September 1, 2010 Leave a comment
Let’s hope this one is premature…
Health Insurance Agents, RIP
Merrill Matthews, 08.30.10, 12:00 PM ET
The first casualties of ObamaCare–not counting truth and the trust the public had placed in President Obama to keep his promises–will be health insurance agents. That proud army of tens of thousands of Americans whose calling was to help individuals and employers work through the maze of available health insurance policies to find one that met their clients’ needs.
Democrats pushing ObamaCare, just as Democrats pushing ClintonCare 17 years ago, always saw the demise of health insurance agents as an acceptable, even a desirable, loss.
In November 1993, when then-First Lady Hillary Clinton headed up her own scheme for a government takeover of health care, an agent asked her what would happen to health insurance agents under her plan. The Wall Street Journal quoted Clinton as saying, “I’m assuming anyone as obviously brilliant as you could find something else to market.”
And now that the Clinton vision has finally come to pass in ObamaCare, many of those agents will indeed find something else to market–because they’ll have to.
It’s not like you couldn’t see this train wreck coming. Once the health care reform debate got underway, I began to warn health insurance agents in speeches and on conference calls that when Obama referred to administrative waste, he was talking about them.
Some of them told me they, in conjunction with their primary trade association, the National Association of Health Underwriters, were visiting members of Congress trying to convince the powers that be that agents provided value. That still appears to be NAHU’s basic strategy.
I think those efforts have been pointless. That’s because of what former President George H.W. Bush called “the vision thing.” The vision guiding those who are really driving the reform effort is a country in which people go online and choose from three or four comprehensive health insurance plans. There will be some choices, like the size of deductible. There may even be a few benefit choices. But ObamaCare is about dramatically reducing choices, not expanding them.
Fifty years ago when people’s telephone options were limited to a black landline, they didn’t need an AT&T store filled with trained professionals to help sort through their needs, finances and available plans.
Health insurance options, like phone options, have exploded in the last decade, with all kinds of innovative new plans entering the market–until now. ObamaCare, as Deputy Sheriff Barney Fife might say, is going to nip that in the bud.
With a handful of health insurance options available online, consumers won’t need an agent. Besides, the law’s provision mandating what health insurers must spend on claims, known as a minimum loss ratio–80% of the premiums for small employers and 85% for large employers–will leave little money to pay agent commissions.
Indeed, agents have told me that health insurers in the individual market–where people buy their own policies–have notified agents selling their products that commissions are being cut. Worse yet, some insurers have even warned they may be forced to cut commissions retroactively, depending on the decisions to be made about those minimum loss ratios. Thus, an agent could sell a policy and get a commission for it only to be told later that he has to give some of that money back.
In addition ObamaCare envisions getting most individuals and small employers in the newly created “exchanges,” similar to what Massachusetts implemented in 2006. Those exchanges will make agents’ problems even worse. A colleague of mine recently received an e-mail from an agent who wrote, “Once my employer clients hear how [ObamaCare] all fits together, 100% of them have said that they will cancel their group plans, and have their employees utilize subsidized care via the government exchange.”
Of course, health insurance agents may continue selling other health insurance products, such as long-term care insurance to cover nursing homes and assisted living facilities. Though even there ObamaCare includes the Community Living Assistance Services and Support Act, or CLASS Act (bureaucrats can devote a lot of effort thinking up catchy bill titles; often more consideration, frankly, than they give on the impact of their bills). It’s a poorly designed and woefully underfunded effort to create a new entitlement for long-term care needs.
Agents can also turn to Medicare supplemental coverage, though probably not Medicare Advantage plans, since ObamaCare tries to defund that program. And there are other types of policies that pay cash if a specific disease appears, such as cancer.
And there’s always life insurance, at least until Obama decides that he needs to reform that market also.
Health insurance and health insurance agents are in for a big change. But no need to worry, even in this awful economy. They’ll be able to “find something else to market.” Just ask Hillary Clinton.
Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas.
Kevin S. Wrege, Esq.
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