Arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. Some agents were developing an interesting application of arbitrage strategy, capitalizing on the difference in commissions between agents and assisters. With assister enrollment payments fixed at $58 and the agent commission expected to be somewhat higher, the deal involved agents paying assister entities more than $58 for the referral. Similar arrangements between agents and grantees would be more lucrative for both sides of the deal because grantees have received a lump sum an are not paid by enrollment.
Because of the concern that financial arrangements between agents and grantees, Assisters or community-based organizations would increase the overall cost of marketing and enrollment assistance, which are directly reflected in health plans’ costs, Covered California is making a policy clarification, with the following recommendations:
Covered California encourages non-monetary partnerships among all groups offering enrollment assistance. With regard to financial arrangements that could increase overall marketing and enrollment costs, staff recommend adoption of the following recommendations:
- Prohibit grantees and Assisters from accepting payment or other valuable consideration from agents for referrals and/or enrollment services; and
- Prohibit agents trained and certified by Covered California from providing payment or other valuable consideration to grantees, Assisters and other community-based groups for referrals and/or enrollment services as a condition of program participation.