It’s coming up on a year since state and federal marketplaces were implemented marking a major shift in the landscape and the way agents handle the individual and group health insurance needs of customers. Even with implementation delays in employer mandates many independent agents were forced to re-evaluate how they approach servicing their health insurance customers. The need continues for agents to not only be familiar with health insurance coverage issues but those of complying with the law. The complexities of understanding the insurance products, regulations, along with changes in procedures will require customers to engage in conversations with not only their insurance agent but their CPA’s and attorneys as well. Businesses have an increased set of variables to analyze when structuring their health care programs. Agents need to know their boundaries and communicate this clearly to manage the expectations of customers.
The one constant in the rollout of the ACA has been change. To mitigate their exposure to E&O claims, agents need to remain committed to an on-going education and monitoring process to stay current on all facets of the ACA. Agents with small books of individual and group coverage may find this commitment too burdensome. Other agents may view the changes brought about by the ACA as an opportunity to expand their business and add value to customers struggling to understand how the ACA will affect them. Change can create opportunity, but keep in mind that opportunity comes with risks. Below are some of the E&O exposures agents face in working with their customers to handle their health insurance needs and some risk management considerations to help avoid potential E&O claims.
Areas of E&O Exposure:
• Know Thy Self: With all of the regulations implemented by the ACA, is agency staff knowledgeable and prepared to assist customers? What is the overall percentage of health business written in the agency? Does it make economic sense to continue to offer health insurance to customers? This is a fundamental question that many agents have had to ask themselves. If the agency continues to service health insurance customers then getting educated, and staying current, on the regulations, products, and processes is paramount. For those agents where it doesn’t make economic sense, then carefully consider the process of referring customers to another agent or partnering with someone well equipped and committed to servicing customers over the long-term. Don’t make a guinea pig out of your customers if the agency is not committed and prepared.
• Will Your E&O Coverage Respond: Take some time to understand if your E&O policy offers the appropriate coverage for your health benefits operations. This especially important for traditional P&C agents that are using the ACA as a springboard to enter the health insurance marketplace. Agencies considering employing a “navigator” should determine if those services fall under the definition of covered professional services.
• Understanding: Keeping up with the trickle of ACA related regulations has been a challenge along with the steep curve of learning provisions that may be less than clear. Being educated on the ACA provisions, however, is one of the most important things the agency can do. While understanding the insurance plans is key, there are thresholds, fines, subsidies, and plan requirements that must be understood. As mentioned above, the ACA fundamentally changes the conversations agents will have with customers. A "loose understanding" will not suffice as there are many technical requirements to ensure a proper analysis of the customers' risk is undertaken and that proper coverage is in place.
• Enrollment/Application process: While the Healthcare.gov marketplace website has had its share of issues, agents who assist individuals need to ensure the transaction is completed and the customer doesn’t think there is coverage in place when there really isn’t. The traditional E&O concerns presented by the application process apply to the ACA as well. For example, the information in the application should originate from the applicant and not the agency. If an agency provides computers in their offices for customers to use to access the marketplace, they should be independent and not linked to the agency's internal local area network (LAN) so as to protect the agency's data. Data security should be of utmost concern.
• Fee-based agreements: Reduced compensation may cause some agents to enter into fee-based agreements with customers for placement pursuant to the ACA. Agents must have solid written agreements that comply with state laws and regulation and that are reviewed or even prepared by their attorney for use with their customers. The agency should also have appropriate licensure in place if required, such as an insurance consultant license. Also, keep in mind that the fee-based agreements have the potential to increase E&O liability for the agency if duties aren’t performed according to the terms of the agreement. Among other provisions the agreement should include the scope of services provided, cost of services, and method for notice termination of services.
• Expansion into other ancillary services: If an agent takes on administration of a self-insured medical plan, they may become a third party administrator. This creates a new risk and may require changes to their E&O policy to cover this exposure. The same concerns as touched on in fee-based arrangements apply to administration agreements. Additionally, in both 2014 and 2015 there are additional charges assessed to an employer who uses an outside administrator versus one who self-administers a self-insured program. This extra charge should be consideration in the employer's decision process when determining method of administering a self-insured program.
• Dabblers: Some agents may look at the ACA as a new opportunity to enter the health business when they have previously had no experience in the area. Like entering any new area of business, inexperience can lead to significant exposure. Solid education and understanding of the ACA and all of its provisions is not just a recommendation, it is a requirement due to the inherent complexities of this legislation. There is danger in dabbling because gaps in knowledge can create exposure to all types of E&O claims, such as risk assessment errors, misrepresentation of coverage, and failure to procure coverage. The knowledge of fines, thresholds, and various calculations put additional pressure on those that have limited experience.
• Navigators: Thinking about bringing a navigator on-board as an added service to customers and an opportunity to touch future P&C prospects? Navigators under the terms of the ACA are only permitted to assist with the navigation of the program. They are restricted from obtaining insurance on behalf of those they assist and significant penalties are in place if those rules are violated. Navigators are not allowed to be compensated by any health care carrier. An overstepping of navigator role could open the agency up to fines.
· Group Health/Plan Design: Assisting your customers in designing their group health plans is important but is also subject to significant risk. Decisions regarding the design of the plan will largely hinge on the numbers of full time employees employed by the customer. Agents should not be making determinations or calculating the full and part-time employees for the purpose of plan design. How subsidiaries are handled and calculation of fines are other topics that may come up. It is imperative that the agents advise their customers that they must first determine if they are required to offer coverage to their employees under the ACA. Whether or not they wish to do so is up to them. Some employers may consider if it makes sense to offer coverage or determine amount of fine and pay that instead. Agents should advise their customers that if they have questions or concerns about how to determine those numbers or whether they should or should not offer coverage, they should seek legal counsel to assist them with the interpretation of the regulation. The size of the employer group can fluctuate and the agency will need to be sure the employer knows it must contact the agency with regard to changes in the size of the workforce as the size may have impact on decisions regarding the plan design.
• Determination of subsidies: Agents may be asked about subsidies on the individual side. There are a couple of considerations when it comes to subsidies and the threshold for determining them. Agency staff should be familiar with and monitor changes in the threshold for determination of subsidies such as the Federal Poverty Level. These subsidies could change over time with changes in income and affect the overall cost of premiums. Agents should communicate this possibility and document the customer file accordingly.
• Exiting the business: As mentioned above, some agents with minimal individual and group health benefits business may decide to exit the business because it doesn’t make good business sense to continue. They need to discontinue/transition this business in a way that limits their liability to future E&O claims. There should be thorough documentation of conversations with customers.
• Protect the Data: Cyber liability continues to be a major exposure for businesses that collect, use, and store Protected Health Information (“PHI”) and Personally Identifiable Information (“PII”). Agents need to understand the data protection standards required by the exchanges and how they relate other state and federal privacy laws, such as HIPAA.
• MEWAs: The ACA provides authority for the Labor Secretary to issue cease and desist orders with regard to Multiple Employer Welfare Arrangements when fraud is suspected, when it is in financial jeopardy, or when the MEWA can be reasonably be expected to cause significant immediate and irreparable injury. The legislation also subjects individuals to criminal and civil penalties if they make false statements or representations concerning the financial condition or solvency of a MEWA, the benefits provided by the MEWA or the MEWA's regulatory status or exemption from state regulations.
These are a few risk management considerations to help the agency avoid E&O claims related to the ACA. The framework of the ACA will continue to evolve. It cannot be understated that agents must be constantly vigilant in staying abreast of these changes and how the legislation is being applied. Finally, the ACA fundamentally changes the conversations that agents will have with customers, with more complex rules and calculations that are required for customers to make informed decisions on what is best for their organization. Agents must increase their knowledge, while at the same time knowing their limits.
This article was written as a collaborative effort by Swiss Re's Annette Hollingsworth and Richard Lund and IIABA's David Hulcher.