Consumers shouldn’t have to endure cross selling to get health insurance.
The Affordable Care Act (ACA) will be driving millions of people to either get health insurance or look at switching plans. The net result is a huge new marketing opportunity for insurance agents to sell not only health insurance, but far more lucrative insurance for life, disability, long term care, indemnity, auto and home or financial services. Because the ACA mandates the purchase of health insurance, and many households will be the recipients of tax subsidies to reduce their premiums, insurance agents should be prohibited from cross selling any non-health related insurance products during the initial meeting with prospects for the new ACA health plans.
Intense pressure to make sales
After the Medical Loss Ratio (MLR) provision of the Affordable Care Act went into force in 2011, agent commissions for the selling of health insurance were slashed in half. The reduction in agent commissions was an easy cut for insurance companies to make and helped them achieve the new MLR requirements. With health commissions squeezed, the pressure to market and sell other products, where the commissions are substantially higher, intensified.
Prohibit cross selling like Medicare
As I mentioned in my letter to California Insurance Commissioner Dave Jones below, Medicare already prohibits the cross-selling of non-health related products when meeting with a prospect to discuss Medicare Advantage and Part D Prescription Drug plans. The same prohibition against cross-selling should be in place in California.
Health insurance is complicated enough
The reality is that hundreds of thousands of people, with no literacy in health insurance, are being asked to make complicated decisions regarding enrolling in a mandated insurance program and potentially receiving a government tax subsidy to reduce their premium. This should not be an opportunity for insurance agents to profit from the ignorance of this new market.
Focus on health, dental, vision
Discussions about the various plans, benefits, deductibles, copayments and eligibility for the Advance Premium Tax Credit are too important to be confused with some hospital indemnity policy an insurance agent may want to sell along with the guarantee issue Covered California health plans. There should be NO marketing or discussion of any insurance products during these meetings except for health, dental and vision. Some of the products that should be prohibited are life, long term care, hospital indemnity, auto and home insurance or financial services.
Below is the letter I have sent California Insurance Commissioner Dave Jones encouraging him to support the prohibition of cross selling of non-health related insurance products while discussing Covered California health plans
Insurance Commissioner Dave Jones 6 August 2013
Sacramento Office
300 Capitol Mall, Suite 1700
Sacramento, CA 95814
Commissioner Jones,
I hope you will join with me in calling for legislation to prohibit the cross selling of non-health related insurance products when an insurance agent meets with an individual or family for the purposes of enrollment into one of the Covered California health plans.
Health insurance is a complex product and should be the sole focus of any meeting or conversation between California residents seeking to purchase health insurance and agents representing health plans offered through Covered California. Just as the Centers for Medicare and Medicaid Services (CMS) prohibit the cross selling on non-health related insurance products when marketing Medicare Advantage and Part D Prescription Drug plans, California should also adopt similar regulations to reduce client confusion, fraud and abuse.
The scenario that will arise will be agents or third party marketing organizations contacting prospects, either through direct mail, cold calling or electronic media, to secure a “no obligation” review of the new health plans and how the individuals or families can save money. Upon review of the health insurance situation, and possible enrollment in a Covered California health plan, agents will proceed to launch into a sales pitch for other more lucrative insurance products such as life, disability, long term care, auto, and home or retirement planning services.
Many families will be eligible to lower their monthly health insurance premium with the Advance Payment Tax Credit. The agent will able to show the prospect what the premium would be with and without the subsidy. The agent might then take credit for saving the client money through his or her assistance. It will be strongly suggested that the “savings” could now be used to purchase other insurance to protect the client.
Any subsidy or reduction of the health insurance premium is not the result of the spectacular advanced calculation of the agent, but rather, it is just part of the Affordable Care Act. There are numerous sales strategies that can be used to confuse the prospective client into making poor decisions when a variety of insurance products are being discussed at one meeting.
- Sales meetings can be structured to lead the client into purchasing other insurance that he or she might assume is part of the Affordable Care Act.
- Sales dialog and scripts can be created to confuse the prospects leading them to think that purchasing a lower value and less expensive health insurance plan, like a Bronze, is better because they will have more money to allocate to the “new” life insurance policy being pitched.
- Agents may rush through presenting the plans and enrollment in an effort to devote more time to marketing other insurance. This deprives the enrollees from thoughtfully considering all their options.
- The discussion of other insurance products can confuse clients into believing they are some how tied to the Covered California health plans.
- Agents might try to bundle less expensive health insurance products with hospital indemnity insurance.
The prohibition against cross selling is not new. CMS forbids any cross selling of non-health related products when an agent is meeting with a prospect to discuss Medicare Advantage and Part D Prescription Drug plans. The agent may leave marketing materials for his or her other products, but must make another appointment at least 48 hours later to discuss them. The point of this prohibition is to avoid confusing people by switching the conversation back and forth between the Medicare Advantage plans and pitching other products.
A litany of marketing prohibitions on the selling Medicare Advantage plans, from a prohibition on cold calling of Medicare beneficiaries to limiting the value of gifts at sales seminars, were a result of numerous and substantiated reports of fraud and abuse by insurance agents. Very similar to Medicare Advantage plans, the health plans through Covered California will be guarantee issue with a high probability of federal tax assistance to lower the premium. Unlike Medicare, there is the individual mandate that creates additional urgency to purchase health insurance and additional opportunities to sell health insurance.
We shouldn’t wait until the inevitable reports of misleading sales presentations, bait and switch tactics, up-selling and cross-selling pressure or fundamental fraud begin to roll into your office. Consumers who are being mandated to purchase health insurance shouldn’t have to be victims of unscrupulous insurance agents operating in an absence of regulations. Government programs should not be used to generate prospects or gain access to a family for the real purpose of selling some other insurance product and not necessarily health insurance.
I have faith that you will attempt to curb any abuse or misleading marketing by insurance agents and work to codify prudent and responsible consumer regulations that protect individuals and families when they enter the market place to purchase health insurance mandated by the Affordable Care Act. The least intrusive and most valuable consumer protection regulation is one that prohibits the cross selling of non-health related insurance products at initial meetings to discuss Covered California health plans.
Sincerely,
Kevin Knauss