Covered California has announced they have reached an agreement with several of the health plans to increase agent compensation for 2022. Aside from a few extra dollars in an agent’s pocket, the increased compensation models will help alleviate potential agent bias in recommending health plans to consumers. Another benefit is the recognition that agents perform assistance for consumers with Medi-Cal eligibility for which they are not compensated.
Higher Covered California Agent Compensation
“The new compensation will increase agent compensation statewide by an estimated $22 million a year, which is a 17 percent increase over current levels. The increase will bring the total compensation provided by carriers to agents to more than $125 million a year, which is nearly equal to Covered California’s entire marketing and outreach budget for fiscal year 2021-22.” – November 17, 2021, Covered California News Release: Insurance Agents Get Big Compensation Boost to Help Enroll and Renew Millions of Californians, Who Are Benefiting From More Financial Help Than Ever
As the Covered California news release notes, agents are paid by the health plans, not Covered California. There has been an erosion agent compensation since the inception of Covered California. Before the ACA, it was typical for health plans to pay 3 to 5 percent commission on individual enrollments. Today, there are three basic models of agent compensation for the individual and family market.
- One and Done
- Per Member Per Month (pmpm)
- Percentage of Premium Amount
The One and Done compensation model pays a flat amount for an enrolled individual for the plan year to the agent. The renewal of the health plan in successive years was typically half of the initial enrollment amount. One carrier paid $100 per person enrolled to the agent for the first year and $50 for a renewal the second year. On a monthly basis, this works out to $8.33 per month the first year and $4.17 successive years. Of course, if the enrolled member stays in the health plan less than 12 months, the derived monthly rate would be higher.
Most health plans have moved to a Per Member Per Month compensation model. On the low side, some health plans will pay approximately $9 pmpm, while other plans pay upwards of $16 pmpm. Some pmpm structures have a higher amount for the first year’s enrollment with a lower pmpm in successive renewal years. Similar to the One and Done model, the compensation is irrespective of the health insurance premium for the enrolled member. Younger enrolled members can have a rate three times less than that of the oldest enrolled individuals at age 64.
The compensation model that is less frequently employed is the Percentage of Premium. It is usually a set percentage of between 1 and 2 percent of the total premium. Consequently, a younger enrolled individual with a lower health insurance premium yields a smaller commission than an older adult with a higher premium. The percentage is paid monthly on the full premium amount, not the subsidized amount the Covered California member may be paying.
As a reference, Covered California is funded by a 3.25 percentage fee on the full premium amount levied on the health plans for each enrolled member through the exchange. For agents, the compensation is the same whether the individual enrolls in a health plan through Covered California or directly with the health plan. Of course, for direct enrollments, the health plans don’t have to pay Covered California the 3.25 percent assessment fee.
Agent Bonuses
Another form of compensation Covered California doesn’t get to participate in are the enrollment or retention bonuses. Some health plans will pay agents an additional one-time bonus for enrolling a certain number of new members, usually in excess of 50. Other health plans will pay a retention bonus to agents for members who keep their health plans for more than a year. These bonuses really benefit large insurance agencies and store fronts who hire temporary agents during the open enrollment period. Typically, bonuses are not distributed to agents who are no longer with agency after the open enrollment push.
The number of certified Covered California agents has also declined. In 2015 there were approximately 15,000 certified agents. For 2022, Covered California is reporting there are approximately 10,000 certified agents eligible to enroll individuals in health insurance through the exchange. However, the negotiated increase of agent compensation was not necessarily brokered to attract more agents.
Agents have been agitating for a more equitable agent compensation model across the market for some time. The reality is that the time to enroll an individual or family in a Covered California health plan is the same regardless of whether the household selects a higher agent compensation health plan or one with a relatively low reimbursement. There is no agent compensation for enrolling individuals or dependents in Medi-Cal. My experience is that 20 to 30 percent of the applications I create on Covered California result in a Medi-Cal eligibility determination for either the individual or the dependents of the adults.
What is the value of an agent’s time?
If you consider certified agents are an extension of the Covered California customer service staff, the different agent compensation models are like paying a different hourly wage based on the health plan enrollment. The varying compensation amounts introduces a certain level of bias. If you are paid $15 an hour for enrollments in health plan X and only $8 per hour for enrollments in health plan Y, which health plan would you favor?
I can’t say that agent bias has overly influenced enrollments. Statewide, the health plans with the largest percentage of enrollments pay on average a lower agent compensation. On a company level, the health plans paying a higher agent compensation probably felt a twinge of irritation that their administrative and sales costs were higher than the lower paying health plans.
As a Covered California Certified Agent, I work throughout California, just not one geographic area. Consequently, when I work with a family in San Diego, I have to be appointed with Sharp Health Plan (who are only in San Diego County) in order to fairly represent all the health plans offered. I have had enrolled members in all of the offered health plans at one time or another through 2021.
You may conclude that I pay close attention to the compensation structures of the different health plans. Well, I don’t. If I have any bias, it is towards those health plans who make life easy for my clients. Health plans with poor customer service and confusing websites will be duly noted in my conversations with clients.
The increased compensation for 2022 is also a recognition – I hope – that agents just don’t enroll individuals and families; a good agent must be versed in immigration status and taxable income. I spend more time with clients helping them estimate their Modified Adjusted Gross Income than I do helping them decide on a health plan. The Covered California application can be complicated and very date sensitive. One wrong date or erroneous tax status condition can result in either no subsidy or Medi-Cal eligibility.
For fiscal year 2021-2022, Covered California will have an estimated staff of 1,440. They will spend $137.4 million on customer service, 34 percent of the budget. Covered California estimates that agent compensation with the increase will be approximately $125 million. That is $125 million spread out over 10,000 agents, most residing in the communities they service as a health insurance agent. With agents handling nearly 50 percent of the enrollments into Covered California, the increased compensation will have a pretty good return on the investment.
What does this health insurance agent earn? Check out my blog post on my taxable income: https://insuremekevin.com/how-much-do-health-insurance-agents-earn/
Covered California Announcement of Increase Agent Compensation
November 17, 2021
Insurance Agents Get Big Compensation Boost to Help Enroll and Renew Millions of Californians, Who Are Benefiting From More Financial Help Than Ever
SACRAMENTO, Calif. — Covered California announced on Wednesday that three of the biggest health insurance carriers that it contracts with — Anthem Blue Cross, Blue Shield of California and Kaiser Permanente — will be increasing the amount they pay insurance agents who provide independent assistance to consumers signing up for coverage in the individual market.
“Agents play a vital role in helping hundreds of thousands of Californians get affordable coverage every year, serving individuals in every corner of the state,” said Peter V. Lee, executive director of Covered California.
“Covered California has been working to be sure that agents are paid fairly for the critical work they do on behalf of consumers for the past two years, and we want to thank Anthem Blue Cross, Blue Shield of California and Kaiser Permanente for doing the right thing and upping payment to agents, who are on the front lines of expanding health coverage for Californians.”
The increased compensation will come at no additional cost to consumers, as Covered California’s Licensed Insurance Agents are paid through the monthly premiums that the carriers receive.
The move comes after Covered California studied agent-commission trends and found that while people were continuing to rely on an experienced person to help them understand and choose their coverage options, agent compensation had steadily declined since 2014.
During the study and analysis, three of Covered California’s biggest carriers (Anthem Blue Cross, Blue Shield of California and Kaiser Permanente) worked with Covered California to bring their agent compensation up to the average levels in the individual market, which is about 2 percent of premium paid to agents helping consumers enroll. The three carriers account for more than 70 percent of Covered California’s enrollees.
The new compensation will increase agent compensation statewide by an estimated $22 million a year, which is a 17 percent increase over current levels. The increase will bring the total compensation provided by carriers to agents to more than $125 million a year, which is nearly equal to Covered California’s entire marketing and outreach budget for fiscal year 2021-22.
“The increase in compensation will be money well spent because agents play such a key role in helping Californians get covered and use their health plan benefits,” Lee said. “Insuring more people means a healthier consumer pool, which means lower premiums for everyone in the individual market.”
In addition, the new payment structure will provide independent agents with a more reliable revenue stream to invest and grow their businesses, which will enable them to provide more services to Californians. For the 6,300 agents who have 10 or more Covered California consumers, the increase will represent an average increase in their annual compensation of about $3,300.
“Bringing compensation up helps keep agents serving the individual market remain actively engaged and supports their dedicated efforts to serve consumers and make sure they are covered,” said Terri Convey, director of Covered California’s Outreach and Sales division. “Insurance agents have been a key partner since we first opened our doors, and this move goes a long way in making sure they will be there when Californians need them the most.”
Free and Confidential Help From Local Agents
Since Covered California opened its doors in 2014, over 4.8 million Californians have benefited from the coverage it provides, which amounts to one in seven of the 33 million California residents under 65 years of age. Licensed Insurance Agents have helped more than 2.3 million (48 percent) of the people that Covered California has served since it opened for business in 2014. Currently, Covered California has more than 11,000 Licensed Insurance Agents, who have established more than 500 storefronts in communities throughout the state (see Figure 1: Covered California’s Over 500 Licensed Insurance Agent Storefront Locations Across the State). These storefronts feature Covered California signs and logos, and they provide consumers with a local point of contact to answer questions and help them enroll in the health insurance plan that best fits their needs.
Covered California’s contracted agents truly speak to the diversity of the state. Nearly three out of every five of Covered California’s agents (57 percent) speak more than one language, which helps them assist Covered California’s diverse population in which two out of every three enrollees represent a community of color (see Figure 2: The Majority of Covered California’s Agents Are Multi-Lingual). Overall, Covered California’s agents speak more than 40 languages (see Figure 3: Covered California’s Agents Serve People in More Than 40 Languages).
The agents are required to meet stringent certification processes that include the obligation to help consumers find the health plan and coverage that is best for the consumer and commit to serving all Californians, regardless of their age, disability, race, ethnicity sexual orientation or gender identity.