Wednesday, November 17, 2021

The broker's tale: Louise Norris on skewed incentives in the ACA marketplace

As noted in last week's post, the ACA exchanges rely heavily on health insurance brokers and agents to help people sort their options and enroll in ACA-compliant individual market plans. Almost half of enrollments on the federal exchange,, which currently serves 33 states, are enrolled by brokers and agents. The same is true for Covered California, the largest state-based exchange -- which, unlike,* has maintained a consistent commitment to making the marketplace work as designed since its launch in fall 2013.

The reliance on brokers was inevitable, given the complexity of marketplace offerings (check out the 221 plans on sale in Miami, the nation's largest ACA marketplace, in 2022) and the pre-existing pool of expertise, commercially funded, that brokers constituted prior to ACA launch.  And while brokers have played a vital role,** the ACA failed to align their incentives in such a way as to ensure that their participation would be an unmixed blessing. Among the problems:

  • Not all insurers that participate in the ACA exchanges pay commissions to brokers. Commissions have fluctuated quite a bit over the seven years of the marketplace's existence, as well as by state, region, and individual insurer.

  • The lightly regulated market for so-called Short Term Limited Duration plans fostered by the Trump administration (which rendered them neither short-term nor of limited duration, if there's a difference) pays much higher commissions than the ACA-compliant market, but serves few enrollees' best interests. STLD plans are medically underwritten, riddled with exclusions and coverage gaps, prone to balance billing, and pay as little as half of premium revenue to cover enrollees' medical claims. ACA-compliant plans are required to maintain a minimum "medical loss ratio" (MLR) of 80% -- that is, pay out at least 80% of premium revenue in claims.

How do ethical brokers deal with these conditions, and how could incentives be better aligned? To address those questions I queried Louise Norris, co-owner with her husband Jay Norris of a health insurance brokerage serving individual market customers in Colorado.

Louise is famous among healthcare reporters and scholars for her voluminous writing about the ACA marketplace at, where her q-and-a's, overviews of each state marketplace, and spotlights on various ACA rules and features constitute a virtual encyclopedia of marketplace offerings, costs, rules and history, constantly updated and always accurate (along with her posts at Verywell). The exchange below is lightly edited.

xpostfactoid: Commissions for ACA-compliant plans first shrank, then improved, right? Can you briefly outline the down-and-up?

Louise Norris: Commissions started to drop in 2011, when the MLR rules [requiring ACA-compliant plans to spend at least 80% of premium revenue on medical care] went into effect. Then they dropped again in 2016/2017, after insurers had been losing money in the ACA-compliant individual market. Some insurers eliminated commissions for SEP enrollments, and some eliminated them altogether. For insurers that kept paying commissions, they were generally lower. Brokers pulled back from the ACA-compliant individual market as a result. Connecticut's marketplace stepped in to require broker commissions as of 2018, because they just didn't have enough consumer assistance available in 2017 due to the commission cuts. 

Commissions started to rebound nationwide in 2019. This corresponded with the trend of insurers returning to the marketplaces (after exiting at the end of 2016 and 2017), and it's all linked to profitability. When insurers weren't profitable in that market, they pulled out, scaled back, and reduced or eliminated broker commissions. Once it became a profitable market, all of those things started to reverse.

Broker bonuses (based on volume) used to be commonplace, but had been scaled back or eliminated by a lot of insurers over the last several years. This year, a lot of insurers reinstated bonuses, and it was clear that insurers were competing for market share this year, trying to enroll as many people as possible. 

In 2022, all marketplace insurers in Colorado are paying commissions for all enrollments -- which has not always been the case.

xpostfactoid: How do commissions for short-term or indemnity plans compare with ACA-compliant?

Louise Norris: First, a disclaimer that we have no current first-hand knowledge of this, as our brokerage focuses entirely on ACA-compliant plans. 

A House Energy & Commerce Committee report last year about broker commissions found an average commission of 23% for short-term plans, versus 2% for ACA-compliant plans. That's not really an apples-to-apples comparison, since short-term plans are so much less expensive than ACA-compliant plans (and that was for 2018, which was before broker commissions had rebounded in the ACA-compliant market). 

All of the insurers in our marketplace currently use a per-member-per-month flat rate for commissions, which means the pay is the same whether you enroll a 22-year-old or a 62-year-old. (This is in contrast to pre-ACA days, when most insurers paid commissions as a percentage of premiums, but premiums were also a lot lower). xpostfactoid note: As premiums for the oldest enrollees are three times as high as for the youngest adult enrollees, and younger adults are both more likely to be uninsured and needed in the marketplace risk pool, this age-flat structure is probably good for the market, if not for brokers.

Depending on the short-term plan and how expensive it is, the dollar amount of the commission might be more than the PMPM commission in the ACA-compliant market. And it's also pretty simple on the front-end, since the broker wouldn't be helping the client figure out subsidies, compare drug formularies, or sort out how much the out-of-pocket costs are likely to be for a given pre-ex condition (since existing conditions wouldn't be covered, drugs might not be covered at all, etc.). So the clients who are drawn to short-term plans are likely to be pretty easy to help. Then again, the broker might find that it's much more challenging later on, if and when a medical need arises and the client is faced with post-claims underwriting and/or claim denials.

xpostfactoid: From the broker's perspective, what are the impediments to giving clients a full view of their options (e.g., ACA-compliant carriers that don't offer commissions or make it otherwise difficult to represent them)?

Louise Norris: If an insurer doesn't pay commissions, the broker is working for free if they enroll someone in that plan. Any assistance they provide with the enrollment and post-enrollment issues will be uncompensated. That's doable if it's just for a handful of clients here or there, but it's obviously not a tenable situation on a large scale.

xpostfactoid: What happens when a broker can't readily or profitably represent one or more insurers selling in the marketplace? Does the broker generally disclose this to clients? 

Louise Norris: A broker should always disclose this to clients. If a client was in an area where plans offered by an insurer that the broker doesn't sell are competitive, the broker can tell the client that she doesn't work with that insurer because they don't pay her -- and that if the client wants to see that insurer's offerings and potentially enroll, he can do so through the exchange.

Brokers are not required to show all plans. Indeed, most of the Enhanced Direct Enrollment platforms [websites that can enroll people in plans sold on, and credit any subsidies for which the enrollee is eligible] are run by insurers, so they're clearly only showing their own plans. 

xpostfactoid note: most insurers that run EDEs use technology supplied by online web broker HealthSherpa, as do thousands of agents in privately-branded versions of the HealthSherpa site. HealthSherpa accounts for almost a quarter of all enrollment on See this post for more about HealthSherpa's role in the marketplace.

Louise Norris (cont.): Last I knew, our marketplace in Colorado requires a broker to show all plans if they get leads through the referral program -- a system that allows a person to say that they want help, and then their info will be sent out to the next available broker -- sort of like Uber for health insurance help. 

xpostfactoid note: also runs such a service, called Help on Demand. I have a query pending with CMS as to whether participating brokers are required to show all plans. 

xpostfactoid: According to, brokers are "required in many states to act in a consumer’s best interest." Do you have a sense of how such laws work in various states? 

Louse Norris: Brokers generally have a fiduciary responsibility to their clients. This is one of the ways that they differ from agents, whose fiduciary duty is to the insurer they represent. Producer licensing requirements including continuing education in ethics, and state insurance departments are responsible for taking action against producers who fail to act ethically. 

But in terms of the type of plan that a broker sells... it's probably a really gray area. There are obviously brokers who sell both ACA-compliant and non-ACA-compliant plans. Ethics rules would require them to adequately assess the client's needs and situation and sell the plan that's the best fit, but as long as they provide appropriate disclosures, they're probably in the clear. 

xpostfactoid note: An insurance broker's "fiduciary" duties are ambiguous and vary by state. It's difficult to find information on the duties of health insurance brokers specifically.

xpostfactoid: What changes in law or rules or incentives would you recommend so that brokers can profitably sell in the marketplace and consistently serve clients' best interests?

Louise Norris: In an ideal world:

Health plans should not be allowed to operate in the marketplace if they're not paying commissions. Without any commissions, they essentially rely on free help from Navigators and the marketplace call center, instead of paying people to represent their products and provide ongoing consumer assistance.

When insurance departments review rate proposals, they should ensure that the commissions that insurers pay are all roughly in line with each other. Personally, I'd rather have all commissions standardized, so that there is no incentive for brokers to sell one plan over another. I think that would help to ensure that brokers are able to focus entirely on their clients' best interests. Jay doesn't pay attention to commission levels, but he's also been doing this for 20 years and has a solid list of long-term clients. For a broker who is new to the industry and struggling to make ends meet, lopsided commissions can be an incentive that might result in clients being matched with plans that aren't really the best fit.

I'd like to see commissions reduced for short-term and fixed indemnity plans. States could impose 80% MLR rules on these plans [reducing the margin available for commissions], or standardize commissions to ensure that they're lower than the commissions that are paid for ACA-compliant plans. Even though those plans aren't subject to ACA rules, the insurers do have to file with the state insurance commissioners and the plans are subject to various state rules. Strengthening those rules to eliminate broker incentives to sell subpar plans would go a long way. I think that's especially important when we consider brokers who might be new to the industry and overly swayed by the sales pitches that these insurers make to their agents.

xpostfactoid postscript: I would add that the ACA statutorily should have made adequate, uniform commissions mandatory for all participating insurers. In myriad ways, American market fundamentalism distorted the benefit provided by the ACA marketplace; leaving broker compensation up to insurers is one instance.

UPDATE, 3:30 ET: Serendipitously, Covered California announced today that the three biggest insurers selling on the platform, which together account for 70% of enrollees, are raising broker commissions by an estimated 17% (presumably a blended average) after the state "worked with" them, i.e., pressured them, to do so. The release also highlights that 500 brokerage storefronts statewide bear the CoveredCA logo, and the state, like, has a Help on Demand service, launched in fall 2016. Update 11/18/21: Covered California requires agents to fairly and accurately present all available enrollment options and prices to consumers.


* The Trump administration in many ways worked to undermine the ACA-compliant market -- though they did also improve it in some ways, including by facilitating the work of brokers and online brokers. That was a mixed blessing, tied up with unleashing the STLD market. Google "health insurance in [any state]", or in many cases even the state health insurance exchange, and you will be inundated with links to online brokers hawking short-term plans and limited plans. These pitches doubtless snare people who are eligible for heavily subsidized comprehensive coverage in the marketplace.

** The ACA statute and the Obama administration stood up a parallel universe of nonprofit enrollment assisters, trained and mandated to serve low income and underserved populations in particular, that provides a vital counterpart.  But the agent/broker pool is larger, better funded (particularly as the Trump administration gutted funding for the federal Navigator program), and, unlike the government-certified nonprofit assisters, can make positive recommendations of specific health plans. For more about the constraints under which nonprofit assisters work, and the services they provide, see this post.  

Subscribe to xpostfactoid

Photo by RODNAE Productions from Pexels

No comments:

Post a Comment