Insurance Commissioners got you a turkey for Thanksgiving

Unless you are an insurance commissioner or an insurance industry lobbyist you probably don’t think much about the National Association of Insurance Commissioners (NAIC). The NAIC is a national professional organization of state insurance commissioners. While the NAIC has always enjoyed some power and prestige its importance was elevated by the passage of national health reform.

One would imagine that this group would be sympathetic to consumers. It is, after all, an organization of insurance regulators. But a key NAIC vote last week revealed otherwise.

For more background on the vote see this News & Observer editorial by Consumer Reports President Jim Guest. In short, the Affordable Care Act created a new rule that insurance companies must start spending a minimum amount of each premium dollar on health care. This rule means that in the future insurers will spend more on your medical treatments and less on executive pay, trips to Cabo, fancy new buildings, and agent commissions. It turns out (surprise!) that agents don’t like the idea of insurance companies spending less on commissions.

So insurance agents are trying to effectively reclassify commissions as medical care or quality improvement. Last week the NAIC took up the issue and voted on a resolution urging Congress and Health & Human Services to weaken health reform and suspend or delay implementation of the new rules.

Sadly, North Carolina Insurance Commissioner Wayne Goodwin made the motion for the resolution and voted in favor of this ill conceived recommendation.

Commissioner Goodwin tried to construct an argument from twigs and twine to support his vote but his logic falls apart with a little poking. For example, Goodwin says he is concerned that if commissions are cut then some agents could go out of business. This would hurt consumer access to agents, he claims. How did he reach that conclusion? He asked insurance agents whether or not consumer access would suffer if their commissions were cut. Interesting methodology.

A different approach would be to ask consumers whether or not they are having trouble finding an agent or broker. Goodwin could carefully monitor responses over time to see if NAIC action is warranted.

His second major contention is that agents run businesses and he doesn’t want them to lose those businesses. I can appreciate that argument but I have trouble seeing why consumers should have to subsidize this business through higher premiums. For many years the NC General Assembly made a similar argument to explain why we shouldn’t work too hard to cut drug prices. Drug companies, after all, provide jobs in the state. True enough, but that doesn’t mean that people should suffer and get squeezed out of the market to ensure drug industry profits. As one broker who supports health reform told me, agents and brokers need to innovate.

The NAIC could have monitored commissions and surveyed families and small businesses to gauge their level of access to brokers. NAIC could have made any number of recommendations to accommodate agents without chipping away at health reform. Instead, under intense political pressure from brokers and agents, they voted to pass a one-sided resolution. Thankfully, it does not have the force of law. But if the symbolic vote weren’t important then agents would not have poured so much effort into getting it passed.

In North Carolina, I hope this is not the start of a troubling trend for the Department of Insurance. Commissioner Goodwin generally stands on the side of consumers. Not this time. Let’s work to make sure this was an aberration for the insurance commissioner and not a change in direction.

Comments

The whole industry seems like a cesspool

And Wayne's explanation, as far as it goes, is absurd. What's up with that, Commissioner Goodwin? If you're going to choose sides in the Great Healthcare Debate, maybe the "consumer side" would be a safer bet. After all, you do work for us, right?

Just saying.

Goodwin

I will note that he says good things about health reform, unlike many other elected officials. But this was a disturbing departure from an admirable record.

Called Goodwin to ask to oppose this change; he did not reply

I got an email while Goodwin was in Maryland for the National meeting of the insurance commissioners. I called him at his hotel, but he had already checked out and left town. When I emailed him to ask his position and ask him to oppose this change, I got no reply.

I, too, am disappointed in his decision, and I think it was very short-sighted. I am a former licensed insurance agent in NC. I understand what is involved here. I would have liked an opportunity to present my arguments, at the very least.

Of course, if we had "medicare for all" (single payer system of health care), we would not have these constant problems in legislation on the issue.

Martha Brock

Goodwin

has been a long-time community member here at BlueNC ... and has regularly used his blog here to explain various choices or ask for input. I'm hoping he'll do the same for this issue. It's hard to imagine how he could defend this action, but I'd like to see him make the effort.

Commissioners - Turkey & Thanksgiving

I have read with interest the comments made by AdamL and others regarding the recent NAIC passage of a Resolution to remove agent/broker commissions from the Medical Loss Ratio calculation and believe that you misunderstand Commissioner Goodwin's position and why he took it, as well as the unintended consequences of this portion of the MLR rule.

Commissioner Goodwin's administration has saved more than $1 Billion for consumers and has no plans to stop. Also, you need to understand ,that by statute he is required to strike a delicate balance to protect consumers, ensure consumer access to insurance, and to ensure a solvent, competitive market and in my opinion has fullfilled his duties in this case.

Many supporting the existing MLR rule contend that removing agent compensation from the equation will cost consumers billions of dollars in rebates from insurance companies. These interests fail to account for the valuable services agents and brokers provide, which are being lost because of the MLR provision. If an auto manufacturer offers a rebate on a car, consumers would obviously expect to receive the same vehicle they would have gotten had there been no rebate, not one with faulty steering and no brakes. The fact that consumers could receive rebates does not make up for the fact that they may no longer be able to count on insurance professionals to help them choose their coverage, enroll employees, help with claims and other problems, and provide vital human resources functions. Also, as insurance companies abandon markets or scale back their product offerings, consumers will no longer have access to the same coverages or plans as in the past. These MLR advocates also fail to account for premium increases that may be driven by the MLR rule. They ignore the fact that without agents to help consumers get proper coverage, sort out claims, and fix other problems,
people are likely to spend much more of their own time on these tasks or, in some cases, give in and pay for claims errors that their insurance should cover.

The Department of Health and Human Services recognizes that the MLR provision can disrupt insurance markets and harm consumers. That is why HHS has granted MLR rule waivers to five states. Maine was the firstto obtain a waiver following an arduous six-month application and review process. Several other states received waivers only after HHS significantly modified their requests. To date, seven other states have applied for relief, and one of those, North Dakota, has had its request denied. The waiver process is an imperfect solution. First, it requires states to spend scarce resources to argue their cases to HHS officials in Washington. Then, the waivers, if they are granted, offer only partial relief. They are temporary and cover only some segments of the health insurance market.
Fortunately, there is a simple way to fix the MLR problem once and for all.

Under current law, some costs, including federal and state taxes, count as “pass-throughs” for the MLR equation. They do not count on either the medical/quality side or the administrative/profits side. It makes perfect sense to count agent compensation, which pays for so much more than simply selling and administering policies, the same way.
Some members of Congress have taken notice. Sen. Mary Landrieu (D-La.)wrote HHS Secretary Kathleen Sebelius urging the agency to “delay the inclusion of agent compensation in the calculation of the MLR” and offering to work on an “appropriate legislative solution” to fix the MLR permanently. Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.) have proposed
bipartisan legislation (HR 1206) that would exclude agent commissions from the MLR calculation. The bill has more than 100 cosponsors in the House of Representatives, agent groups have encouraged members of the Senate to introduce a companion bill. An
influential group of state lawmakers, the National Conference of Insurance Legislators (NCOIL), passed a formal resolution urging Congress to enact the Rogers-Barrow legislation and calling on state governors, insurance commissioners and legislators to contact their congressional delegations on behalf of the bill.

Of course, congressional action would not be necessary if HHS would simply reconsider the MLR rule. Nothing in the PPACA says agent compensation must be included in the MLR. Now that so many unintended consequences have come to light, HHS could and should revise the rule to treat agent compensation as a pass-through.

Even President Obama has acknowledged that parts of the national health care law are flawed. In his State of the Union he said “anything can be improved.” It’s time for government, whether it be elected members of
Congress or officials at HHS, to step up and fix the broken MLR rule. Brokers and their staffs are losing their jobs. Consumers already have fewer health care choices and are losing access to quality customer service.

I cannot imagine what the damage has been to agents nationwide. We’ve lost valuable people because of this misunderstood – and maybe well-intentioned – action on MLRs. It will take us a long time to get back to where we were service-wise. But fixing the MLR rule is an important first step.

I would be happy to provide more infromation to anyone that is truly trying to understand the full impact of PPACA and in particular the MLR rule that on the surface some believe restrains insurance companies from overcharging for insurance coverage to pad their profits, when in fact the subject is far more complicated than that. Our REAL problem is the cost of HEALTH CARE in this country, not how we finance it, whether through private industry or through the government through mine and your taxes.

Good information, but...

I'm having a little trouble wrapping my mind around this:

An influential group of state lawmakers, the National Conference of Insurance Legislators (NCOIL), passed a formal resolution urging Congress to enact the Rogers-Barrow legislation and calling on state governors, insurance commissioners and legislators to contact their congressional delegations on behalf of the bill.

These are (state-level) elected officials who are also employed in the insurance industry, and they are basically lobbying the U.S. Congress on behalf of their (private) employers. And they're using their status as Legislators to give that lobbying more clout.

The potential conflicts of interest in this formula are astounding, and it demonstrates (to me, anyway) just how far we've slipped into corporatocracy in this country. And what's even scarier: You (and many others) probably think I'm a radical for making that observation.

More about Commissioners and turkey

scharrison, you are not radical for taking that position, but would say your perception is wrong as to " These are (state-level) elected officials who are also employed in the insurance industry".

Most of these legislators have tried to educate themselves on the issue based on their own research and help from outside sources with various ponts of view and have come to their own conclusions.

I have had contact with many elected officals in NC and across the country and find that for the most part they are independent thinkers not easily influenced by one position or another unless it is in the best interest of their constituents.

None of us should be judged as radical about the positions we take based on the information we have to formulate that position or opinion. It is important, however, to make sure we fully understand the issues before we take a position.

Let me repeat myself: Medicare for ALL

Shared with me by a friend in Forsyth County:

Subject: A Letter to the Editor by a respected physician
Printed in the Journal November 23, 2011

Medicare for all

I agree with many who believe that Obamacare is not ideal for this nation. Instead, Medicare for all is the best and least expensive way of providing health care to all Americans. CEOs of private insurance companies are paid millions of dollars. The CEO of United Healthcare, which AARP recommends, took home $106 million last year.

The less fortunate receive $3 million to $50 million a year. The more they make, the more they want, and these are people who in no way participate in the treatment of any patient.

As for those who do treat the sick, extra personnel is always needed in doctors' offices and hospitals in order to handle the complicated and divergent systems of the various insurance companies, an administrative expense that contributes to the rising cost of health care. Administrative costs for Medicare are around 3 percent; for private insurance companies, 17 percent.

Medicare premiums increased by 400 percent from 1969 to 2009; private health-insurance premiums rose 700 percent in the same period. It is predicted premiums will increase 8.5 percent in 2012, and large and mid-sized businesses may be given the option to stop contributing to the cost of employee's insurance.

The label of "socialized medicine" is the source of hysterical reactions, fueled by millions donations from large corporations that benefit richly from the current system. Fifty million Americans don't have health insurance. Medicare for all is the only structure that will help all Americans, and will also decrease the cost of health care.

DR. ERNESTO DE LA TORRE

Lewisville

Martha Brock

mbrock has it right here

Ask Medicare recipients how they like their coverage. The vast majority will tell you that it is wonderful. Instead of what is coined "Obamacare", this should have been what was proposed and ultimately passed. There are many government programs that aren't run well. Medicare, by and large, isn't one of them. It is efficient and serves the tens of millions of recipients well.

I wonder just how many people would have been on board with including all citizens in America into the Medicare system. I guess it is too late to make that happen now, which is a shame.

I must rise to defend Wayne

I must rise to defend Wayne in this…

The vote on excluding broker commissions is NOT a anti-consumer move. If anything, it is a pro-consumer move. Today, the vast majority of health insurance purchased in North Carolina is through the services of agents. Agents who are licensed and regulated by the Department.

The people I know who work as agents, brokers and consultants for health insurance in North Carolina are almost universally a well-educated and active group of professionals. They work with the individual who walks in their door to buy an personal policy for health insurance all the way up to helping large international companies to provide for their employees the best benefits for the best price.

The perception that they are working FOR the insurance company is simply wrong. From personal experience, I have seen agents fight tooth and nail to get someone insured, and to get the right rate for an employer who they knew was getting screwed by the system. I know agents who repeatedly walk someone all the way through the process of underwriting for an individual health insurance product, only to get their application declined by the carrier for coverage. But then those same folks walk the individual through the hurdles of obtaining coverage through the High Risk Pool options.

Agents for most small businesses are more than just their health insurance agent. They become their de facto benefits department and provide all manner of HR support. With so many new requirements on employers related to health insurance, agents are also becoming the compliance experts for their clients.

The services that agents provide are almost always paid through commissions. And those commissions have dropped pretty dramatically in the last five years. In the past, agents were paid a percentage of the premium — which most felt uncomfortable about because it created for some the wrong incentive… a rich plan meant more commissions. Now nearly every carrier pays its agents a flat per-employee per month fee that varies almost exclusively on the size of the employer.

But what has happened for the smallest businesses has been the most dramatic. In the past, an employer with four employees would have earned for that agent approximately $1,800 a year in commissions. However over the past two years, that has been dramatically cut so that now that same group will earn less than $400 a year in commissions.

But the sale of health insurance has not dropped for these businesses. No, agents keep working on these cases because they have felt a strong responsibility to maintain employer-based health insurance for all sized businesses and nonprofits and their overall commitment to this industry.

I am telling all of this for two reasons. Wayne’s work on this issue has been very measured. Remember that he voted against this the first time it came up back in May because there was no clarity about the preservation of protections for consumers.

Since, HHS has given states (and for those states who are clearly intentionally not enforcing their responsibilities, the US Department of Health & Human Services will do this) the authority to review carrier increases that exceed 10%. With this new responsibility (which Wayne was a big advocate for with the White House), we have just seen the first calendar quarter since 2008 where the trend increases are less than 10%.

Further, Wayne has already ordered over $150 millions in refunds for individual health insurance policies last year and most expect some similar number.

But most importantly, the people buying the health insurance want to make sure that their agent, broker or consultant are getting paid a fair wage for the work that is being done on their behalf.

I have already applauded Wayne for his vote, even with the knowledge that some, who don’t really understand how this works would criticize him, because he saw it as in the best interests of consumers.

Finally, I want to say that we too often ignore what is going on around us. EVERY southern states EXCEPT for North Carolina has participated actively in efforts to undermine or delay implementation of the Health Care Reform legislation. Wayne has led the way and is consistently seen as a leader on these issues. We’ve already seen the White House recognize him, and frankly it makes me proud that he’s doing it even though many would have run away for their own political survival.

As you know, I ran against Wayne in 2008 for the Democratic nomination, but I can say that Wayne has held up his end of the bargain. I think we owe him some gratitude and flexibility to make sure that health care reform is implemented appropriately in North Carolina.

Smith, Did I miss something in the "carrier increases > 10%"?

The proposed change to the law is the whole point of the previous posts. Commissions for agents and brokers (direct sales staff of Blue Cross for example) would be excluded in the computation of that 10% limit if the Insurance Commissioners' resolution were enacted into statute or rule.

That is exactly why Medicare rates increase much more slowly than private health plan costs year after year.

How do you keep administrative overhead reined in and allow commissions to increase without a cap? Commissions are a big part of insurance administrative overhead.

Martha Brock