Health Insurance Agents are the Canary in the Mine of ObamaCare
by BRUCE KESLER
August 24, 2010
Having been a heavily credentialed health and other benefits broker for the past two decades, and working on the corporate buyer side of the relationship for 15-years before that, I will say – strongly – we have been worth it. I described why and how in this earlier post, “In Defense of Health Insurance Agents, and You.”
A health insurance agent is required to complete initial and regular formal training courses in the subject (including ethics), pass initial and periodic tests, and are screened by their state and by insurance companies for criminal or personal conduct (including declaring bankruptcy) that may negatively affect their reliability to be licensed to provide agent services. In addition, through professional associations, through insurer education programs, through self-study, and through competitive pressures, health agents stay current on the latest laws and offerings from various insurers. Furthermore, almost all health insurance agents are independent businesses or work for independent agencies, not beholden to the insurers but to their customers. Importantly, individuals, small and larger businesses have priorities more important and pressing than becoming experts in health insurance or its interactions with other laws or aspects of their primary concerns, and heavily depend upon qualified, trusted health insurance agents. Lastly, many health insurance agents have extensive credentials and experience….
But, the unfolding of ObamaCare raises the question of whether health insurance brokers will continue to be of value, or able to be.
One of the premises of ObamaCare is that an excess of premiums is spent on items that aren’t strictly medical care delivery. So, ObamaCare imposed medical loss ratios on large health plans of 85% and on small plans and individuals of 80%. It would have been set higher, but as I wrote, the Congressional Democrats retreated 5% in the face of the Congressional Budget Office saying that 90% would equal outright nationalization and the CBO would have to add significantly to its calculation of, as forecast by critics and proven since, ObamaCare’s understated costs.
As with the cost forecasts of ObamaCare, the presumption that it will be simpler to deal directly with the government or its proxies is dubious, and the negative spillover effects have not been taken into account. The expertise and independence of the ObamaCare employees will be less than that of independent brokers. The complexity of figuring out the best alternative for buyers among competing plans will not be lessened, and ObamaCare employees should not be expected to provide that independence. The ObamaCare exchanges will vary across states, which will need the knowledge to create a medical insurance plan for small and large multistate employers.
A new start-up client of mine has four employees, in different states. The owner depends on me to figure that out, and as a condition of choosing me requires that I provide his regulatory and related counseling. If this start-up prospers, and it should, many more employees will be added. If its resources are stretched to dealing for itself with these matters, like other start-ups and small companies, the major source of new employment in the US, will have reduced prospects.
Under ObamaCare, agents expect their already reduced commissions to be considerably lowered, and will be less able to provide their services and stay in business. That will, also, affect the availability of agents to evaluate and implement plans for dental care, vision care, life and disability insurance, or the myriad of other benefits issues – like Cafeteria Plans – or related and tangential business and regulatory matters. Small firms particularly, but many large and giant firms, do not have the in house resources or expertise of their own to do so. This may lead to some agents – to stay in business – to overemphasize these other plans, not to the clients’ best interests.
Individuals purchasing health insurance will, similarly, have less access to independent agents to evaluate alternatives, or to rely upon for other health related matters, but most are expected to have no alternative than government plans or to be dumped on them by employers escaping the onerous regulatory burdens or increased costs of ObamaCare.
Health insurance brokers are, thus, on the firing line. The National Association of Insurance Commissioners from each state overwhelmingly just affirmed that the states’ exchanges under ObamaCare “"appropriately reflect the important role of insurance producers who are skilled, knowledgeable, educated and licensed and registered."
That is welcome, but doesn’t address the upcoming rulings as to how much so and how much they’ll be paid, which is the crux of the matter.
How health insurance agents are treated under ObamaCare will be a major leading indicator, a canary in the mine, of how ObamaCare will actually impact consumers.
FamilySecurityMatters.org Contributing Editor Bruce Kesler served in USMC Intelligence in Vietnam and was a researcher at the Foreign Policy Research Institute. He worked as a financial and business operations exec for Fortune 100 and small companies, and for the past two decades as an independent certified health and benefits consultant and broker. His columns have appeared in many major newspapers. He currently blogs at Maggie’s Farm.