely to be
a controversial issue. The report notes that irrespective
of how the producer role is defined, they believe
producers are critical to the success of the SHOP
exchange. The SHOP exchange is the exchange for
small businesses.
The report considers that General Agencies (GAs) may
offer a viable option for broker support services for the
exchange. They note:
“GAs are gearing up to work closely with Exchanges,
and the state may be well served by outsourcing this
function to an agency demonstrating strong producer
support services, advanced technological capabilities,
flexibility, and importantly, strong existing
relationships with the producer community.”
The Wakely Report on Financing
of the Exchange
Federal funds are available for the planning and
implementation of exchanges. However, once
exchanges are operational in 2014, they are required
to become self-sustaining the following year. How
exchanges will be funded is directly linked to the
functions of the exchange. The Massachusetts
Connector, for example, has a significantly larger
operating budget than does the Utah Exchange. While
some of this distinction is due to size of enrollment,
some is also attributable to the decisions made on the
scope of the exchange in general.
Key issues to consider for exchange funding include
whether to charge a service fee on everyone purchasing
coverage through the exchange or whether operating
costs should be built into the premiums for coverage.
Other possible funding sources could include advertising
on the exchange website, sin-taxes such as the tobacco
tax and a myriad of other sources of funds.
If these funds are collected solely from plans
participating in the exchange, the report provides
an estimate of the assessment necessary. These are:
“…the assessment required to finance the cost of
running the Exchange, as a percent of premium, will
be between 2.24% and 3.39%. We estimate that the
cost of the Exchange on a per-member per-month
(PMPM) basis will be between $10.47 and $16.83 in
2014 and between $8.92 and $13.47 in 2015.”
The report acknowledges that “broadening the base” to
include assessments on insurers both inside and outside
the exchange may be worth considering. They point
out that a reduction in uncompensated care and
increased enrollment in coverage will benefit the
non-exchange market as well.
Conclusion
These next few months when Illinois is making initial
decisions regarding an exchange are critical. Brokers
should use this time to become familiar with the options
under consideration and how these decisions will affect
their businesses. Equally critical is to engage in an
ongoing dialogue with elected state officials.
Reflections
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A service publication for brokers from
Euclid Managers®, proudly representing
UnitedHealthcare of Illinois, Delta Dental of Illinois,
MetLife and HumanaOne.
Visit us online www.euclidmanagers.com.
Legislative Review is published by Euclid Managers®, 234 Spring Lake Drive., Itasca, IL 60143. For more information, contact your Marketing Representative or Marcy Graefen
at (630) 238-2915 or fax your request to (630) 773-8790. Outside Chicagoland: (800) 345-7868, Fax (877) 444-2250. © Permission to quote with credit to source.
Illinois’ Exchange - The Wakely Report
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