Colorado: New law aims to reverse the "Barton Fink"-ization of insurance brokers

2019 OPEN ENROLLMENT ENDS (most states)

Time: D H M S

I have mixed feelings about private health insurance companies and, by extension, health insurance brokers.

On the one hand, as a universal coverage advocate who'd prefer that it be pretty much all publicly funded, I see private, profit-based insurance carriers as a middleman which shouldn't be necessary in the first place.

On the other hand, until the day comes where universal coverage via a single Medicare-for-All-like national healthcare system, insurance carriers are necessary, and since they offer a variety of different policies with different networks, coverage features, premiums, deductibles, co-pays and so forth, that means a lot of hand-holding is also necessary.

If you're shopping around for health insurance on the individual market, there are three ways you can do so: You can do it yourself via one of the ACA exchange websites like HealthCare.Gov. You can talk to an official ACA "navigator" or other authorized "assistor"; these folks don't work on commission and aren't allowed to point you towards one particular carrier, but they guide you through the process, explain the terminology, pros and cons of various options and so on. Finally, you can use an old-fashioned insurance broker, who can point you towards a particular carrier/policy and--until recently, at least--did usually receive a commission from the carrier for signing up a new customer.

A couple of years ago I wrote a few pieces about some serious slashing/burning of commissioner fees going on within the individual insurance market. The short version is that many ACA exchange carriers started either reducing or eliminating altogether the commissions they offered brokers to encourage getting them to promote their policies. I'm not sure how much of this was a simple cost-saving measure and how much of it was designed to intentionally reduce enrollment in their policies (presumably in order to improve the risk pool among those who did enroll).

My conclusion was that the carriers were basically playing out the last scene of "Barton Fink", in which a Hollywood studio executive manages to get Fink into a contract in which everything Fink writes belongs to the studio...yet the studio will deliberately never produce anything Fink writes:

"Get him out of my sight, Lou! I want him in town, though. He's still under contract. I want you in town, Fink...and out of my sight."

I haven't really followed up much on the broker commission story since then, but it's my understanding that more and more carriers have gone this route. As a result, more and more brokers are seeing zero reason to bother encouraging anyone to enroll in ACA exchange plans, since they receive nothing for their trouble.

Apparently the state of Colorado has decided to rectify this problem:

Yesterday the governor signed into law a bill that will allow brokers to charge a fee when assisting a customer buying a health plan that does not include a broker commission.

Brokers have played an important role in assisting our customers throughout our history and we expect that to continue. We also continue to work to inform our customers on the full cost of their coverage and will incorporate this change in future communications.

The Division of Insurance will develop rules on implementing the law. You can read more on the legislation, including the text of the bill.

Here's the details on the bill itself:

The bill allows an insurance producer or broker advising a client on individual health benefit plans to charge the client a fee if the producer or broker does not receive a commission related to the individual health benefit plan selected by the client and if the producer or broker discloses in writing the fee to the client. The commissioner of insurance shall promulgate rules regarding how the producer or broker must provide the fee disclosure.

SECTION 1. In Colorado Revised Statutes, 10-16-133, amend (5) as follows:

10-16-133. Health carrier information disclosure - website - insurance producer fees and disclosure requirements - legislative declaration - rules. (5)

(a) An insurance producer licensed pursuant to part 4 of article 2 of this title TITLE 10 who solicits or negotiates an application for health care insurance on behalf of a carrier shall disclose to the person purchasing the plan that the insurance producer will receive a commission from the carrier. The insurance producer shall provide the consumer with the standard compensation schedule for the product being sold. Any change to the insurance producer's compensation from the initial disclosure to the time of purchase shall be disclosed by the insurance producer to the purchaser at or before the time of sale.

(b) AN INSURANCE PRODUCER MAY CHARGE A CLIENT A FEE FOR ADVISING THE CLIENT ON THE SELECTION OF AN INDIVIDUAL HEALTH BENEFIT PLAN ONLY IF THE PRODUCER:

(I) WILL NOT RECEIVE A COMMISSION FROM THE INSURER OFFERING THE INDIVIDUAL HEALTH BENEFIT PLAN SELECTED BY THE CLIENT; AND

(II) PROVIDES A WRITTEN DISCLOSURE TO THE CLIENT IF THE PRODUCER WILL CHARGE A FEE FOR THE SERVICE.

(c) THE COMMISSIONER SHALL PROMULGATE REASONABLE RULES THAT ARE NECESSARY OR PROPER FOR IMPLEMENTING AND ADMINISTERING THIS SUBSECTION (5). THE RULES SHALL INCLUDE A PROHIBITION ON AN INSURANCE PRODUCER CHARGING A FEE TO ASSIST A CLIENT TO ENROLL IN MEDICAID, AS DEFINED IN SECTION 10-22-103 (8), OR THE CHILDREN'S BASIC HEALTH PLAN, AS DEFINED IN SECTION 25.5-8-103 (8).