Brokers ‘devastated’ by reform rule

The decision last year by the U.S. Department of Health and Human Services not to exclude health insurance brokers commissions from a provision in the 2010 health reform law has been “devastating to brokers,” broker advocate Janet Trautwein said during an August speech in Fishers, and there are signs that Congress will act to reverse the policy.

The health law caps health insurer's profits and overhead expenses at 20 percent of premiums (and only 15 percent for large employers). That threatened to cut off the livelihood of brokers, whose commissions were traditionally baked into the prices charged by health insurers to their employer clients.

The decision has accelerated a consolidation trend among Indianapolis-area brokers, in which many veteran brokers have been selling their firms.

Trautwein, CEO of the National Association of Health Underwriters, spoke enthusiastically about the possibility of bipartisan legislation passing that would declare broker commissions as neither overhead nor medical expense, but instead a transaction charge to employers.

“It should not have been part of the calculation to begin with because it is not an insurer expense,” Trautwein said of brokers’ commissions during a speech at the Fishers Hospitality & Conference Center, which hosted the annual meeting of the Indiana State Association of Health Underwriters on Aug. 19.

Of course, brokers for years have enjoyed the benefit of employers' having no idea they were being charged this extra expense, but that’s another matter.

In any case, Trautwein said, that argument was gaining traction among both Democrats and Republicans in Congress. But the brokers’ chances would be much better if the National Association of Insurance Commissioners would endorse the legislation, which is sponsored by Republican Mike Rogers of Michigan and Democrat John Barrow of Georgia.

But that’s looking less and less likely, according to an Aug. 29 report by Politico.  The insurance commissioners’ executive committee last month decided to put off further action on whether to endorse the Rogers-Barrow bill. Supporters looked for some sort of action at last week’s conference of the insurance commissioners, which was then delayed because of Hurricane Irene. But a spokeswoman for Florida Insurance Commissioner Kevin McCarty, chairman of the insurance commissioners’ health insurance advisers task force and one of the broker bill's biggest advocates, told Politico that no major action on the broker bill was planned for the conference.

The National Association of Insurance Commissioners recommended in October that broker commissions be included as an administrative cost that counted toward the 20-percent cap. The Obama administration’s Department of Health and Human Services then incorporated that recommendation into its regulations.

But Trautwein said that Obama advisers in the White House worry the decision could force so many brokers out of business that it could undermine another key part of the health reform law: the health insurance exchanges that will serve as the main marketplace for individuals and small business to get health coverage. The exchanges will also be the place where consumers go to get subsidies for health insurance, one of the law’s key mechanisms for expanding overall health coverage.

Those exchanges are scheduled to begin operating in 2014.

“They actually want agents and brokers to remain part of the process,” Trautwein said of her contacts at the White House. “They worry that brokers and agents won’t be around in 2014 to enroll people in the exchanges.”

The room of brokers listening to Trautwein in Fishers erupted in laughter.