Brokering A Better Healthcare System
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By Janet Trautwein
The Supreme Court just affirmed that President Obama's health reform law is indeed constitutional. Supporters of the measure have rejoiced that America may finally be on its way toward achieving universal health coverage.
Unfortunately, the newly upheld law undermines one of the chief means of expanding access to affordable coverage, particularly among small businesses -- by threatening to put thousands of insurance agents out of work.
The Affordable Care Act (ACA) requires insurance companies to devote no more than 20 percent of premium dollars to administration and profit. This "minimum medical loss ratio" may seem like a reasonable way to ensure patients get their money's worth.
But it puts the jobs of insurance agents at risk -- to their detriment and that of their customers.
Last year, the Department of Health and Human Services ruled that insurers had to count commissions paid to agents as administrative costs.
Insurers responded by slashing commissions. The Government Accountability Office found that commissions for many agents were cut by 50 percent.
Consequently, some agents are leaving the business or downsizing, laying off employees just to keep their doors open. Already, one in five has done so. And that number will likely grow.
Ironically, just when many consumers would benefit from brokers' expert counsel on the healthcare law and its benefits, that same law is winnowing their ranks.
Treating agents as mere overhead is a mistake. Just ask anyone who's had to buy insurance on their own. Or ask the 75 percent of small businesses who rely on brokers -- including many who use them as de facto human resources departments.
Independent agents do more than just sell insurance policies. They help consumers navigate a rapidly changing marketplace and secure the best coverage at the most affordable price. They don't work for insurance companies but for their clients, often serving as consumer advocates when billing and claims issues arise.
The National Association of Insurance Commissioners -- which represents state insurance regulators -- has called agents "essential" to a functioning, consumer-friendly marketplace.
Take the case of John Walley, an Alabama-based agent. Upon meeting with an 80-year-old client, Walley discovered that she was living alone in a disheveled trailer and spending nearly a quarter of her $400 monthly income on Medicare premiums. Walley applied for Medicaid for his client, which waived her $96.40 monthly deductible. He also enrolled her in a Special Needs Plan that exempted her from paying the deductibles and co-pays that kept her from seeing a doctor for 15 years.
Or consider New Jersey agent Thomas Kohler, who intervened on behalf of his client in a hospital billing dispute -- and succeeded in lowering the client's medical bill from $7,000 to $3,000.
Defenders of the medical loss ratio claim that brokers won't be needed once the health insurance exchanges mandated by the ACA are up and running in 2014. Consumers will then be able to pick from a menu of health plans on a government website, they say.
But shopping for health insurance is more complicated than buying a pair of shoes online. Consumers are often confused by pages of legalese describing benefits, deductibles, and provider networks. Some may be inclined to make choices based solely on price, which might not be the wisest course.
More importantly, unlike a pair of shoes, a consumer will only find out if the policy "doesn't fit" when he's sick or injured -- when it's too late.
In its own programs, the federal government has experienced how difficult it can be to expand access to insurance without agents.
Consider the health law's temporary Preexisting Condition Insurance Program, which was supposed to provide coverage to "high-risk" consumers.
The law initially gave agents no role to play in attracting people to the program. Not surprisingly, very few signed up. Just 18,000 had done so by March 2011 -- less than 5 percent of the 375,000 that federal officials expected by the end of 2010.
So the feds enlisted the help of agents. Immediately, enrollment climbed -- by 400 percent over the past year and 24 percent over the last few months.
Lawmakers have historically recognized the importance of agents and brokers. And they must continue to do so. Otherwise, brokers will vanish from the marketplace. That would be bad news not just for the patients who depend on them as advocates -- but for the broader job market, too.
Janet Trautwein is CEO of the National Association of Health Underwriters.
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