Note to Agents on Health Care Reform: Keep Focused

The Governor’s Health Care Plan contains dozens of elements, many of them controversial. There’s coverage of the children of undocumented workers. There’s taxes — oops, no, he calls them fees or dividends, anything but taxes — on doctors and hospitals. There’s yet another fee for employers who don’t offer coverage to their workers. There’s an individual mandate to purchase coverage and the corresponding requirement that insurers accept all comers, even in the Individual health insurance market. About the only non-controversial element of Governor Schwarzenegger’s proposal is it’s encouragement of a healthier lifestyle.

For agents, however, there’s two provisions which require close scrutiny: the requirement that carriers spend 85% of their premiums on medical costs and the purchasing pool for subsidized (i.e., low income) consumers. While the former guarantees no role for agents in the individual and small group markets, the later only has the potential for doing away with our profession.

I’ll write in more detail on these issues next week, but for now let’s put it this way:
1. If carriers only have 15% of their premium dollars to spend on administrative expenses and profits, they will need to greatly curtail distribution costs. The easiest way to accomplish this is to cut commissions — or do away with them all together and require consumers to directly pay agents a fee.
2. If the government runs any kind of a purchasing pool, it will have a natural tendency to create rules and regulations that favor the purchasing pool. It’s only human nature. Imagine a referee suddenly donning a jersey and joining one of the teams. Does anyone really think that referee could remain impartial? Well, government bureaucrats are as human as referees — they just have better eyesight. (Sorry, a cheap shot. I enjoyed it, but it was cheap).

What concerns me is that agents care about a lot of the other issues on the table, too. For philosophical, political and business reasons, they care about the controversies in Governor Schwarzenegger’s plan. But as they study the plan, I hope agents will apply two measures when determining where to bet their political clout:
1. If the provision becomes law will it harm our profession or our clients?
2. Is changing the provision an absolute necessity for other stakeholders?

If a provision doesn’t harm our profession or our clients, then I’m not sure its appropriate for agents to seek changes to a provision as agents. As Californians, yes, if agents care about an issue they should speak out. Not as agents, but as citizens and voters. If a provision is a high priority of another stakeholder, and that stakeholder’s interests are aligned with agents, there’s nothing wrong with letting the other stakeholder lead the charge. Agents can be supportive, but it’s unlikely to be an issue on which we’ll need to expend great resources. (An exception would be if agents are part of a coalition where our grassroot efforts on what for us is a secondary issue gains us support from others on our first tier issues).

If you apply these measures against the myriad of controversies the Governor’s Health Care Plan raises, to me agents priorities are clear: focus on the administrative cap and the purchasing pool. All of our organizational and individual resources should be devoted to these two items. These are the two most poisonous pills from our perspective. If we don’t make sure they are agent-friendly in whatever eventually becomes law, no one else will.

It will be a challenge for agents to keep focused on just two issues when there’s so many elements to the health care proposal. But history indicates this is the right course. I led the California Association of Health Underwriters’ efforts during the debate over small group health insurance reforms — what became AB 1672 — in the early 1990s. Then, too, there were lots of issues on the table. CAHU focused solely on those issues which met the two-pronged criteria outlined above (although, to be fair, we didn’t articulate the criteria quite this way back then). Because of our laser-like focus on a few, critical issues, we were able to not only preserve a role for agents in the final legislation, but make what became law better than it would have been otherwise.

It’s important not to get too caught up in the strategies of past battles when facing new challenges. When it comes to focusing agents’ political power on a few issues, however, I personally believe history has a great deal to teach us.

What do you think?