There has been little attention paid to a game-changing decision by the Department of Health and Human Services (HHS) in its March 2012 health insurance exchange final rule.  Yet, this small addition has the potential to drive big changes in the exchange market, potentially altering the business model many are using for Affordable Care Act (ACA) exchanges.

In a part of the regulation issued as an interim final rule, HHS opened the door for states to allow an agent or broker to enroll individuals, employers or employees in Qualified Health Plans (QHPs), in a manner that constitutes “enrollment through the exchange,” on their own website.  In other words, if the consumer would be eligible for a refundable tax credit for a QHP purchased on the exchange’s website, he or she is eligible to access the tax credit for purchases through the broker or agent’s private web portal. 

Requirements for agents and brokers.  The regulation sets out a series of requirements brokers or agents must meet in order for their clients to be able to access the tax credits for purchases through their sites.  These requirements do not appear, on the surface, to be onerous.  First, and most importantly, brokers and agents interested in pursuing this option must be registered with the exchange in advance.  This means that the state, or the federal government in the case of a federally facilitated exchange (FFE), still has control as to whether their exchange remains the exclusive market for the tax credit.

Once registered, the broker or agent and their site must meet other standards.  All QHPs must be sold and the agents and brokers assisting the customer must be trained on all QHP options, meaning a single-carrier exchange will not be able to qualify.  In addition, these private websites must present all QHPs and all QHP data in a manner that meets HHS standards and not use financial incentives to lure customers to one QHP over another (i.e. no rebates or giveaways).  Consumers always have the right to withdraw from the process and use the exchange website, and the web portal must be compliant with exchange privacy and security standards.  State laws related to agents and brokers continue to apply.

Interestingly, the private web portals, unlike the state or federally-facilitated exchanges, do not have restrictions on selling products other than QHPs. Brokers and agents can use their existing web portals, as long as the requirements above are met.

But the bottom line of this new model is that consumers never have to go near the state or federally-facilitated exchange website to buy a product and access the refundable tax credit. All of the information transfers between the private broker site and the ACA exchange and the insurance carriers are invisible to the consumer.

What It All Means

For agents, brokers, and private exchanges, the shift presents a new opportunity to access the exchange population.

For consumers, it is likely more will look into whether or not they qualify for a tax credit while shopping for insurance, which could increase QHP sales.

For HHS, the March exchange rule made it clear they hope to use this private distribution channel to drive enrollment to the exchanges.  Moreover, the more recent guidance from HHS goes further, saying, “to the extent permitted by a State, HHS intends to work with web-based brokers that meet all applicable requirements to help consumers select health plans on-line,” revealing that the federal government is likely hoping to rely on the private sector to lift enrollment in QHPs.

For states, if the ACA is not struck down by the Supreme Court, this regulation could provide a way for them to meet looming deadlines by leveraging the existing private insurance internet backbone.  Conversely, it may make other states reluctant to move forward if a significant number of private broker portals might be available in that state through the FFE.

For technology vendors and others developing business models for exchange services based on a “captive population model,” understanding if the private web portal option will be utilized in a state is critical.  As reports from Massachusetts have shown, exclusivity has been critical in attracting and retaining customers. Yet, political debate may be complex in some states around this issue because it may be unpalatable to keep brokers and agents out of the exchange shopping and enrollment process if they express interest in participating.

For carriers, this appears to be a significant setback for single-carrier exchanges in the individual and small group market.  But the increase in distribution channels for QHPs may make the exchange market more attractive for many.

Finally, keep a close eye on how the private exchange market reacts to this change.  Since there is nothing in guidance to date that would prevent these private websites from selling products other than QHPs, one can imagine “benefits marketplaces” that include life, disability and other types of insurance emerging as a one-stop shop for consumers.