Two thoughts as the 2012 legislative session nears: What is worth your time and attention? And, be careful what you wish for.
Both are vital reminders for all of us in our increasingly busy world. But as Iowa lawmakers again consider proposals for the competitive health insurance marketplace, or health insurance exchange, these reminders are relevant to health reform stakeholders.
Last legislative session, way back before the Fiscal Year 2012 budget gridlock, or the property tax debate, several lawmakers issued proposals for the creation of an exchange.
One proposal (which won the support of the health underwriters’ and insurance brokers’ lobby and no one else) seemed far more interested in protecting the insurance brokers than it was in creating an exchange that helps Iowans get affordable, quality coverage. Under that proposal, every purchase in the exchange would have been mediated by a broker, who, by law, would have received at 5 percent commission on each insurance sale in the exchange.
It’s worth remembering how the exchange is intended: Individuals, families, and small businesses will be able to quickly and easily compare health insurance plans — based on price, value, benefits and other relevant factors — and premiums will be based strictly on age, geographic area, and smoking status. Pre-existing conditions will be a thing of the past.
The exchange should permit small businesses to leverage some of the bargaining power of the larger employers. Many small businesses that offer employees coverage will be eligible for tax credits.
According to projections from the nonpartisan Congressional Budget Office, however, most exchange users will be individuals and families. Low- and moderate-income (up to 400 percent of the federal poverty level, or about $89,000 for a family of four) individuals and families who do not receive insurance through an employer will be eligible to receive sliding-scale premium assistance in the form of tax credits. Small businesses are likely to comprise a much smaller slice of the exchange-user pie.
This brings us back to the question this post opened with, what is worth your time and attention?
Do brokers really want to be involved in every purchase of health insurance in the exchange? Remember that most of these exchange customers won’t be HR folks, familiar with the ins and outs of insurance terminology. Most won’t be the proprietors of small businesses that have dealt with brokers in the past and know what sort of benefit and cost-sharing packages their employees have or haven’t liked.
Most exchange users are going to be members of ultra-small groups — families. Many will have moderate levels of income ($37,000 a year to about $89,000 a year for a family of four). For many, the terminology of health insurance terminology will be a new language. Deciding what benefit package they want or need will be a calculus as difficult as, well, calculus.
Is a bill like last session’s SF391 really the best use of a broker’s time and attention? I’m not a broker, so I’m in no position to say.
But it seems that rather than spending four hours describing insurance terms, benefits, and options to a family of four that has never purchased health insurance and earns $35,000 a year is a far less effective use of time than spending an hour on the phone with a seasoned HR rep from a business with 30, or even just 10 employees. And let’s not forget that many exchange users will end up not even purchasing insurance, but become enrolled in the newly expanded Medicaid.
Regardless of health reform implementation, there will be continued demand for the services of insurance brokers. They provide a valuable service, and are trusted by many small businesses and entrepreneurs. That won’t change.
But if brokers push for a repeat of last year’s offerings, they may just give themselves business that they don’t really want. Be careful what you wish (and lobby) for.
Posted by Andrew Cannon, Research Associate