Agent – Broker – Consultant E&O Liability under PPACA

bareUnder-Insured Insurance Agent/Broker

Insurance agents, brokers and consultants better dust off their E&O policies and read them. There is a good chance they may not be covered in areas they need to be due to increased exposure under PPACA. For example, is there coverage for self-funded employee welfare plan sales, service and recommendations? If so, is there a policy sub- limit such as $250,000? Giving advice as a fee based insurance consultant  is almost never covered under most group E&O policies, does yours? Probably not. In fact, one would probably need to go to the surplus lines market to find adequate coverage these days. And what about cost? Standard group A&H E&O policies run around $400-$700 per year. Adequate coverage  can cost thousands of dollars per year.

Going bare is risky these days………….

Posted on April 10, 2014 by Curt Pearsall

There has been volumes written about the PPACA (Patient Protection and Affordable Care Act) but for agents and brokers, I am not sure that there has been a lot written about, what I think is, the increased E&O exposure. First, I will admit that I am, by no means, an expert on PPACA but let’s think about the exposures that the PPACA potentially presents…

– It definitely presents a number of complex new compliance challenges for employers – what role will agents / brokers play in this?

– Employers may have to now reconsider their health benefit strategies –what role will agents / brokers play in this?

– Employees need to be educated – what role will agents / brokers play in this?

There are some recent survey statistics that bear noting:

Only 27% of employers understand health care reform very or extremely well (2013 Aflac Workforces report)

72% of employers have yet to identify the cost of health care compliance (The Willis Human Capital Practice Health Care Reform Survey – 2012-2013)

Only 13% of companies named “educating their employees about health care reform” as an important issue for their organization (2013 Aflac Workforces report)

These are all opportunities, yet challenges, for agents and brokers in the new world of PPACA.

Add to that, agents and brokers are probably more involved than previously in the role as Benefit Plan Design consultants. They may also have an enhanced  role dealing with  employee benefit communications.Personally, I feel that being more consultative potentially equates to increased E&O exposure.

Compliance is a significant issue and agents / brokers need to be extremely knowledgeable on PPACA and how to comply with its requirements. There is no doubt that employers are going to be looking to the agents / brokers for this knowledge and expertise. Once again, agents and brokers will be more consultative than ever before.

One of the additional issues facing employers deals with the decision to be fully insured or to consider self-funding this exposure. While traditionally self funding has only been considered for the larger employers, many small employers (less than 199 lives) may now look to self-funding as an option. What role will agents / brokers play in assisting employers to determine the viability of this approach?

These are all roles that agents and brokers will probably need to fill…the key is that they need to understand that with these roles comes a potentially increased E&O exposure.


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