The Open Enrollment Convergence: Scope and Resources

To state the obvious, there are 12 months in the year. Unfortunately for health insurance companies, brokers, exchanges and those they serve, various health care coverage open enrollments for most Americans are crammed into less than four of those months. The scope and challenge of this Open Enrollment Convergence is mind-boggling.

Open Enrollments by the Numbers

Medicare’s open enrollment period is October 15th through December 7th of each year. Open enrollment for individuals runs from November 1, 2015 through January 31, 2016. The majority of small and large group plans renew on either December 1st (because last year employers wanted to put off coming into the ACA market for as long as possible) or January 1st (so benefit years coincide with calendar years).

Cramming all these open enrollments and renewals into a 15 week period impacts most Americans. The US Census Bureau estimates that in 2014 enrollment was:

  • 50 million in Medicare
  • 60 million in Medicaid
  • 45 million in medical policies they purchased themselves (primarily individual and family coverage)
  • 175 million in private group health coverage

Renewing any one of these cohorts in a two-or-three months is a Herculean challenge. Deal with all of them at once and you’ll find the Demigod in a fetal position off in a corner somewhere muttering about ACA compliance reports. Yet, all at once is when they’re happening.

Resources:

Alcohol is not a resource. Nor will it help get brokers through the Open Enrollment Convergence. Avoid it until February 1st. The three sources, however, will help. This blog’s Health Care Reform Resources page lists additional useful sites.

The National Association of Health Underwriters, the preeminent organization for health insurance brokers, consultants and benefit professionals, publishes a lot of extremely useful material. The NAHU Compliance Cornered Blog is accessible to everyone. Tools and information in the association’s Compliance Corner are available only to members, but well worth the dues. One feature allows members to pose detailed questions to experts and quickly receive a personalized response. The breadth and depth of the compliance expertise available through this service is impressive and invaluable.

The Henry J. Kaiser Family Foundation is an outstanding resource for dependable information on health policy and parsing the Affordable Care Act. (The Foundation is unrelated to Kaiser Permanente health plans). The Foundation’s Health Reform FAQs recently updated 300 items on a broad range of ACA topics. If you’re into Twitter, you’ll benefit from following the Kaiser Family Foundation. (Of course, if you’re into Twitter I hope you’ll follow me as well, he shamelessly plugged).

The Department of Health and Human Services is the government’s lead agency on the ACA. The HHS Health Care site serves up extremely helpful data, forms and explanations along with a bit of not unexpected ACA cheer leading.

Go Team

I wish I had a pithy message to help get you through the fourth quarter renewals; some poster-worthy motivation you could hang on your wall. However, in the accurate words of the folks at Despair.com, “If a pretty poster and a cute saying are all it takes to motivate you, you probably have a very easy job. The kind robots will be doing soon.”

Robots will not be handling an Open Enrollment Convergence anytime soon (the stress would rupture their … whatever robots rupture). New tools are on their way to help benefit brokers manage the workload. These, however, will amplify the high-touch service and expertise benefit brokers deliver, not replace agents.

Because there’s nothing easy about helping consumers find and use the health care coverage they need. Fortunately, professional benefit brokers are really good at doing just that.

This may not be a motivational statement, but it is factual.

An ACA Tweak: Miracles Happen

Just when you thought Congress and the White House were officially incapable of agreeing that the days of the week actually end with the letter “y” they come up with a surprise — a tiny sliver of light that penetrates the cynical gloom in which most Americans shroud Congress. Lawmakers today passed legislation that amends the Patient Protection and Affordable Care Act.

Yes, that’s not a misprint. Congress amended the ACA.

It wasn’t a major change, more of a tweak, but a change nonetheless. Specifically, both chambers of Congress passed the Protecting Affordable Coverage for Employees Act (H.R. 1624). The legislation allows states to set the definition of “small group” as opposed to being required to adopt the definition set in the ACA. HR 1624 is on its way to President Barack Obama’s desk for his signature. Given the strong support in Congress (it was passed by unanimous consent in the Senate) I’m optimistic the President will sign HR 1624 into law. And the President did sign HR 1624 on October 7th.  <I’ll update this post when the President acts.

What’s going on here? As far as the substance of the bill is concerned: currently, the small group market covers companies up to 50 full-time equivalents (“FTEs”). Small groups are subject to a host of requirements under the ACA concerning plan design, pricing, medical loss ratio, and more. Large groups (currently defined as companies with 51-or-more FTEs are subject to different regulations. (Full time equivalents is a measure that takes into account part-time employees when calculating a company’s size under the ACA).

On January 1, 2016 the definition of “small group” is changing to include companies with 100-or-fewer FTEs. This is going to result in substantial changes for these companies — more than a few of those changes of the unpleasant variety. Some carriers are averaging 35%-to-40% rate increases in this market segment. A company of 51-to-100 FTEs will find fewer plan options and other limitations at which they are likely to chafe.With the enactment of HR 1624, many companies will now be able to remain in the large group market. (To be fair, there’s some benefits to being considered a small group that these companies may regret missing out on, but overall most brokers I talk to report that their impacted clients would like to avoid entering the small group market).

In practice, HR 1624 doesn’t change the definition of small group under the ACA. It simply allows states to set their own definition: think of it as permitting state preemption of the federal definition.

Consequently, HR 1624 may or may not matter. States may decide to move forward with the redefinition of small group to companies with up to 100 FTEs (California is a state likely to take this position). Your state Association of Health Underwriters chapter will be a good source for learning what your state is doing.

What’s going on here politically is even more interesting. Allowing states to set their own definition of what is a small group is the kind of tweak that’s supposed to happen when Congress passes complex legislation. In the old days after passing something like the ACA, Congress and the Administration would work together to refine the law into something less burdensome and more effective. That’s what HR 1624 does, but getting it this far was no easy task. It took a bipartisan group of lawmakers in Washington (that’s a phrase becoming increasingly rare) and the urging of many business and industry groups like the National Association of Health Underwriters to push the bill over the line.

Which is why, while the substance of the law is significant, what’s most significant is that the law passed Congress at all. The current Congress is not known as a “can-do” group of folks. Getting them to agree on anything meaningful is a Herculean task. That they came together on the Affordable Care Act is newsworthy — they usually prefer to use health care reform to bludgeon one another about the head. For this Congress at this time to make any change to the ACA is remarkable.

The passage of HR 1624 is remarkable, but not unprecedented. Congress, for example, previously removed an onerous provision of the ACA that would have required businesses to issue 1099s to any vendor they spent $600 with in a year. Everyone realized that was silly and they repealed the provision. So enactment of HR 1624 is not unprecedented.

It is, however, welcome and remarkable.

 

HHS to Pay Brokers for Enrolling Consumers in Federal High Risk Pool

Should brokers be compensated for helping consumers to enroll in government programs like the Pre-Existing Condition Insurance Plan (PCIP) created by the new health care reform law? Until now, the federal government’s answer has been “no.” That changed today and a significant precedent is being set.

The National Association of Health Underwriters announced today that, beginning no later than October 1st, licensed agents and brokers will be paid a flat fee of $100 per enrolled applicant. (Payments could begin sooner if the changes to the application can be done more quickly).

This fee will only apply to the high risk pools set up by the federal government for the 23 states who declined or were unable to do so plus the District of Columbia. Many, if not most, state-run exchanges already pay brokers for assisting their citizens in enrolling in their pools. According to NAHU the average state-based fee is $85 per enrolled applicant.

In announcing the change, the Department of Health and Human Services noted the greater enrollment success achieved in states pools that compensate brokers for their work. As stated in the Department’s press release: “This step will help reach those who are eligible but un-enrolled. Several States have experimented with such payments with good success.,”

The decision to support and work with brokers is part of the Department’s efforts to increase enrollment in the PCIP high risk plans by removing administrative hurdles and lowering premiums. In fact,  in 18 of the states, premiums will be coming down as much as 40 percent according to a press release from HHS.

The PCIP was designed to provide coverage to individuals unable to obtain health insurance in the private market due to existing health conditions. 18,313 Americans have enrolled in the federal high risk pool through March 31st, a fraction of the 5 million consumers expected to enroll in the program (fraction as in “0.4%).

Progress usually comes in small steps, not giant leaps. The significance of HHS recognizing the value brokers bring to America’s health care system—and their willingness to pay for that value—should not be underestimated. For example, the House of Representatives will soon conduct a hearing on HR 1206, the legislation to remove broker compensation from the medical loss ratio calculations required by the Patient Protection and Affordable Care Act. Proponents of this law will be able to point to the recruitment efforts of HHS in support of the federal Pre-Existing Condition Insurance Plan to reinforce the need to keep brokers in their role as consumer counselors and advocates in the new health insurance world being created by the PPACA.

NAHU and other agent organizations worked hard to achieve this recognition. No doubt, however, some brokers will protest that the HHS program pays brokers only a one-time fee. This complaint is misplaced. Enrollment in the PCIP is fundamentally different than working with consumers shopping for coverage in the commercial market. The PCIP is, after all, a government health plan, more similar to Medicaid than to plans available on the open market. Further, enrollees in the high risk plan, by definition, cannot obtain traditional coverage. What’s significant is not the details of the compensation (although it is worth pointing out that HHS is setting the fee higher than the average paid by states), but the existence of compensation for enrolling Americans into a federal health plan.  When it comes to precedents, this is one that can aptly be described as “significant.”

Catching Up on Health Care Reform

Hello. It’s been awhile. Hope you’re all well. To all who have inquired, my thanks for your concern, but all’s good. Hectic, but good. Lot’s going on (more on that later) and an awful lot of travel. I’ve had a chance to meet and talk with brokers in various parts of the country, including a few places I’ve never been before or haven’t been to for years: Boise, Omaha, Denver, Nashville. It’s been a great time to learn, recharge and stay a bit too busy to write any meaningful posts. While staying busy appears to be the new constant, I’ll try to find something worthy to share on a more regular basis. For now, however, let’s play some catch-up:

We’ll start with some (relatively) good news. One of the more popular elements of the Patient Protection and Affordable Care Act is the ability for children up to age 26 to remain on their parents’ medical insurance. The Department of Health and Human Services estimated 1.2 million young adults would take advantage of this opportunity. A story at Kaiser Health News indicates the actual number may be much higher: at least 600,000 young adults have already obtained coverage under their parents’ health plans. While most of the growth has apparently been in self-insured groups, fully insured plans are experiencing the same upsurge in membership. WellPoint, for example, reports adding 280,000 young adult dependents nationwide and the federal government added a similar number (although the article didn’t state what percentage of these were in fully-insured plans).

Of course, when it comes to health care reform every silver cloud has a gray lining. The Kaiser Health News article quotes Helen Darling, CEO of the National Business Group on Health, as noting “I don’t think anyone is eager to spend more money. This is not something employers would have done on their own.” She further cites the unfairness of asking employers to cover adult children who may be employed elsewhere. And businesses (and their employees) will pay a bit more due to this expansion of coverage to young adults – about one percent more according to estimates. And while its unclear how many of these individuals would not be able to obtain coverage elsewhere, but the general thinking is that a large majority of these young adults would be uninsured or underinsured, but for this provision of the PPACA.

Next let’s pause to note how rate regulation can be big business for consumer groups. In some states, regulators must approve health plan rate increases before they take effect. In others carriers may need to file their rate changes with regulators, but so long as the rate increases are actuarially sound they move forward. California, where rate increases tend to generate national news, is in the latter camp. The state’s Insurance Commissioner, Dave Jones would like to change that. (Actually he’d like to put health insurance companies out-of-business by implementing a single-payer system, but that’s another matter). However, he and others are pushing to change that. Assembly Bill 52, authored by Assemblymen Mike Feuer and Jared Huffman. This legislation would give the Department of Insurance (which regulates insurers in the state) and the Department of Managed Care (which regulates HMOs) to reject rate or benefit changes the agencies determine to be “excessive, inadequate, or unfairly discriminatory.”

In the findings section of the bill (which are the “whereas” clauses justifying the bill), the legislation cites rising premiums and the need for the state to “have the authority to minimize families’ loss of health insurance coverage as a result of steeply rising premiums costs” are among the problems the bill is intended to address. The solution: give politicians and bureaucrats the power to reject rate increases. No need, apparently, to address the underlying cost of medical care. The assumption seems to be that the way to reduce health care spending is to clamp down on premiums. This, of course, is like saying that the way to attack rising gas prices is to limit what gas stations can charge at the pump. One might conclude that, to be charitable, the legislation is addressing only a part of the problem.

Not only does AB 52 give medical care providers a free pass, it is likely to result in a windfall for the consumers groups supporting its passage. Politico Pulse notes that AB 52 requires insurance companies to pay for costs incurred by groups representing consumers at rate hearings. For groups like Consumer Watchdog this can represent a substantial amount of income. The Politico Pulse post reports that “Under a similar California provision for property and auto insurance, Consumer Watchdog has recouped approximately $7 million in legal fees since 2003”

Then there’s the 4th Circuit Court of Appeals hearing on two Virginia law suits seeking to have the Patient Protection and Affordable Care Act declared unconstitutional. A ruling from the three judge panel is expected in July. Much has been made of the fact that two of these three Appeals Court Judges were appointed by President Barack Obama – and the third by President Bill Clinton. While those so inclined are likely to consider this a conspiracy of cable news worthy dissection ad nauseum, it’s important not to make too big a deal about this.

First, courtrooms are not like the floor of Congress: partisan leanings have far less influence there. Second, as the Associated Press article points out, there are 14 judges on the court. Which of them hear a particular appeal is randomly determined by a computer program. There’s nothing sinister about the three judges selected for these appeals being appointed by Democrats, it’s just the way things turned out. No black helicopters are involved. Third, whatever this panel decides will be appealed by whichever side loses. The appeal could go to a hearing before all 14 Appeals Judges in the 4th Circuit or it could go straight to the Supreme Court. Finally, even if the appeals remain at the circuit level for another round, the final decision will be made by the Supreme Court. Everything going on in the lower courts (and there’s a lot of other suits out there needing to go through their appropriate Circuit Courts), is simply prelude. Yes, what the appeals court decide influences the Supreme Court Justices, but in a matter of this magnitude, far less than one might imagine. What happens at the District and Circuit levels is not unimportant, but it’s far from definitive.

While we’re playing catch-up: my previous post noted that Congress was likely to repeal the 1099 provision in the health care reform law. They did and the President Obama signed the law removing the tax reporting requirement from the PPACA. The PPACA no longer impacts 1099 reporting. I know you already knew that, but I wanted to close the loop on this issue. It’s now closed – and repealed.

Finally, a note about broker commissions and the medical loss ratio calculations required by the health care reform law. Where we last left our heroes, the National Association of Insurance Commissioners was debating whether to endorse bi-partisan legislation (HR 1206) that would remove broker compensation from the MLR formula used to determine a health plan’s spending on claims and health quality initiatives. The NAIC task force dealing with this issue wants time to review data being pulled together by the National Association of Health Underwriters, carrier filings and elsewhere.  Pulling together all this information, much of which has never been gathered before and is not maintained in a centralized data base, took a bit longer than initially anticipated. According to Politico Pulse, however,  the task force no”now believes it has all the data it will be able to get.” Which means the task force’s final report on broker commissions and the MLR calculation is now expected by May 27th.

Stay tuned.

And thanks again for staying tuned to this blog.  I look forward to continuing the dialogue with all of you.

NAIC to Study MLR Impact on Compensation and Consumers Before Voting on Changes

Brokers holding their breath to see if their compensation will be removed from the medical loss ratio formula required by the Patient Protection and Affordable Care Act will be turning a darker shade of blue. The hoped for support from the National Association of Insurance Commissioners, which was expected to result from a meeting of the NAIC’s Professional Health Insurance Advisors Task Force this past Sunday, has been delayed at least four weeks.

While there was widespread and strong support for removing independent broker compensation from the formula carriers are used to calculate their medical loss ratio under the PPACA, the Task Force opted to ask their staff to provide additional data before making a decision.

While disappointing the delay is not really surprising. A substantial of the commissioners are new, having just been elected or appointed as a result of the November 2010 election. As Jessica Waltman at the National Association of Health Underwriters put it in a message to NAHU’s leadership, “[I]t was clear as soon as we arrived in Austin that some of the new Commissioners (and there are quite a few of them) had reservations about moving that quickly since this is their first meeting…. some of the more senior Commissioners were very sympathetic to their concerns about rushing things through. The NAIC almost never endorses legislation, so this is a huge deal for them.“

In addition, the issue is controversial. Consumer groups and some liberal Democratic Senators have voiced opposition to changing the MLR formula.

The Agent-Broker Alliance leading the charge for this change to the health care reform law met with several supportive commissioners and the decision was made to delay the vote. This would allow time for information relevant to the issue, already requested of carriers, to be received and considered. This time will also be used by the Agent-Broker Alliance to gather and submit data on how independent brokers are able to save clients money and the post-sale service brokers provide their clients.

Most observers I talk with are optimistic the NAIC will eventually endorse this change in spite of hesitancy from some liberal commissioners. In this regard, Politico Pulse is reporting that “Liberal insurance commissioners got a little feisty (well, for insurance commissioners) … pushing back against the speedy, one-month time line for” considering the broker compensation exemption proposal. Politico quotes California Insurance Commissioner Dave Jones as saying “I’d hate to see haste impede us having the information in front of us to make a relevant decision.” And Washington state’s insurance commissioner Mike Kreidler as declaring “I hope what we produce as a work product we can stand behind and that we’re more interested in accuracy than speed.”

When politicians speak of the need to “study” and “consider” an issue it means 1) they sincerely want to learn more about the topic or 2) they want to defeat the proposal without having to go on the record voting against it. While I hope I’m wrong, given the opposition to the exemption from liberal consumer groups, I’m betting on the latter motivation in this case. (Time will tell as I’m inclined to believe the data will be very supportive of moving forward with the exemption). That the NAIC went ahead with just a four week delay in spite of calls from Commissioners Jones and Kreidler to slow down is a sign that while there will be debate, there’s a better than even chance the NAIC will indeed support legislation to make changes to the medical loss ratio provisions of the PPACA.

Ultimately whether broker compensation is included in medical loss ratio calculations will be determined by Congress and President Barack Obama – which means nothing is certain. While I believe taking this action furthers the intent and purpose of the health care reform bill, the proposal will not enjoy smooth and speedy sailing. The bipartisan legislation introduced by Representatives Mike Rogers and John Barrow, HR 1206, has been referred to the House Energy and Commerce Committee, but no date for a hearing has yet been set.

That the idea is still alive, however, is both remarkable and encouraging. But it’s still too early to start breathing again quite yet.

Broker Testimony Before NAIC Concerning MLR and Commissions

The National Association of Insurance Commissioners will be meeting in Austin, Texas this week to consider a number of issues related to the Patient Protection and Affordable Care Act. One topic will be how the medical loss ratio provisions of the health care reform bill impacts brokers and consumers. A coalition of broker organizations will be testifying this Sunday urging the NAIC to move forward with a proposal to exempt producer compensation from the MLR calculation.

The MLR targets (individual and small group carriers must spend 80% of premiums received on claims or health quality efforts; large group carriers must spend 85%) is a critical part of the PPACA’s scheme to “bend the cost curve” when it comes to premiums (never mind that the biggest driver of premium rates is the cost of medical care). Limiting the amount of premium dollars insurers can devote to administration and profit, supporters believe, will result in reduced insurance rates. Also, since the PPACA requires all consumers to obtain health insurance coverage the medical loss ratio rules are designed to prevent carriers from gaining an undeserved financial windfall.

Significantly, exempting broker commissions does not run contrary to either purpose. The legislation being considered by the NAIC will still limit the percentage of premiums carriers can spend on administration and profit – and to a greater degree than most state measures addressing MLR targets do today. In addition, carriers will still need to aware of the total cost of their policies – including broker compensation. From a consumer’s point of view, the total cost of coverage will be the carrier’s premium and the broker’s commission. Carriers will be unwilling to go to market with a total cost that is uncompetitive because of overly generous broker commissions. This is one, but not the only reason, broker commissions are unlikely to return to where they were before the passage of the PPACA even if broker compensation is removed from the MLR formula. That broker commissions should increase at the rate of medical inflation, as opposed to general inflation, for example, is hard to justify when medical inflation is increasing at twice the rate of increases to the Consumer Price Index. But this change will — and should — be driven by market forces, not arbitrary limits set by Congress.

The NAIC proposal is also consistent with the purpose of the PPACA’s approach to MLRs because, as I wrote last summer, exempting commissions from the medical loss ratio may actually reduce overall administrative costs in the system. Carriers today aggregate broker compensation from small groups and individuals then pass 100 percent of these dollars onto independent third parties, retaining none of it for themselves. This reduces paperwork costs for hundreds of thousands of brokers, businesses and families and is a cost-saving measure that should be encouraged by the PPACA.

Not everyone sees it this way, of course. The American Medical Association, consumer groups and some Democratic legislators have urged the NAIC to keep the medical loss ratio calculation put in place by the Department of Health and Human Services (with input from the NAIC) as is. On the other hand, a bipartisan group in the House of Representatives has introduced HR 1206 to remove broker compensation from the formula used to determine a carrier’s MLR.

The broker coalition, comprised of the National Association of Health Underwriters, the National Association of Insurance and Financial Advisors, the Council of Insurance Agents & Brokers, and the Independent Insurance Agents and Brokers of America, was asked by the NAIC to present their views at Sunday’s hearing on the NAIC medical loss ratio proposal. Significantly, they were told there was no need to talk about the value brokers add to America’s health insurance system – this value was already recognized and appreciated by the Insurance Commissioners. Instead they were asked to focus on the economic impact of the MLR provisions as currently being implemented.

In a letter to NAIC from the Agent-Broker Alliance reports on a study that shows 25 percent of brokers surveyed are reporting business income reductions for individual and small group sales of 21-to-50 percent with another 25 percent describing losses at between 11 and 20 percent. The result is that brokers are leaving these markets, reducing the availability of their expertise to consumers just when the complexity of health care reform makes this expertise more critical than ever.

Past NAHU president Beth Ashmore will be providing testimony at the Sunday NAIC hearing. As a long-time Texas broker she will be able to provide Commissioners with a glimpse into how the “theory” of the PPACA is revealing itself in practical terms.

The NAIC has no vote in Congress, but they do have significant influence, especially to the extent the NAIC vote in favor of changing the MLR calculation is bipartisan. If they support exempting broker commissions it will give considerable momentum to efforts bills such as HR 1206. The legislative process takes time so there will be no quick fix. The key is to keep initiatives moving forward down the path. The NAIC meeting is a milestone along the way.

NAHU’s Legislative Influence in Context

This blog attempts to addresses health care reform issues of interest not just to brokers, but to a broader audience as well. This post, however, is aimed at brokers only.

Most brokers are disappointed with the Patient Protection and Affordable Care Act. The list of complaints are long, but would include the impact of the medical loss ratio provisions on their livelihood, the failure to deal with rising medical care costs, and a host of issues related to the exchanges.

Brokers fought hard to make health care reform meaningful, to assure it constrained costs and increased access. On some issues we succeeded. On too many we lost.

Brokers are angry with the result and, understandably, are looking to understand the cause. Sometimes its not enough to identify who won. Blame needs to be apportioned. And a surprising number of brokers, albeit a distinct minority, are blaming their own professional association, the National Association of Health Underwriters.

NAHU can defend itself from the specific charges being leveled (and I invite them to do so here on the blog). But if we’re going to spend time on a discussion of what NAHU could and couldn’t accomplished, then let’s have an informed discussion.

For example, I often hear brokers demand that NAHU educate Americans concerning the value of brokers. Ironically, this is a job each and every broker can do simply by doing their jobs in a professional, effective and visible way. But the context that’s missing from this criticism is the enormous cost such an undertaking would involve.

Then there’s the political battles. NAHU is apparently expected to win them all. But here’s a a quick quiz to explain why this might be harder than some believe. In considering your answers, it might be helpful to remember the adage of then-California Assembly Speaker Jesse Unruh that money is the mother’s milk of politics:

Given a political fight, who is more likely to be heard in Congress, Association A spending over $144 million on lobbying or Association B with a total budget – for everything it does – of less than $6 million?

Who is more likely to win a legislative battle, Association B with it’s $6 billion total spending budget or Association C with a mere $22 million lobbying payout?

Would it change your mind if Association B had a Political Action Committee with roughly $300,000 versus Association C’s contribution to federal candidates totaling more than $17 million?

When it comes to influencing Congress, the US Chamber of Commerce is the king of the hill. The Chamber spent over $144 million on lobbying activities in 2009 and another $132 million in 2010. No one else came anywhere close.

With over 225,000 dues-paying members, the American Medical Association is both a grassroots and a financial power. The AMA contributed over $27 million to federal candidates in the 2010 election cycle and spent $22.5 million on lobbying.

NAHU is the one with the $6 million budget (which also covers member educational activities and the like) and the PAC contributions totaling in the low hundreds-of-thousands-of-dollars.

Some other interesting numbers:

The Service Employees International Union spent over $1.7 million on campaign contributions in the 2010 campaign cycle, down from over $2.8 million for the 2008 election.

In the 2008 election cycle alone, the pharmaceutical industry contributed over $26 million to federal candidates.

Of the top spending lobbying efforts in 2009 according to OpenSecrets.org:

  • #1, as noted, was the Chamber of Commerce at $144.5 million
  • #4 was the Pharmaceutical Research and Manufacturers of America at $26.1 million
  • #5 was Pfizer Inc. at $25.8 million
  • $6 was the Blue Cross Blue Shield Association at $23.6 million
  • #7 was AARP at $21 million
  • #9 was the AMA at $20.7 million
  • #12 was the American Hospital Association at $18.3 million.

You get the idea.

The ability of these organizations to devote these resources to advocating for their members is because those members provide them the resources to do so. What resources NAHU has comes from the same source.

NAHU will never be in the league of $20 million lobbyists. Nor does it need to be. NAHU’s influence is far greater than its lobbying expenditures or the size of its PAC would suggest. It may not have the tens-of-millions of dollars necessary to run a national public education campaign, but it has educated lawmakers and regulators about the role of brokers. We did not win the fight on the medical loss ratio, but that battle continues and the loss would have been harsher, but for NAHU.

There are probably more than 100,000 brokers in this country who earn significant revenue from the sale and service of health insurance. Fewer than 25,000 are members of NAHU. That is a travesty, especially since many of the organization’s most vocal critics are numbered among those contributing nothing to the effort. Standing on the sidelines and criticizing is easy, often unhelpful, but easy.

So here’s the context: NAHU’s size is small relative to many of the other players. And here’s the reality: NAHU’s influence is much larger than its size. NAHU’s done much with relatively little. It could do more with more – more members, more revenue, more PAC contributions.

Asking tough questions of the association’s leadership is appropriate and helpful. If your not a member, letting the organization know why, in a professional manner, can be very helpful feedback. Seeking changes to its direction is the right of any member – non-members deserve and get no voice in determining the organization’s future.

So I am not suggesting in any way that criticism of NAHU is wrong. But to be constructive, the complaints need to understand the scale and scope of the political context in which NAHU operates.

HHS Certifies MLR Rules Lack Commission Relief

The Department of Health and Human Services certified the rules surrounding the calculation medical loss ratios carriers will need to meet beginning in 2011. For the past few months there had been considerable concern expressed by state Insurance Commissioners, the National Association of Health Underwriters and other agent organizations, about the negative impact the MLR provisions of the Patient Protection and Affordable Care Act would have on broker commissions and, consequently, on consumers.

While the Department had engaged in considerable discussion on how to handle this, the medical loss ratio regulations HHS promulgated today does little to resolve the issue. Yes, they leave the door open for addressing the reality that the treatment of commissions under the MLR rules could “disrupt” the market, but they had the chance to do a lot more.

In future posts I’ll address the impact of this result, but for now, so readers know what happened, here is NAHU’s report on the HHS certification of the medical loss ratio rules.

(By the way, brokers reading this who are not members of NAHU should be ashamed. The most important legislation of your career is being reviewed, refined and revised. No organization speaks more loudly or effectively on behalf of brokers than NAHU. You owe it your clients, your profession and to yourself to support those efforts by joining NAHU today).

This morning, the Department of Health and Human Services issued interim final rules on the MLR provisions in PPACA. The rules include agent and broker commissions as part of the non-claims costs in the MLR calculation and does not allow for any portion of the agent and broker commissions to be considered a passed-through expense and excluded from the MLR calculation. NAHU is extremely disappointed in this result because, in our meetings with HHS, the White House and state insurance commissioners on this issue, all repeatedly acknowledged the potentially negative impact of the MLR calculation could have on agents and brokers as well as consumers’ access to affordable health plans.

However, the regulation does permit states to seek waivers from the MLR requirements, including the possibility of seeking a waiver to have agent and broker commissions taken out of the denominator of the MLR calculation for policies sold in that state. The regulation specifically states that the impact of the MLR standard on agents and brokers will be a factor in considering whether a particular individual market would be destabilized. Furthermore, the regulation establishes a process by which stakeholders will have input on the waiver decision-making process and specifically included agents and brokers among the stakeholder groups that must be included.

The interim rule is effective on January 1, 2011, but HHS is actively seeking comments on the regulation and will issue further guidance and a final rule later this year. HHS specifically requested comments on how this interim rule will impact agent and broker compensation and how that may lead to marketplace disruption, and NAHU will be submitting detailed comments on behalf of its members on this critical issue.

Over the next few weeks, NAHU will also be coordinating with the leadership of each state chapter and insurance commissioners in each state to encourage their participation in the medical loss ratio waiver process. We expect that many state insurance commissioners will wish to submit waiver applications based on the impact the MLR rules may have on broker compensation and individual and small-group market competition in their states. The states of Georgia, Iowa, Maine and South Carolina have already indicated to HHS their intent to do so, and Florida and West Virginia have indicated publicly that they are in the process of considering moving forward with a waiver application. NAHU expects that many more states will follow suit once they have finished analyzing the impact the 308-page MLR regulation will have on them.

Finally, NAHU has been working with a bipartisan group of lawmakers for the past few months on federal legislation to exempt agent and broker commissions from the MLR calculation. The regulation delays the time that MLR rebate payments must be made to policyholders until August 2012, providing some time for a legislative solution to be enacted. Pursuing a legislative strategy to permanently solve this problem will be NAHU’s top goal with the 112th Congress.

Commission Exemption Not in NAIC’s MLR Rules, But Issue is Still Open

The National Association of Insurance Commissioners approved rules defining how carriers will calculate their medical loss ratios as is required by the Patient Protection and Affordable Care Act. The NAIC’s proposal will now be considered by the Department of Health and Human Services which is expected to finish its review of the regulations in a few weeks. Which is a good thing considering the PPACA requires carrier to begin meeting the medical loss ratio targets established by the health care reform law (80 percent for individual and small group plans; 85 percent on coverage for groups of 100+) beginning January 1, 2011.

In approving the MLR regulations the NAIC rejected or tabled amendments put forward by insurers and brokers. One change some insurers sought was to allow carriers to calculate their medical loss ratios based on national business (the Commissioners are requiring the calculations to be based on a state-by-state spending). Another would change the “credibility adjustment” formula used in the calculation.  Apparently this would have made it easier for smaller carriers to meet the MLR target.

The amendment put forward by brokers to exclude commissions from medical loss ratio calculations was withdrawn and the issue was referred to a working group of the NAIC’s executive committee. While some interpret this as ending the issue, that is far from clear.

The National Association of Health Underwriters along with the National Association of Insurance and Financial Planners and the Independent Insurance Agents and Brokers of America were the advocates of the broker commission amendment. I attended a conference today at which NAHU’s CEO, Janet Trautwein spoke. I’ll do my best to summarize my understanding of the situation based on her talk bolstered with reporting by National Underwriter.

Apparently there were enough votes among Commissioners to pass the broker commission amendment. However, NAIC lawyers questioned the authority of the organization to promulgate such a rule and warned that it conflicted with other proposals submitted to HHS by the NAIC. This led to a concern that including the broker commission exemption would lead to HHS rejecting the NAIC rules altogether. At the very least, HHS was likely to strike the commission exemption.

To avoid this result  a compromise was brokered between HHS staff and supportive Insurance Commissioners. A joint NAIC executive committee/HHS working group will be created to address broker compensation and the medical loss ratio provisions of the health care reform law. The MLR amendment advocated by the agent associations will be the “starting point” for the working group’s deliberations. Aware of the need to resolve this issue quickly, the NAIC committed to convening the working group immediately (which, I assume, means in in a few weeks). The goal of the commissioners supporting this approach is to work with HHS to fashion a regulatory solution that ensures equitable compensation for brokers.

Ms. Trautwein noted the possibility that the working group approach could result in a better outcome for all parties (regulators, carriers and brokers) than if the amendment had been adopted by the NAIC. This would certainly be the case if exempting commissions was deemed, as the NAIC lawyers warned, to exceed the NAIC’s authority.

NAHU and its allies have certainly built a great deal of political support among Insurance Commissioners (both Democrats and Republicans) behind the need to preserve a role for professional brokers in the new health care reform system being created as a result of passage of the PPACA. They recognize the value brokers bring to the products they sell and, as importantly, service well beyond the initial purchase. They also recognize the heavy service load underfunded and ill-prepared state agencies would need to take on if producers are removed from the health insurance marketplace.

There are some, including commentators on this blog, who believe without the commission exemption brokers will be put out of business. I disagree and will explain why in a future post. What’s significant to note now is that the treatment of broker compensation under health care reform has yet to been finally resolved. And there are individuals of good faith from both parties seeking a workable solution. That doesn’t guarantee a positive result, but it certainly creates the possibility for one.

Commissions: In or Out of MLR Calculation?

The National Association of Insurance Commissioners is meeting with the intent of finalizing rules surrounding the medical loss ration requirements contained in the Patient Protection and Affordable Care Act. The impact of their decision will be profound on consumers, employers, carriers and brokers. A final vote is scheduled for tomorrow (October 21st) by the full membership on the rules – and on amendments to those rules – which have been worked on for hundreds of hours by NAIC committees. Whatever emerges from the NAIC plenary session will be forwarded on to the Department of Health and Human Services. The Department may make amendments to the NAIC proposal, but The Hill has reported that HHS is reluctant to “override” the commissioners on NAIC medical loss ratio rules.

What this means is that a lot of issues surrounding the MLR provisions of the new health care reform law – provisions which take effect on January 1, 2011 – will come into clearer focus tomorrow. Again, HHS may still modify these rules, so these won’t be the final rules. And states are given some flexibility in applying the medical loss ratio regulations on carriers doing business within their boundaries, but there will be far greater clarity tomorrow than there is today.

Some of the issues being hashed out are esoteric (not to actuaries, but to the rest of us). But one issue that is of great concern to brokers is how commissions will be used in calculating a carrier’s MLR. As noted previously in this blog, the National Association of Health Underwriters and other agent organizations have been working hard to have broker commissions be removed from the medical loss ratio formula. The logic behind this is that carriers collect broker commissions as an administrative convenience to producers and their clients, passing 100% of these dollars along to independent third-parties. The carriers receive no benefit from this process, but the cost to brokers and policy holders, in the aggregate, is greatly reduced, lowering overall administrative costs.

Exempting this pass-through of commissions from the medical loss ratio calculations is not currently a part of the NAIC MLR regulations. However, I’ve been told that at least 10 Insurance Commissioners are co-sponsoring an amendment to create this pass-through exemption in the rules sent to Health and Human Services. And supporters believe they are closing in on the majority of the Commissioners needed to adopt this amendment.

Politico is reporting on the upcoming commission amendment, too. They note that “This could be a tough one for many commissioners who say that if agents/brokers go out of business – because their commissions would decrease – they’re going to get flooded with consumer inquiries and requests for help.”

Inclusion of the pass-through provision in the NAIC’s medical loss ratio rules would certainly decrease the pressure on carriers to dramatically reduce commissions. However, pressure on commissions will still continue. Tying broker commissions to a percentage of premium – premiums that increase based on medical cost inflation, not general inflation – is still likely to fall as carriers’ commission systems are refined to accommodate different calculations. And broker commissions will need to be disclosed to employers and consumers (carriers will need to separate broker fees from premium). In some states this is likely to result in downward pressure on commissions. And the guarantee issue provisions taking effect in 2014 will also tend to lead to lower commissions. On the positive side, the Insurance Commissioners’ recognition that brokers play an important role after the sale in counseling and advocating for their clients will tend to assure that brokers are compensated fairly.

Of course, all of this is moot unless the NAIC approves the amendment, HHS concurs with this provision and states don’t enact laws or regulations that run counter to it. We’re about to get some clarity. Certainty, however, is still to come.