Agent E&O Coverage Integral to Risk Management Strategy

Craig Irvine

An Interview with Chuck Campbell

PPACA is changing our industry significantly. While healthcare reform can provide great economic opportunity for BCBS agents, it will likely increase the risk and frequency of issues and liability claims. For over 15 years, BCS has offered an Errors and Omissions program to BCBS independent agents. We recently interviewed Chuck Campbell, Vice President–Agency Sales, Blue Cross Blue Shield of South Carolina on the role Agent E&O plays in his risk management program.

BCS Financial:  Chuck, can you tell us how many years have you have been with BCBSSC and what your responsibilities are?
Chuck Campbell:  I have been with the Plan for 20 years. I’m responsible for all agent driven product sales and retention efforts for groups of 2-100 lives, plus all individual products including U65, Medicare Supplements, Medicare Advantage and Part D, and Short Term Health. Additionally, we market and sell a host of ancillary products to attach to our group offerings.

BCS:  I’m sure you’ve spent a good deal of time analyzing the risk impact of PPACA on your Plan, but it must also present new challenges for your agents.
CC:  Absolutely. It seems to me that the health insurance market has never before been faced with such complexity. Agents must deal with the challenges of navigating clients through this new world. Agents need to understand the regulations and help their customers make appropriate decisions. The Insurance Exchanges are new marketplaces for individuals and small businesses. Agents must be knowledgeable and have strong communication skills to help their customers understand their options.

BCS:  Tell us about your agent oversight in the changing healthcare world.
CC:  Well, we have always been diligent with agent oversight. All of our agents have background checks, vector one and go through the appropriate licensing procedures. We monitor them closely and if there are any DOI complaints, license issues or liability claims, we are typically notified. One of the most important features of our agent oversight is that we require all agents and agencies to maintain at least $1,000,000 in Errors and Omissions coverage. From our perspective Agent E&O coverage provides a layer of liability protection for all parties involved: our customers, our agents and the Plan.

BCS:  BCBSSC has sponsored BCS’s Agent E&O program for a number of years. Can you tell us the background?
CC:  This program started in 2006. It has been a very successful value added benefit for our agents. We are pleased that we can make a cost effective option that has quality coverage available to our agents. And we’re pleased to be one of the top Blue plans nationally in agent enrollment in the BCS program administered by MGA.

BCS:  Many carriers have the requirement but only confirm coverage at the time of original appointment. From what we hear, confirming coverage on an annual basis is an administrative headache.
CC:  Well, I can confirm that it does present an administrative challenge. But the good news is that we partner with the BCBS E&ampO plan administrator MGA Insurance Services to assist our annual enforcement. MGA manages the entire process from sending notifications 90 days ahead of the E&O renewal to collecting and confirming credible coverage. We work closely with them through a weekly web-based reporting process.

BCS:  Is the agent E&O requirement an outcome of healthcare reform or have you always had that requirement in your contracts?
CC:  We have strongly supported having an E&O insurance requirement for many years. BCBSSC distributes products through hundreds of independent agents. Because the agents are contractors, there is an inherent exposure to the Plan that is outside of the Plan’s control. If agents are negligent, they should be held accountable and the loss should be applied to the appropriate policy. And with all of the changes in healthcare and the movement to more independence among agents, I can’t imagine a Healthcare insurer not requiring E&O coverage.

BCS:  Do you see the role of agents as changing?
CC:  The role of agents appears to be changing from pure product salesperson to being more of an advisor/consultant. As I mentioned before, there has never more complexity to the sales process. We believe that Agent education and training is critically important. But as we move through 2014 and as agents assist clients with the decision making process, the agents will certainly have increased potential for issues that could lead to claims.

BCS:  Thank you, Chuck, for sharing your perspectives on Agent E&O insurance.

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The Roles of Agents in the Exchange Marketplace

Sharon Dold

Though the insurance industry has been focused on the Exchanges, Agents continue to have questions about their roles and the roles of navigators. Fortunately, there are online resources from the federal and state governments that answer many of the questions agents have. The Centers for Medicare & Medicaid Services website is a good place to start.

In-Person Assistance in the Health Insurance Marketplace  |  CMS.gov, Centers for Medicare & Medicaid Services
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New P&C Rider Available

Sharon Dold

Optional Limited Personal Lines Property and Casualty endorsement available to Blue Cross and Blue Shield agents who purchase BCS E&O coverage through MGA Insurance Services.

As our industry adapts to a changing world, agents are facing new challenges and opportunities. Many agents are seeking to diversify their activities by including personal lines property and casualty insurance in their sales strategies. In recognition of these changes, BCS Insurance Company and MGA Insurance Services are pleased to announce that we are rolling out a new coverage enhancement to agents. BCS Insurance Company has just introduced a Property & Casualty endorsement that addresses exposures agents may have from the sales of personal lines insurance. This endorsement is available to agents that purchase the BCSI E&O coverage. This optional endorsement extends coverage, on a limited basis, to the sale of personal lines including homeowners, automobile insurance and travel insurance. As always, please refer to the policy and endorsements for a full description of the coverage. Agents that want to find out more information or purchase the coverage can visit www.bcs-eo.com or call MGA at 888.437.6611.
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Health insurance: 10 things about exchanges

Greg Petit

This article from Healthcare Reform Facts, by Alson Martin, details some excellent information about state health insurance exchanges. As the ACA moves through the stages of implementation, this summary is very helpful to those involved in working with insurers, brokers, and clients.

10 things to know about state health insurance exchanges | Alson Martin, Healthcare Reform Facts, LifeHealthPro

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Exchanges Face Enrollment Challenges

Sharon Dold

The insurance industry faces many challenges as we prepare for the implementation of the Affordable Care Act, not the least of which is outreach to the uninsured population. This article addresses some of the steps being taken and the obstacles faced by our industry over the next few months.

Worries Mount About Enrolling Consumers In Federally Run Insurance Exchanges | Kaiser Health News

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5 Ways Agents may be Impacted by PPACA

Sharon Dold

If you’ve wondered whether or not PPACA will have any direct or indirect impact on brokers, the answer is yes.


PPACA will impact agents in many ways. Here are a few:

1.  As Plans comply with MLR requirements, agents will probably see their revenues decrease.

2.  Agents with low production may be cut.

3.  There is the potential for agents to make a mistake because they do not fully understand the new requirements under PPACA, creating an E&O claim.

4.  As individuals begin using exchanges, they will likely question the need for a broker. There may be fewer differences in policies, so there is less of a need for professional assistance.

5.  Small groups may stop offering health insurance, which can create big problems since small group business can be the bread and butter of revenue for individual agents.

These are just a few of the potential ways agents may be impacted by PPACA. If you have any questions or would like to discuss this further, please feel free to contact me by visiting our Contributors page.

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A Tale on Risk Management

Chad Chaffin

Consider the following actual case:*

Since 2004, a BCS insured agent, Deborah Jones, has assisted her client, our potential claimant–The Cholo Company, in procuring health insurance for its employees through the local BCBS plan. In 2007 and 2008, Deborah Jones submitted an Average Age Adjustment Appeal to the BCBS plan to help reduce The Cholo Company’s premium costs. The appeals were honored both of those years. Deborah Jones submitted the same type of appeal again in 2009 after speaking with The Cholo Company and the BCBS plan about her intent to do so before the end of May 2009. In the meantime, Deborah Jones went ahead and met with the employees of The Cholo Company to discuss approximate rates based upon the expected approval of the 2009 appeal. But on June 1, 2009, the BCBS plan denied the appeal claiming that The Cholo Company had a bad loss ratio for the last three years. As a result, the renewal rates Deborah Jones quoted to The Cholo Company’s employees were lower than the actual rates the BCBS plan charged for the renewal. This resulted in approximately $35,000 of additional premium cost to The Cholo Company. Deborah Jones contends that the BCBS plan representative admits never having check the loss ratio for The Cholo Company prior to the denial. The Cholo Company has retained counsel and is suing for $50,000.

*Actual names of individuals and companies have been changed and are fictitious.

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