How the Affordable Care Act Will Affect California Health Insurance Brokers

Written By: Roger J. Brothers, Esq. and Dominic V. Signorotti, Esq.

Buchman Provine Brothers Smith LLP

Walnut Creek, California

The Patient Protection and Affordable Care Act (often referred to as "Obamacare", and hereinafter referred to as the "Affordable Care Act") is set to alter drastically the manner in which health insurance is brokered and purchased in California. Any insurance brokerage which currently brokers health plans in California, or which intends to in the future, should take steps to familiarize itself with the new system.

The Affordable Care Act mandates that all states establish a health insurance exchange, wherein individuals and small businesses will be able to purchase health insurance at competitive rates. The California Health Benefits Exchange (the "Exchange") is scheduled to begin operation on January 1, 2014. In order to participate in the Exchange, brokers are required to comply with a number of new regulations and requirements. At this point, the Federal government has outlined general rules and requirements to govern brokers' participation in health insurance exchanges, while leaving many of the specifics up to the individual states. California is proactively soliciting input from industry stakeholders, and has issued a number of proposed rules and regulations, many of which are likely to become law.

The Broker's Role in the Exchange.

The first major change under the Affordable Care Act is that brokers will have the option of participating in the Exchange in two separate ways—as "Navigators" or "Assisters." The primary purpose of Navigators is to educate consumers and guide them to appropriate health plans. Navigators will receive compensation directly from the Exchange for enrolling individuals, and will not be compensated for enrolling individuals in health plans outside of the Exchange. Navigators do not need to be licensed insurance agents or brokers.

"Assisters," on the other hand, are equivalent to traditional insurance brokers, and will receive payment from third parties (e.g., health care plans) in exchange for enrolling individuals in the Exchange. Assisters are required to be licensed. While brokers may act as Navigators, they will be subject to the restrictive compensation and eligibility requirements imposed by the Affordable Care Act, including the prohibition from receiving compensation from health insurance carriers when acting in such capacity. Given these compensation constraints, it is anticipated that most licensed brokers will choose to participate in the Exchange as Assisters only.

California is in the process of developing certification requirements for Navigators and Assisters. At this point, it is likely that such individuals will be required to (i) attend a two (2)-day training program on the mechanics of the Exchange and the requirements of the Affordable Care Act and (ii) pass a certification test.

New Limits on "Eligible Health Plans."

Pursuant to the Affordable Care Act, the only health plans authorized to be sold in the Exchange are "qualified health plans" ("QHPs"). QHPs must satisfy minimum requirements established by the Affordable Care Act. There are a number of specific criteria which will be analyzed in order to determine whether a health plan is a QHP, but in basic terms, a plan must: (1) be offered at the same rates in the Exchange and on the private market; (2) offer a "child only" plan, and plans at the "silver" and "gold" levels; (3) satisfy certain privacy and transparency requirements; (4) maintain an adequate provider network in the locale in which the plan is offered; (5) satisfy minimum requirements regarding service areas; and (6) satisfy specified rating and enrollment standards. Brokers who participate in the Exchange may continue to sell policies outside of the Exchange, subject to the same requirement that all policies be QHPs.

How Should Brokers Prepare for the Exchange?

No matter how one feels about the Affordable Care Act, it is undeniable that it will affect profoundly the manner in which California health insurance brokers conduct business. What then, should brokers do to prepare for January 1, 2014? First, brokers should familiarize themselves with QHPs, and learn the minimum requirements for the "metal plans" (e.g., bronze, silver, gold and platinum) authorized by the Affordable Care Act, and required to be offered through the Exchange and on the private market. Second, in order to structure a business plan for participating in the Exchange, brokers should acquaint themselves with the new compensation limits and requirements for Navigators and Assisters. Finally, brokers may wish to take advantage of the Exchange's solicitation of stakeholder comments and advice with respect to its regulations, and proactively shape the very regulations which will govern their industry for the foreseeable future.

The health insurance industry is set for massive transformation, and health insurance brokers will be at the heart of these changes. The very manner in which health insurance is bought and sold in California is set to change drastically, and all licensed health insurance brokers should take steps to ensure that they are ahead of the pack when it comes to conducting business in the age of Obamacare.

For more information about Buchman Provine Brothers Smith, please visit www.bpbsllp.com or the International Society of Primerus Law Firms.