Change is Hard

Change is hard. Change imposed is even harder. Change that is convoluted, inartful, at times misguided, uncertain, and coming fast is beyond hard. This kind  of change is disruptive, frightening and disheartening.

That brokers feel the coming health care reform will shunt them aside, destroy their careers, and shutter their businesses is, consequently, neither surprising nor without basis. Add to the mix the fact that we’re still in the tea leaf reading stage of how health care reform will play out and the outcome can be a poisonous brew of anger, anxiety and paranoia.

Given this reality recently posted comments are well considered, well reasoned and, to a greater extent than should be expected, objective. (My thanks to all for sharing their thoughts and insights with readers of this blog). That the expressed concerns and conclusions are rational and reasonable, however, does not mean they are accurate or certain. Indeed, I think they’re wrong and in the next few posts I’ll try to explain why.

First a reality check: my perspectives on the impact of reform, how carriers, lawmakers, regulators and consumers will react, and what all this means for brokers is no better than anyone else’s opinions on these topics. As mentioned, all we have now are tea leaves. Yes, the law has been passed, but this only creates a framework for reform, not the details. Think of the Patient Protection and Affordable Care Act as a 2,000-page blueprint. Future legislation, regulations and the actions of real people dealing with it all represents the actual building process – the framing, laying pipes and wiring, painting and additional hard work required to actually create a usable building. The blueprint will give a good idea of what the structure is supposed to look like, but it’s what the carpenters, plumbers, electricians and others that determine what the structure will look like.

Which leads us to Katz’s Two Laws on Laws. The first is the Law of Regulatory Change. It holds that “there is what the law says. Then there is what a regulator says the law says. And what the regulator says the law says is what the law says unless a judge says the laws says otherwise.”

Take the issue of the provision of the health care reform law that prohibits carriers from applying pre-existing conditions on insured children. There’s nothing in the law that says carriers have to accept all children applying for coverage (what’s called “guarantee issue”), only that if a child is accepted for coverage excluding pre-existing conditions is not permitted. Yet President Barack Obama and others talked about the law as if insurers did have to cover children. And preventing exclusion off pre-existing conditions for children doesn’t accomplish much if carriers can simply deny kids insurance in the first place. So regulators (in this case the Department of Health and Human Services) simply declared that health plans did have to accept children on a guaranteed issue basis. And unless a judge says otherwise, that’s the way it is.

The second Law on Laws is the Law of Implementation. This one holds that “there is what the law says and what regulators say the law says. Then there is what carriers say the law says. And what carriers say the law says is what the law says unless a judge or regulator say the law says otherwise” (other industries should feel free to replace “carrier” with a more appropriate implementer).

HHS’s requirement put carriers in a bind. If they are required to guarantee issue coverage to children, what’s  to prevent parents from waiting until their kids are sick or injured before purchasing a policy? This is the functional equivalent of allowing folks to buy homeowners insurance from the firefighters dousing flames or to buy auto insurance from the driver towing their battered car away. The result of such an arrangement inevitably and substantially increases the cost of coverage. Some carriers (as noted by the commentators mentioned above) have responded by dropping children-only coverage. Others are deciding to guarantee issue coverage only on a plan’s anniversary date or during a child’s birth month. And until a judge or regulator says otherwise, that’s what they’re going to do.

While we’re on the topic of laws on laws, here’s another for you, the Law of Unintended Consequences. My definition for this phenomena, which is as certain as the law of gravity, is that “a law may or may not do what it seeks to do, but it will always do some things it did not intend to do.” Congress did not intend to stop health insurance carriers from dropping children-only offerings, but that’s reportedly what’s happening. (And yes, an argument can be – and often is – made that the goal of the PPACA is to drive medical insurers out of business altogether, but that’s not what we’re discussing here. I raise the point here only as a no doubt vain attempt to forestall comments on this post from veering off in that direction).

This examples of how the laws on laws plays out only deals with one small part of the health care reform legislation. It is and will be repeated on provision after provision after provision. Which brings us back to our reality check: predicting what the new law will mean for brokers (or insurers, consumers, businesses, medical professionals or anyone else) is a tricky and maybe futile endeavor.

Then there’s the fact that while I’m a broker, my work day is, to say the least, diversified. Which makes my (relative) optimism (relatively) easier. On the other hand, when you’ve spent your career building financial security around a product that legislation might eliminate, seeing things through very dark colored glasses is more likely and understandable. My point is that one’s stake in the outcome doesn’t determine the validity of one’s predictions (another long shot attempt to keep comments on point).

Because the pessimism of professionals facing this possibility is understandable does not make dour predictions right. It just makes them, well,  understandable.

In future posts, as I’ve done in past writings, I’ll offer my thoughts on why health insurance brokers are unlikely to go the way of travel agents (of which, by the way, there are still tens of thousands in this country). And why I think brokers will need to adapt – and will be able to adapt – to a new reality.

Even if I’m right (and I’m offering no guarantees, just educated guesses) this won’t make dealing with the changes to our industry and profession any easier, but it may mean making such changes is worthwhile.

10 thoughts on “Change is Hard

  1. I agree pretty much with what you said. I write a blog specifically to help rookie and young insurance agents learn how to market. A couple of weeks ago I sited NAIC’s proposal to include brokers in the exchanges and the Navigator program in the PPACA as reasons for new health insurance agents not to get too depressed. Anything can happen in 2013 when the Exchanges are formed. If Americans are convinced that Obamacare is good, they will keep him in power in 2012. If not, the new president and his Secretary of HHS will determine our future as agents. In my opinion, now is a good time for a refresher course in Civics for worried insurance brokers. All of us have to make a decision for our futures. That decision, in my opinion, should be based on facts not rumor.

    PS: The final law that Obama signed was printed single space and a smaller font. It is only 945 pages, not 2000 pages. That was the rough draft.

  2. Hi Alan,
    I just wanted to note that my commentary is pretty much driven by my absolute disgust at what I see going on here in CA and elsewhere in our country today. Full disclosure: I voted for Obama because I was stupid enough to believe that here was a man who wanted to reach across the aisle and create legislation (for a variety of issues) that was bipartisan in nature.

    Today as I sit here composing this note I am just utterly aghast at how President Obama took such a hard stance on the issue of health care reform and turned it into simply the most partisan piece of legislation I have known in my adult life.

    Alan you are of course correct that Obama used the leverage he had in Congressional numbers to ram home an utterly flawed piece of legislation and to my dismay people like me who ‘wanted to believe’ have been left high and dry. Where is OUR President? Where is the man (or woman) who is going to treat Congress as an AMERICAN institution and not an institution that happens to tilt one way or the other based on party numbers? I can see now – bit by bit – that this country is lost. We have lost the true essence of what made America the special thing that it once was. We have a Congress and White House that has a completely deaf ear to what the American people want. We have 1 in 7 Americans who are living below the poverty level. Think about that: 1 in 7 Americans are below the poverty level. We have a Congress that is absolutely obsessed with only one thing: How can we tax the American people in new and different ways (Watch and see how the Web becomes the next domino to fall in the tax wars.)?

    I realize even as I write this that I sound like a true Tea Party fanatic. (I always voted the man not the party so my affiliation with anything politic is fleeting at best.) I live in a state where my choices for Governor are a fanatical left wing politician who has made a career of living on the public (political) dole and has no clue what it is like to have to survive in the private sector and a billionaire who hasn’t even voted in 30 years. (Dear God: DID NOT VOTE IN 30 YEARS and wants to start a political career as Governor?! Good Lord you just can’t make this stuff up…). If America is lost, California is so far gone that it might as well be a make-believe land in a fairytale. I used to live in an East Coast state where the state legislature only had two months a year to screw up the state – out here they give these incompetents the WHOLE year.

    I’m afraid I’ve once again hijacked your post Alan but I think the fact that this conversation has taken two subjects – health insurance and government – and so intertwined them to the point where you can’t discuss one without the other is a clear indication something is badly screwed up in a capitalist society. Look, I want EVERYONE to have access to affordable health care, but the sad fact is: This just ain’t it. This legislation has done absolutely ZERO to stem the tide of the real cost driver here and that is our health care system itself. I have a very dear 78 year old friend who just had a tumor removed from his colon. Immediately after the surgery he was supposed to start chemo. That was two months ago. In the past two months my friend has undergone a liver biopsy and various other procedures – none seemingly related to his initial diagnosis of colon cancer. Why all these other procedures? Simply because doctors can and do order any and every test they want to under the sun because A – they can and B – they are protecting themselves from the potential of lawsuits. Let’s face it Alan – in England or Canada? My friend would have gotten two things: The tumor removed from his colon followed by chemo. Bing bam boom. Over and done with. Instead, this guy is getting a litany of tests that have all come back negative simply because the doctors feel like it. For those of you counting at home that is literally tens of 1000’s of health care dollars going up in smoke and being paid for by Medicare and Medigap. THAT Alan is the problem with health care in the U.S. today and as you can see it has NOTHING to do with the health insurance industry. We simply live in a day and age where everyone must live to be 120 and anything short of that will generate a wrongful death suit.

    As I close I have to acknowledge something: You and I have probably spent more time composing our comments here than anyone in the Democratic Party on the campaign trail has spent talking up the benefits of health reform to the American people. As I understand it the candidates, Dem Party leaders and even the President himself try to avoid the subject at all costs. Gee – what does that tell you?

  3. Alan,
    Thanks, for the encouragement. I’m old enough to have seen lots of change and lucky enough to still be around to talk about it. Of course, it wasn’t just luck. The other survivors and I learned to adapt. Sometimes by fighting back (remember Sec.89?)and sometimes by expanding our capabilities (COBRA, HIPAA, HDHPs and HSAs), but we survived. Survivial begins with the will to survive and the ability to innovate. (read: “Deep Survival” – L.Gonzales)

    Your comments call to mind a new version of an old saying.
    “When one door closes, another opens, but it’s hell in the hallway.”

  4. Well Alan it’s only appropriate that I lead off here considering I did hijack your last post to voice my dismay at what I see going on. I actually believe that in some states – where liberal democrats are not the ruling majority – the life of an insurance agent will go on much as before. They will operate in harmony with a state exchange that is relatively benign and will actually help usher consumers towards agent services.

    In California the die is already cast: The legislature has gone to an extreme to set up a system that will operate completely independent of the DOI and said nothing in any legislation I can find about actually even using licensed ‘helpers’ in their call centers.

    The unfortunate part of your commentary is that you are purposely turning a blind eye to the very real phenomenon that is the state of Congress today: Almost on a daily basis doing things that defy all logic. Alan: There’s a reason that the Congressional approval rating stands at 19%.

    How many years has the Alternative Minimum Tax which is reviled and universally loathed by every right thinking politico and Joe Citizen been allowed to stand? The AMT is a great example of trying to apply logic to a situation where there is none. The Republican-leaning states and their national reps to Congress will talk a great game about how evil the AMT is but they won’t do anything because – for the most part – it simply doesn’t affect a whole lot of their constituents, while the left leaning (HIGHER state tax states and thus democrat!) states have never met a tax they wouldn’t embrace with open arms.

    My point is that The Affordable Care Act is now the law of the land but it will be up to each of the 50 states to hand out justice when it comes to the fates of insurance companies and brokers. In speaking to the office of my (Republican) legislative rep here in CA, I was basically told as it relates to the most far left leaning exchange you can imagine – ‘…yeah it stinks but it’s a done deal’…(And oh yeah – about the ‘helpers’? From the same legislator’s office: ‘Well that’s pretty much what you can expect of state legislatures who rarely if ever actually look at what they are being asked to vote on.’).

    I smell a vague “chicken little” rebuke in your post Alan and since it’s your blog it’s your call to make that assessment. But: A more optimistic tea leaf reading isn’t any more valid just by virtue of its inherent optimism and I get that you have an audience that wants to “believe” – oh boy do they ever – so you have to talk the talk AND walk the walk. Nevertheless: The writing on the wall is starting to appear more legible now and it’s coming into sharper focus for some of us. Sorry I don’t share your optimism Alan – maybe if I lived and worked in Texas, but in a state where we have a Democratic Governor masquerading as a Republican? Thanks but I think I’ll pass on that batch of Kool Aid.

    • Curt: Thanks for the comments. They’re great. And I wasn’t intending to cook up a “chicken little” rebuke. In fact, I had intended to emphasize that your point (and those of others who echoed your concerns) were well grounded and reasonable. So my apoligies if the tone came across wrong. I think where we disagree is how indelibe and legible the writing on the wall is at this time. Yes the legislation passed in California to create the Exchange is flawed. But I also know that CAHU is already lining up authors (Democrats) to introduce very worthwhile amendments. And even if the law stands as written it’s unclear how it will be implemented. Could it be a disaster for brokers? Absolutely. Could it be a benefit? Possibly. We’re at the start of this journey, not the end.

      As for Congress, I don’t see much of a difference between this one and previous versions, whether Democrats or Republicans were in control. As you note, the AMT has survived for years through Congresses controlled by both parties at one time or another. And yet, examples like the AMT aside, the country survives. As I wrote in another blog I used to write, President Obama knew this was the most supportive Congress he was going to get during his tenure in the White House — whether that turns out to be four or eight years. Through two election cycles Democrats had taken control and built huge majorities. This represents their high water mark. The party in the White House nearly always loses seats in an Administration’s first mid-term election. And having won seats that were traditionally Republican, the outgoing tide was bound to be significant. That’s one of the reasons he pushed for so much major legislation while he could. Republicans would be in a better position to thrawt his legislative goals even without a recession. So there’ll be a new Congress. And there will be changes to the law. And these are more likely to improve than to hurt things (Wow, I guess I am an optimist).

      To make a long comment short: As Yogi Berra said, “It ain’t over ’til it’s over.” Now is the time to prepare for change, another issue you and I agree upon. I think where we may differ is that I think there’ll be a lot more twist and turns to come than we’ve seen so far.

      Again, thanks for sharing your thoughts Curt. I appreciate it.

    • The “fallacy of either/or” states that one thinks there is option A or option B, but no option C. For instance, are you optimistic or pessimistic? Is the glass half full or half empty? Those are “Either/Or” options. Ah, but there’s option C. Neither optimistic nor pessimistic, but realistic. The glass holds two states at one time. It is half full and it is half empty. Realistic.

      Since everyone is making predictions, let me predict this. The pessimistic brokers will leave this business. May you find contentment and success in whatever endeavor you pursue. Extreme optimists will suffer shell shock if they don’t prepare for the rough road ahead. Realistic brokers will adapt, and fight. They’ll join NAHU and other organizations to create CHANGE, on a grand scale and a small scale. We can survive the new law and all the upcoming reforms of the reform. I just hope we don’t die of a heart attack caused by predictions of doom and gloom first.

      • Surviving the new law doesn’t necessarily mean you are making good use of your time, which may be better spent researching other options (industries) to jump into. Realistic brokers will adapt, and fight. I agree Ann. But surviving is not motivation for a sales person. Agents and brokers are motivated by sales commissions. Surviving the new law when there is no clear indication yet of what the new commissions structures will look like is like playing with fire. I may get a lot of heat for saying this, but I’ve survived a couple wars myself. Was the Vietnam War worth the hassle? Was the Iraq War worth the hassle?

        This is about making rational decisions given the cards you’re dealt with, governed by the same people who have made some of the worst decisions in our history. We shouldn’t have to survive a new law. We should be voting out the very people who laid this on us to begin with.

        And for those who are looking for Option C to survive this reform, got a nice letter from Aetna that states: “More information on grandfathered health plans may be found at the U.S. Department of Health and Human Services website at http://www.healthreform.gov. You head over there and proceed, as a consumer, to fill out some stuff to get quote and you’re presented with: http://finder.healthcare.gov/more_info/ihi?no_afford=n&age=2&audience=fam&situation=losing&state=CA&zip=90210&x=41&y=24

        So at our own expense, the government feels free to come in and start moving traffic to carriers directly. What happened to private enterprise and healthy competition? I guess they don’t feel that way about this industry anymore. So again, to all the brokers out there: if surviving is watching your book of business dwindle because the government is blind enough not to realize your worth, then I’m going with Option A all the way.

        Survive as you wish, but life is about making the ‘right’ choices too: ones that might affect how you feed your children or put them to bed at night. Pessimism is a strong word for Option A. Why not call it being ‘Smart’? You know, 1 + 1 = 2, not 3, and I’m not being pessimistic about that answer too.

        • David, I appreciate your answers. I’m not arguing any of your points with this reply, because you have a right to voice your views, and your views are as valid as any.

          I just thought something was hilariously funny about the government website that you provided a link to. The prices aren’t shown in the “quotes”, but instead it says the prices will be available 10/1/2010, some of the plans are outdated, some of the links are broken… In the Arizona section, they list insurance companies that are such minor players, most consumers and many agents wouldn’t recognize them.

          But, nonetheless, I agree with you about the fact that the government has no right to direct business to a particular insurance company, nor to leave out the broker. I think many who visit that website will call brokers anyway due to the confusion of comparing those plans, and due to the fact that smart consumers will realize they’ve never heard of some of those insurance companies and they want the help of an advisor. But other consumers will click through to an insurance company and apply directly, bypassing the broker.

          The worst thing about this website is that it violates many of the rules that we, as brokers follow by law and by ethics. It doesn’t warn consumers to stay away from minor players, or limited policies. It doesn’t explain in human-to-human communication why certain policies are not right for that particular client.

          Even so, this absolutely isn’t the government’s place (well, not until the exchanges), and let’s hope they do just as bad of a job with the exchanges as they do with this thing. Or let’s hope they do just as bad of a job as they do with Medicare.gov that likewise will direct you to various insurance plans in an overwhelmingly confusing manner.

          Once again, this is not a disagreement with your right to view, and to express your view, that our future income will not be sufficient for what we do. I just find this whole thing of the government being an insurance agency to be kind of stupid, as well as kind of scary.

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