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PPACA – The End of the Health Insurance Broker in America? Hardly

July 23, 2011

The following is a response I posted to a broker who wrote this blog post and started a LinkedIn discussion on this topic:

“When the Hunter is killed by the Hunted: The End of the Health Insurance Broker in America”

 “The Patient Protection and Affordable Care Act has made a determination of our worth, and destroyed our profession as a result….Many of you may be confused, or misinformed, about the extent to which this legislation has relegated us to the level of a customer service representative, or the Barista at Starbucks, but rest assured: it has.

This is the most depressing and self defeating article I have read on this topic and I think your myopia and negativity blinds you to the opportunities that are there for quality intermediaries. And no Troy PPACA was not created to destroy your profession or worth.

“Obamacare only exists through misinformation …America is depending on your expertise, and our fate as health insurance brokers is now intertwined with the fate of our nation. We all lose our shirts if Obamacare is allowed to stand…all of us.”

Why you are quoting the discredited McKinsey study and any of Galen’s propaganda is beyond me. Taking Galen’s propaganda as gospel is enough to make anyone want to slit their wrists and get in a hot tub but thankfully it is factual swiss cheese

Here is a complete debunking of McKinsey’s study or at least a much broader set of views:

https://bentelligence.wordpress.com/2011/07/22/sen-barasso-you-are-dead-wrong/

“If our customers followed our honest advise, they would all join the exchanges..”

This statement is utter nonsense and reflects to me a real lack of understanding your clients, their businesses, their employees and why benefits are provided in the first place.

  • Should some join?  Of course.
  • All?  Not likely.
  • How about the 40 million new customers created by the law. Will they need professional help assessing their options? Yes.
  • Will you get commissions for this work? Not always. States will have a say in this long term and HHS is reviewing options here now.
  • Will you need to charge fees? Yes sometimes. That is financial planners and others do today.

Let me ask you one simple question. If all employers wanted to do was drastically lower their medical insurance costs why haven’t every employer in the nation gone to a $5000 or $10,000 deductible/HSA?

Frankly the best advice you could give them is to go this route in many circumstances. Have you? Why not?

There is much more to a discussion with an employer than a back of the napkin calculation comparing dropping coverage and paying a fine and for employers <50 there are no requirements or fines for them only positives when the exchanges get going.

If an employer calculates the total cost of dropping coverage, increasing salaries, grossing up salaries to cover the increased tax and FICA burden for the employee and pay the penalty the cost difference is not going tp be much and anything short of this is simply going to demoralize employees and make recruiting and retaining talent harder, which is what drives any business.

If you cannot be perceived by a client as a true trusted advisor in their business like a lawyer or accountant and prove your value so you can generate fees in lieu of commissions it really is time to find a new line of work.

No industry in this nation has stood still and our has been glacial in terms of change until now. No one ever said any of us were owed a living and that things would never change.

You do realize that carriers will still offer plans outside the exchanges? That similar plans must have similar rates? That carriers do NOT want everyone that they insure today to go to the exchanges? That they will likely have unique options outside the exchange to entice businesses and will still pay commissions there?

I work and talk with benefits brokers everyday all over the country and do not hear this type of negativity. Most of my clients have hired in the last year not shrunk and are not worried at all that their clients are going to drop coverage.

My personal suggestion is that you get better educated about PPACA and focus on becoming trusted advisor to your clients vs. a one trick pony health insurance agent.

With change comes opportunity and the exchanges and law’s changes coming their will increased confusion and complexity that require real expertise.

You have the opportunity to a major part of the solution for clients vs. frankly part of the problem repeating misinformation about the law and sounding like Eeyore about your future.

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Sen. Barrasso – You are Dead Wrong on Declines in Employer Sponsored Insurance

July 22, 2011

Senator, with all due respect your staff did you a real disservice by not doing their homework before you published Watch for dramatic declines in employer-provided health insurance based on old, discredited news and McKinsey’s own walkback of it.

The McKinsey study that “points to a radical restructuring of employer-sponsored health benefits” that started this thread made the bold prediction that 30% or more of employers would drop their ESI and that from 50 to 100 Million people would be dumped into the exchanges.

When challenged on their findings McKinsey, after 2 weeks and a letter from the Senate Finance Committee released their 29 pages of questions and methodologies and included this statement:

  • The survey …”was not intended as a predictive economic analysis of the impact of the Affordable Care Act.” . . . [T]he survey was more of a point-in-time reading of employer opinion. “As noted, the survey only captured current attitudes,”

Other Research

The survey’s headline grabbing results are a huge divergence from every other study done by CBO, SHADACRobert Wood Johnson FoundationAvalereBooz AllenThe Urban InstituteMercer , Rand and others that showed just the opposite.

Three recent surveys done by benefits professionals who are in the trenches with clients in the mid-market everyday are also starkly at odds with the McKinsey study.

  • McGraw Wentworth, the largest independent benefits broker in MI and 8th largest independent in the nation, (500+ employers surveyed)
  • Corporate Synergies (156 financial execs interviewed) , a large NJ/Philadelphia broker, the third largest independent benefits consulting firm in the nation
  • United Benefit Advisors (12,000+ employers surveyed), an affiliate group of 140 mid market benefits brokers and the 5th largest benefit advisory group in the US.

They all reported little inclination by employers to drop coverage due to the law. This is also in keeping with the International Foundation of Employee Benefit Plans (IFEBP) found with <1% of employers planning to drop coverage.

Finally remember that in MA 5 years after Romneycare was enacted 76% of employers now offer coverage vs. 70% before and that is with no subsidies, small business tax credits and lower fines than PPACA has.

Clearly time will tell what really will occur but in trying to read the tea leaves work done by folks who work daily with the employers who will make these decisions trumps any academic work by any consulting firm of any type and should be used as the basis of any analysis not simply a study that discredits a law that you and your Republican colleagues don’t like.

The Conservative View Of Exchanges and Brokers

July 17, 2011

There has been a lot of talk about the new Exchanges being created at the state level under PPACA. In fact this week HHS released the draft regulations for review  “by putting States in the driver’s seat when it comes to establishing Exchanges” and providing some real insight into how they will work and be managed and regulated.

The most interesting thing about the Exchange concept is that it is a favorite of conservatives and Republicans in favor of market based, consumer oriented solutions

Both Michael Leavitt and Tommy Thompson, HHS secretaries under W strongly support them and support states taking Federal funds from PPACA to get them setup.

Meeting with the National Governor’s conference this weekend Leavitt, a Mitt Romney advisor called them “a very practical solution to a problem that needs to be solved.”

Tommy Thompson noted in a recent article:

“Exchanges are a market-place, let us make them a state market-place. Exchanges are a vehicle for future innovation in health care delivery — and if there is one thing we know we all need here, it is a platform for better ideas. States that take charge of the exchange will be in the driver’s seat; those that don’t will take a back-seat to the federal government.”

Even more interesting to me is the Heritage Foundation’s white paper on Exchanges. If you read the substance of it and ignore its misrepresentations and anti-PPACA bias you will find a very compelling story for the value of Exchanges:

“Health insurance exchanges are a good idea— if they are used to implement patient-centered and market basedhealth reforms that enhance choices and value for customers.”

Also how they view the role of the broker/agent and how they should be compensated speaks to the new world of health reform regardless of PPACA:

Role of agents and brokers. 

For businesses that decide to offer health benefits on a defined-contribution basis, insurance agents could not only help the business make the necessary arrangements, but could also counsel individual employees on making coverage choices that best suit their particular needs and preferences, and “service” their policies—such as by helping them should they experience a problem or seek to appeal a claim or coverage decision by their insurer.

The availability of such advice from a trained and knowledgeable professional benefits the employer as well as its workers, since business owners generally feel uncomfortable giving their employees personal advice and are naturally wary of any possible legal ramifications.

The key change for insurance brokers is that in a defined-contribution market, they will act as “buyer’s agents,” instead of their more traditional role of “seller’s agents.” This is similar to the business model shift that has occurred in recent years with many real estate agents.

State lawmakers can facilitate such a shift by providing for a per-enrollee, feebased compensation structure for agents in which the broker is paid the same amount regardless of which plan the worker (client) chooses. While some brokers welcome such a change, seeing it as a way to expand their client base and establish relationships with new customers who might also be interested in other products the brokers offer—such as life, disability, or property insurance—others have so far been resistant.

 In a defined-contribution market, however, agent compensation can take the form of a fee paid by the buyer, which is therefore separate from any minimum loss ratio calculation applied to insurer premium income.

This also means that agents can offer their clients all the plan options available in the defined-contribution market, not just those from insurers with whom they currently have contracts.

State insurance regulators can help facilitate this transition by providing licensed brokers with additional training, information, and comparison tools for the state’s new defined-contribution market.

So it seems that at least in concept we have some broad agreement that Exchanges are a good idea and the way to help the small business and individual health markets and that agents/brokers are an important part of their success.

PWC says this about Exchanges in a recent report:

“Millions of Americans will soon gain what they have long waited for in healthcare:  Purchasing power that will make health insurers want to work harder to win their business and loyalty.”

The devil will be in the details and states actually doing their job versus pouting about “Obamacare” and leaving their exchanges to HHS to setup and run for them, thus abrogating their opportunity to serve it citizens with a local “laboratory” attuned to their state, its population and their healthcare infrastructure.

Their “Obamacare” myopia should not get in the way but for many, sadly it will.

The McKinsey Healthcare Report and PPACA

July 6, 2011

This post is a summary of an interesting debate that we have been having on the Employee Benefit News LinkedIn Group among industry professionals.

It is a specific answer to a summary of the discussion done here by another member – Jack Towarnicky – a knowledgeable benefits lawyer with WIllis in Ohio.

The one thing that was abundantly clear from this fascinating discussion, and reiterated in every study that has been done, is that people are very confused about this unarguably imperfect law, be they employers or industry professionals. A good review to jog your memory is here. I would note here that there is a lot going on relative to Medicare and Medicaid costs that does not get the attention it should.

Background

PPACA was signed into law in April, 2010 after the most contentious debate in modern US history. In trying to get bi partisan support over 150 Republican supported and numerous other industry amendments were added to the final 907 (not 2700) page bill and still no Republicans supported the legislation.

Unable to get a straight up or down vote on the bill this forced the Democratic controlled Senate to use reconciliation rules to pass it. This process was not terribly unusual as it had been used for important measures in the past by the Republicans including the 2003 Bush tax cuts that required VP Cheney to break a 50-50 tie in the Senate.

In contrast to the unfunded Medicare Part D drug plan passed by Pres. Bush in 2003, which will add $1 Trillion to the Federal Deficit by 2020 ($15.5 Trillion over 50 years), the CBO estimates PPACA’s costs are funded with revenue increase and  will save the budget over $114B from 2014-2020 and over $1 Trillion between 2020 and 2030 while positively impacting nearly 25% of the country. Nearly 40 million uninsured Americans will get coverage and the estimated 30 million underinsured Americans who have limited or restrictive coverage currently will see their coverage improved.

The McKinsey Survey

The McKinsey study that “points to a radical restructuring of employer-sponsored health benefits” that started this thread made the bold prediction that 30% or more of employers would drop their ESI and that from 50 to 100 Million people would be dumped into the exchanges.

When challenged on their findings McKinsey, after 2 weeks and a letter from the Senate Finance Committee released their 29 pages of questions and methodologies and included this statement:

  • The survey …”was not intended as a predictive economic analysis of the impact of the Affordable Care Act.” . . . [T]he survey was more of a point-in-time reading of employer opinion. “As noted, the survey only captured current attitudes,”

Before, and even now after being shown to not be “predictive”, the survey’s results have continued to be used used as a cudgel against PPACA by every program on Fox News, and by political opponents like Karl Rove, Sens. Demint, Johnson and McConnell and many others., further muddying the discussion

Other Research

The survey’s headline grabbing results are a huge divergence from every other study done by CBO, SHADAC, Robert Wood Johnson Foundation, Avalere, Booz Allen, The Urban Institute, Mercer , Rand and others that showed just the opposite.

Three recent surveys done by benefits professionals who are in the trenches with clients in the mid-market everyday are also starkly at odds with the McKinsey study.

  • McGraw Wentworth, the largest independent benefits broker in MI and 8th largest independent in the nation, (500+ employers surveyed)
  • Corporate Synergies (156 financial execs interviewed) , a large NJ/Philadelphia broker, the third largest independent benefits consulting firm in the nation
  • United Benefit Advisors (12,000+ employers surveyed), an affiliate group of 140 mid market benefits brokers and the 5th largest benefit advisory group in the US.

They all reported little inclination by employers to drop coverage due to the law. This is also in keeping with the International Foundation of Employee Benefit Plans (IFEBP) found with <1% of employers planning to drop coverage.

Clearly time will tell what really will occur but in trying to read the tea leaves work done by folks who work daily with the employers who will make these decisions trumps any academic work by any consulting firm of any type.

Highlights to Date

Jack pointed out the High Risk Pool (poor use) and early retiree results (over subscribed) to date and how they have missed CBO projections to highlight the difficulty of predicting the future.

Some other Initial impacts of PPACA included that have become effective over the last year are:

1)      Children to age 26 – Over 1,000,000 have signed up to date and it is estimated that well over 1.5 million will do so before the end of 2011 compared to the original HHS estimate of 1.2 million

2)      $250 Donut hole credit for Med Part D – over 300,000 seniors have got checks in 2010.

3)      50% off Name-brand drugs through the donut hole – So far in 2011 478,000 seniors have saved $260 M with this new benefit.

4)      Free Preventive care for Seniors – over 150,000 seniors took advantage of this new program in the first quarter alone.

5)      Small business tax credits

6)      Tort Reform – $50 million is available for five-year demonstration grants to states to develop, implement, and evaluate alternatives to current tort litigations

The issue of medical bankruptcies will be addressed with the removal of annual plan maximums and lifetime limits on coverage that begin in 2014. This will benefit all Americans by removing the spectre of bankruptcy due to medical issues.

Massachusetts

MA was also referenced in Jack’s review and that state has seen a rise in ESI from 70-76% since Romneycare went into effect and the facts in MA on how popular it is, if wait times have really increased due to it are a source of great debate. A great overview of the MA program is here. MA had the highest healthcare costs per capita in the US before reform and the still do. Their annual cost increase have not turned downward or accelerated since the plan went into effect.

The MA program did not enact any minimum plan standards and any rules like the MLR to move insurers into more efficient operating models and partnerships with their payors. PPACA will help them clearly in these areas as they are grappling to bend the cost curve.

Exchanges

Finally the state based exchanges ( for individuals and groups <50) are in the early stages of getting going in a number of states, including some of the 28 suing to have PPACA overturned in the various lawsuits. They have gotten a late start but with focus still have 2 ½ years until going to work. The challenges here are not technological but political and I expect we will see both well though successes and some poorly implemented failures.

Former Republican WI Governor and HHS Secretary Tommy Thompson views the exchanges as critical to long term reform efforts in the “50 state laboratories”, even if SCOTUS does overturn the law:

Conclusions

I had 3 main takeaways from this discussion that really is a microcosm of the national debtate.

1) The main thing I have learned  is how confused and misinformed people of all backgrounds are. The studies all showed the same thing for employers. There is also an inherent assumption that the Government screws everything up and will here that seems to then color further opinions.

There is a lot in this imperfect law but the negative drumbeats of the long debate and the politicians and right wing media – “death panels”, “2700 page bill”, “Waivers for supporters”, “government takeover”, “Chicago style politics”, “Read it to find out what is in it” , “rammed down our throats”, have become the accepted norm for many, not digging in and learning what the facts are right or wrong.

Also after being critical people offer few, if any, practical solutions offered other than leave it to the “free market” and “consumers” to solve the problem.

2) As expert as folks on this thread are in the industry, the vast majority have wide experience sets in their discipline, few with real depth across the entire problem. We all know its complex and we know what our area and personal experiences but not much more.

3) There are a lot of “oxs being gored” in a change like this and , not surprisingly, that really colors the debate. Some more than others. Brokers/Agents are fearful of their role in the future is but one example. No one ever said things would always be the same and change is hard especially when it effects what you do or will do in the future in any role.

Change always brings opportunity and big change like PPACA, brings even bigger opportunities if one understands the law and adapts their business to take advantage of it and help employers and consumers.

The reality is that PPACA is the law whether you like it or not and we all need to get as educated as we can and I suspect many of us will see that the long term value from many areas in the law.

All this tells me is that we need to continue have substantive discussions in diverse groups like this that educate everyone and hopefully empower folks to get more knowledgeable and ready to deal with the future as well as generate ideas to make reform work.

If the new MLR law had been in effect la

June 19, 2011

If the new MLR law had been in effect last year, HCSC would have had to return $146 million to policyholders in IL, TX, NM and OK