Monday, June 10, 2013

Obamacare - For Agents Only

The public is probably not aware of this potential hitch in Obamacare nor do they care. This only concerns agents and health insurance carriers.  

More specifically, agents that are going to write health insurance business through the exchange (AKA marketplace).

People who buy through the exchange will be credited with a premium subsidy designed to reduce their out of pocket cost for health insurance.

At least that is the promise.

But the subsidies are not instant. Only the calculation, which is an estimate of your subsidy, is (almost) instant once you spend about 45 minutes completing the (up to) 26 page application.

So let's say you take time out to complete the subsidy application then (and only then) go shopping for a health insurance plan. This is not like your EBT card where money is transferred to merchants at point of sale. Once you select a policy the issuing health insurance carrier will have to notify HHS (or whoever is running this baby) and then wait on the government to issue a check on your behalf.

Let's say for argument sake that your gross premium is $500 but you will only be expected to pay $150 and the government (taxpayers) will fund the $350 balance.

Brokers normally are paid a percentage of premiums collected.

So if a broker, agency or approved entity assisted you in the process will they be paid on the $150 you actually paid?

Carriers pay "as earned" on collected premium.

When (if) the carrier finally does receive your subsidy from the government it will presumably come in the form of one check and an accompanying list (and amounts?) of who is included in the wealth redistribution scheme. How quickly will the government turn around these subsidy checks to the carriers?

No one knows.

Consider that with Cash 4 Clunkers some car dealers waited MONTHS before they got their checks and that was a small program that only generated a one time check (per individual).

This is much more massive with (possibly) repeat checks every month going to carriers.

So let's say this all runs smoothly.

And let's say a policyholder decides to exercise their right to a 90 day grace period and does not pay their premium for 3 months. But the government keeps sending subsidy checks to the carrier on the assumption that you are in fact paying your part.

Does the carrier pay the agent on the subsidy but not the premium? At what point is the carrier obligated to tell the government the insured is no longer insured and here is a refund for amounts paid? 

I see this as a real nightmare for carriers, agents and providers that may wind up treating people that are not really covered since they stopped paying premiums for a few months.

Is it any wonder why some carriers really don't want to participate in the exchange?
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