Elections always contain a particular element of uncertainty. One thing is known, however — regardless of who becomes the next president of the U.S., health care insurance reform will pose challenges for the agent community.
Health insurance reform is one of the most pivotal issues being debated by the presidential candidates. There are a variety of sub-issues falling under this umbrella, and each candidate’s plan offers a different combination of solutions for one problem: There are far too many Americans living without health insurance today.
Coverage that’s easier to obtain
Sens. Hillary Clinton (D-NY) and Barack Obama (D-IL) both recommend a government-established entity to facilitate the purchase of private coverage. The idea is to provide more Americans with health insurance options they may not have otherwise had. But while this type of entity does provide private choices, the choices are limited to those that have been selected by the government. A marketplace delivers best value when consumers are presented with diverse options from many competitors and are given reliable information on which they can base informed decisions.
In addition, the health insurance agent plays a valuable role in the delivery of health insurance coverage and benefits. Purchasing pools often exclude the professional services offered by agents. It would be a significant error to assume that a health insurance exchange arrangement could perform the many services currently performed by the agent.
Employer mandates
Both Clinton and Obama advocate a pay-or-play system for employers where most businesses would be required to provide a “meaningful contribution” toward the cost of health insurance. Clinton’s health reform plan also calls for an individual mandate — and mandating coverage without addressing costs is a recipe for disaster. An affordable basic benefit policy should be made available. Simply offering less expensive policies helps the uninsured find affordable coverage and reduces the need for a government mandate to buy health insurance.
Community rating and guaranteed issue
Clinton and Obama’s plans both establish guaranteed issue and community rating. Pure community rating and guaranteed issue plans, however, will only continue to insulate individuals or employer groups who perpetuate poor lifestyle choices and behaviors. Modified community rating provides the opportunity for those who take the initiative to improve their lifestyles and health status to be rewarded in a premium cost variance.
Obama’s proposal also includes a new public insurance program for those not eligible for Medicaid or SCHIP. Many of the uninsured — 10 to 50 percent, depending on the study cited — may be eligible for public programs but are not currently enrolled.
Before creating new public programs, efforts should be made to ease the administrative challenges of signing up for existing programs.
Tax code reform
Clinton and Sen. John McCain (R-AZ) both propose reforming the tax code to eliminate the bias toward employer-sponsored health insurance. Polls consistently show that Americans who have employer-sponsored health insurance like it and don’t want to lose it. Individual tax credits and tax deductions proposed by Clinton and McCain are excellent means of encouraging more individuals to purchase coverage; however, they should not be offered in lieu of incentives for employer-sponsored plans.
Association health plans and insurance across state lines
The McCain proposal would allow for association health plans and the purchase of insurance across state lines. The establishment of association health plans that are exempt from state consumer protection laws, regulatory oversight, and solvency laws produces severe fragmentation of the health insurance market. Lack of high solvency standards and state regulatory oversight may leave beneficiaries holding the claims bag after lack of regulatory oversight allows fraudulent operators to flourish and even legitimate plans to become insolvent.
Allowing insurers to sell individual health insurance policies across state lines under the authority of the policy’s approval in just one state — the primary state — raises a number of questions, including policy pricing, that could cause problems in secondary states. While secondary states may require the licensing and oversight of agents and advisors selling primary state individual health insurance in secondary states, additional information is needed on potential conflicts between rules in primary as compared with secondary states relative to licensing issues. An effective cross-state individual health insurance sales regime must also address issues involving the effectiveness of state regulation by a state where the purchaser does not reside.
While presidential candidates talk about improving the health care system and reducing the number of uninsured Americans, Congress is left to figure out the actual costs and path needed to succeed in enacting health care reform. Choice, quality, competition, and professional service must be a part of any health care reform effort.
Licensed, regulated, and fairly compensated, insurance agents offer a cost-effective means of achieving assistance in the selection of insurance coverage for individuals and employers of all sizes in all markets.
It is imperative that agents explain to their lawmakers the role that they play in the current distribution system and why this valuable service needs to be a part of any proposed reform effort. The health care reform challenge is to bring the estimated 47 million uninsured Americans into the system and to reduce the high cost of health care for everyone. These two challenges are related, and one cannot be solved without tackling the other.
Robelynn Abadie is president-elect of the Association for Health Insurance Advisors. She can be reached at robelynn@abadiefinancialservices.com. 