Kilpatrick

Carrier News

Aetna Removing Broker Commission in Small Group – update

Update on Tue, Jul 14…

Aetna decided to retract this Producer Service Fee strategy in small group beginning with groups effective on Oct 1, 2015. Aetna notified brokers with an email communication. Aetna says they are reverting back to commissions in small group new business and renewals because recent CMS guidance raises questions about the validity of the Producer Service Fee strategy.

  • Aetna is currently developing “revised commission schedules” and will alert producers when they are finalized
  • Aetna is reverting back from the Producer Service Fee strategy while they evaluate the effect of the guidance.
  • The decision to revert back to producer commissions only applies to Small Group (2-100) and does not impact their ongoing Producer Service Fee strategy in other segments (e.g.: Large Group)

 

Beginning with July 1, 2015 effective and renewal dates, Aetna is removing broker commission from Small Group medical plans (2-100 employees). See Aetna’s Producer Service Fee FAQ flyer.

New Business. The broker designates the compensation amount during the quoting process—as a percentage of premium or dollar amount per employee per month. Aetna loads the designated amount in the quoted rates.

Renewing Cases. For existing cases renewing on or after July 1, 2015, Aetna will include a default compensation level applicable to the state. If the broker wants to change the compensation, they must submit a request to their Client Manager for a re-rate. This must be done prior to completing the renewal. Remember, small group renewals are sent directly to employers so changes made to compensation at renewal would cause the client to see change in rates.

Critical Process and Timing. The broker and client must electronically sign a Billing and Collection Agreement to confirm the compensation amount and to authorize Aetna to administer the payments. The broker will receive the link via email from EchoSign first, then the client. If the client (or broker) does not sign the agreement five days or more prior to the effective/renewal date, Aetna will remove the compensation from the premium it invoices for the first month. Aetna will allow a 15 day grace period (within the first 10 days after the effective date). If the agreement is fully executed within this grace period, Aetna will load the rates for the second month billing and will apply a retro-adjustment to collect the compensation for the first month. If a fully executed agreement is not received within the first 10 days of the plan year, it will not be honored. The producer must wait until the following renewal, which would require the producer compensation to be loaded into the renewal rates—thus requiring an additional increase/adjustment to the rates.

Commentary

Aetna’s sample Billing and Collection Agreement stipulates the following:

  • Aetna has the right to unilaterally terminate the agreement with 30 days prior written notice. Presumably, one outcome of this action would the removal of the broker compensation and an equivalent discount to the client’s monthly invoiced rates. (paragraph 8)
  • The client has the right to terminate the agreement (and thus the broker’s commissions) with 30 days prior written notice. The termination does not require the broker’s consent and it does not require the client to assign a new broker to the policy. (paragraph 8)
  • Aetna has the right to assign the rights and duties of the agreement to other parties with 30 days prior written notice. (paragraph 9)
  • Aetna has the right to waive any provision of the agreement with 30 days prior written notice. The waiver must be signed by the party against whom the waiver is to be effective. (paragraph 11)

Rationally, the immediate purpose of this initiative is to remove broker compensation from the Medical Loss Ratio requirements under ACA whereby Aetna can take an additional 5% in profit without having to rebate members. However, there are a few additional implications.

The agreement is very one-sided. There are no real protections for the agent. If the deadline is missed, Aetna won’t pay compensation for a year and the broker will have to justify loading the compensation at renewal. If the client does not sign, the broker compensation is removed and the client saves money. With all other carriers who offer small group plans, removing the broker does not change the monthly cost and employers have no financial incentive to eliminate the representation of an objective third party advocate—the broker. Under Aetna’s strategy, the client has a financial incentive to eliminate their representation. Under Aetna’s model, brokers can do a lot of work pro bono.

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