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.