Guest Blog: Stranger Danger - Health Insurance Exchange Edition

[Patrick Paule is a regular reader and commenter here at IB. Recently, he emailed us regarding an article about "insurance enrollers" in Exchanges. His extensive background in insurance and securities gives him a unique perspective on this potentially dangerous development, so we asked him to pen this Guest Post to explain the issue to our readers. HGS]

On January 1, 2014 you hear a knock at the door. Open it up and there stands a complete stranger. First thing he says is that he is an "insurance enroller" from -Insert Community Organization Here- . He asks to come in and help you understand health insurance. He will also explain the process of enrolling into an Obamacare exchange. Then he finishes his pitch by telling you that if your income level is low enough that it might be your lucky day and your insurance could be "free". What the person doesn't tell you is where the train wreck begins.

The LA Times had a nice little article on "insurance enrollers" last week. These are the people that the Federal Government believes can enroll people into Health Insurance Exchanges/Marketplaces (whatever they are calling them this week). California is one of the few states that has decided to create their own Exchange. Cover California, the state agency assigned with the task of implementing this train wreck, has taken an initial stance that these "insurance enrollers" should be screened to deter fraud and protect consumers. In fact, Obamacare backer and California Insurance Commissioner Dave Jones agrees, saying that without background checks and fingerprinting he thinks "there is a very real probability of immense consumer fraud." This seems pretty reasonable to me. After all, licensed insurance professionals must go through the process of background checks, fingerprinting, carry an E & O policy, and also have continuing education requirements every two years.

However, Cover Cal officials are preparing for a "battle" with community organizations over whether or not these “enrollers” should undergo background checks and fingerprinting (never mind the fact that they aren't even considering licensing these folks). Robert Ross, a Cover California board member and CEO of California Endowment, had the following to say about background checks:

"I have fears about adding bureaucratic mountains that slow us down." He goes further to say that "fingerprinting can come across in many of these diverse, ethnic communities as a scary, big-government thing." (Side note, isn't Obamacare a "scary, big-government thing?")

The "insurance enrollers" will play an important role in helping individuals understand complex terms like deductible and actuarial value, and to guide consumers through the “simple application process.” In order to complete the application, "insurance enrollers" will have access to information including: social security numbers, personal residence addresses, income data, tax returns, employment information, and dates of birth. 

Cover Cal is projecting that they will need 20,000 "insurance enrollers" to enroll the projected 1.4 million people this year and that outreach is extremely important. State officials will be paying these "insurance enrollers" $58 (!) per application. Depending on how you interpret this, it can obviously be a very lucrative deal or a very low income deal. But for the taxpayers of California, paying out $81,200,000 next year is not a simple drop in the bucket.

Cover California, and insurance exchanges in general, will be full of fraud and will cause more headache than good. Most people who enroll will have no idea exactly what they are purchasing. This will be the case especially if unlicensed idiots ”insurance enrollers” who don't have to undergo background checks or continuing education are allowed to perform the transactions. So, come January 1, 2014, the best thing to do when you hear that knock at the door would be to not answer it.

Thanks, Patrick!