Medica won’t pay commissions to brokers who help new Minnesota customers buy individual health insurance policies for 2017.
The move is temporary, the Minnetonka-based insurer said, but brokers see it as another sign of troubles in the individual market, where about 5 percent of state residents purchase coverage.
Brokers help explain the features of health plan products to consumers, but some insurers in other states have stopped paying commissions as a response to financial losses in the individual market.
“It is very unusual, and unprecedented, in Minnesota,” said Bob Stein, president of the Minnesota Association of Health Underwriters, a trade group for insurance agents and brokers.
The change comes in the individual market, which provides coverage for about 250,000 state residents. It is the market for self-employed people and those who don’t get coverage from their employer, or don’t qualify for government programs like Medicare, Medicaid or MinnesotaCare.
The individual market has been the focus of changes with the federal Affordable Care Act, which eliminated preexisting condition exclusions that health insurers previously used to control costs. The health law also launched new health insurance exchanges like Minnesota’s MNsure exchange, so individuals could purchase coverage and tap federal tax credits.
Since major health law changes kicked in for 2014, health insurers across the country have struggled to make the business profitable. Over the past year, several health insurers have pulled back their business in the market, or sought large rate increases.
When Minnetonka-based UnitedHealthcare announced in late 2015 that it would be retreating from the individual market exchanges in several states, one of its first steps was to reduce or stop paying commissions. The fees can vary considerably, but typically come in about 6 percent of the monthly premium, said Roger Feldman, a health policy expert at the University of Minnesota.
By eliminating commissions, health insurers cut their costs, Feldman said. The move also suggests that competition isn’t robust in the individual market, he said, since brokers and agents play a key role in selling coverage.
For 2017, Eagan-based Blue Cross and Blue Shield of Minnesota is dropping individual market policies that cover about 103,000 people. The company will only sell in the individual market HMO policies that have tighter limits on the doctors and hospitals that subscribers can use.
Bloomington-based HealthPartners will no longer compete next year in 56 of the 67 counties where it currently sells individual market products. HealthPartners, Medica and Minneapolis-based UCare will have enrollment caps that limit how many individual subscribers can purchase their plans next year.
“I see this as a potential consequence of the fact that we’ve lost so many of the competitors that the role of the broker is less important,” Feldman said.
Medica said it will pay commissions when brokers help current individual market customers renew their policies, but not for new business.
Medica will continue paying commissions to brokers who sell coverage to employer groups and Medicare beneficiaries. The insurer also will pay broker commissions in other state individual markets where it competes including Iowa, Kansas, Nebraska, North Dakota and Wisconsin.
“This change is not intended to reflect on the value Medica places on brokers but represents the current realities of our business and the market,” the company said in a notice to brokers on Monday. “We will re-evaluate this for 2018.”
Traditionally, consumers in the individual market haven’t seen the cost of broker commissions. Carriers, rather than consumers, have paid commissions directly to brokers, with the costs becoming part of the insurance company’s overhead.
Some insurance agents likely will charge fees to individual market customers if they wind up selling a Medica health plan, said Stein of the Minnesota Association of Health Underwriters. But imposing such fees is tricky, he said, because MNsure’s marketing has told consumers that they can utilize brokers for free.
Plus, premiums in the market are spiking by more than 50 percent, so clients won’t be happy about paying a fee they haven’t seen before.
“The agent has a right to charge a fee ... as long as they let the client know,” Stein said. But he added that brokers are in “uncharted territory.”