The first victims of Democrat health care monstrosity
As Democrats on the campaign trail do their best to drum up support for health care reform by touting the benefits that take effect this year, it's easy to forget that the full thrust of the Patient Protection and Affordable Care Act doesn't kick in until 2014. But by then, a few major players in the health care industry might have already experienced a real downside of the massive overhaul, so much so that they may no longer exist.Agents are just the first to feel the pain of the health care law, but the uncertainties caused by the law are effecting economic decisions up and down the chain of suppliers and providers of health care and the insurance that pays for much of it. It has already become clear that the savings the Democrats promised is not going to happen. Things will get worse as the control freak aspects of the law go into effect.
Insurance agents and brokers and small insurance companies are among those who may have to scramble to stay afloat over the next few years. This is partly by design and partly an unintended consequence of a new law that is so sweeping, it will affect nearly every corner of an industry that accounts for one-sixth of the U.S. economy. (See the top 10 health care reform ads.)
Agents and brokers are so concerned they will be viewed as redundant under the new law that they successfully lobbied to get state insurance commissioners to publicly acknowledge their importance. At a meeting of the powerful National Association of Insurance Commissioners (NAIC) last week in Seattle, 25 commissioners sponsored a resolution stating that implementation of health reform should "recognize and protect the indispensable role that licensed insurance professionals play in serving consumers." (Comment on this story.)
The resolution was passed just as the NAIC was debating a much-anticipated set of recommendations on how insurance companies should calculate their medical and administrative expenses, known as medical loss ratios. Under the Affordable Care Act, beginning in January, plans sold to individuals and small groups must spend 80% of premiums on actual medical care (as opposed to administrative costs); the figure is 85% for large group plans. Plans that spend less will be required to send rebates to customers. The NAIC counted agent and broker commissions, which can make up 5% to 20% of premiums, in the administrative category. Most experts, therefore, predict these commissions will be on the chopping block as insurers scale back administrative expenses to comply with the new rules. (See the top 10 players in health care reform.)
Agents and brokers are also worried about the future for another reason: a vital part of their current role, sales and marketing, could be made redundant thanks to the new state insurance exchanges that will go online by 2014. These Web-accessible marketplaces will be where individuals and small groups go to purchase insurance. In addition to listing plans available by location, the exchanges will post quality and price information and administer federal subsidies for those who qualify, making it easier for individuals and small-business owners to compare plans and choose the options that best suit their needs.