Gridlock & Gridluck
This being a typical presidential election year—that is to say, not much is getting done on the Hill—I decided to accept as many invitations as I could to speak to Council member firms on the road this year. As I’ve perfected my PowerPoint catalog of doom on healthcare reform and regulatory issues, I’ve become quite the curmudgeon.
Like all those right-track, wrong-track public opinion polls, I’m surly and cynical, and I don’t come across as Little Miss Sunshine.
But it’s time for a bit of self-correction. It’s time to catalog some of the rare good things that have happened in the government affairs realm for commercial insurance brokerages.
Yes, our anxiety about the Affordable Care Act remains high. But as states belatedly (and many reluctantly) gear up to enact the law, the role of brokerages as trusted advisors has been underscored, not undermined. Even in historically hostile jurisdictions such as California, officials charged with establishing exchanges seem to understand that their new system simply can’t work if they cut brokers out of the process. The idea that disintermediation is a viable way to cut the cost of healthcare seems to have disappeared. Of course, some states are better off than others. But as officials understand more of the complexity of navigating the health insurance system, they realize that they need professionals who add value to consumers trying to secure the best coverage.
I don’t often praise the federal Department of Health and Human Services, but their guidance for state-based exchanges this spring was very encouraging concerning broker services. Brokers can serve on exchange boards. They can be considered as navigators and featured on exchange websites. Is all this just a pat on the head? Time will tell, but the guidance seemed a long way removed from the White House health czar’s statement during the ACA debate that one of the reasons to enact reform was to get rid of those unnecessary brokerage middlemen.
I’m also relieved that the administration will not implement the “CLASS Act” provisions of the law, which would have created an unsustainable long-term care program. It would have been the very embodiment of the concept of adverse selection. I’m happy, too, that the administration punted on implementing the auto-enrollment provisions for larger employers—appointing a task force, instead, that won’t issue its report or implementation guidance until at least 2014.
These provisions will be very costly. Lockton ran the numbers assuming 75% of those auto-enrolled will drop out because they’re covered under a spouse’s plan or elsewhere. Even with that assumption, the new law would cause costs to escalate more than 4%. The administration now seems to understand this, and for that I’m grateful.
On the congressional front, it is a bit of a wonder to me that the federal flood insurance program was reauthorized for a full five years with reforms that most everyone supports to make it more actuarially sound. For the past several years, Congress has kicked the flood insurance can down the road. This year, leaders on both sides of the aisle and in both chambers (notably the House Financial Services Committee and the Senate Banking Committee) put aside their differences and forged a genuine compromise. I’ll even thank Senate Majority Leader Harry Reid, D-Nev., for forcing the bill’s consideration on the Senate floor, when all else seemed to grind to a halt.
Kudos as well to Sen. Roger Wicker, R-Miss., for achieving the first step in resolving the prickly issue of wind-versus-water. Until Wicker stepped in, the wind/water debate was a polarizing, acrimonious battle between trial lawyers and the insurance industry.
Quietly and steadily, things have gotten better in the surplus lines marketplace with respect to multistate placements. The Dodd-Frank Act established a new standard that the only rules governing surplus lines placements (and premium taxes) are the rules of the home state of the insured. The state response to this straightforward law was chaotic, but the overwhelming majority of states have decided the best course is to simply go it alone and not enter into premium tax allocation schemes. As a result, the tortuous implementation of the non-admitted law has been much relieved. Yet the bureaucratic burdens remain far too high. But when it comes to states joining the Nonadmitted Insurance Multistate Agreement (NIMA, administered by the state of Florida), no news has been good news.
Can I still catalog the ways in which America has become a dysfunctional, European-style social welfare state? Am I frustrated that even simple things affecting commercial insurance brokerages are almost impossible to achieve in the current congressional environment? Does polarization and the collapse of the political middle threaten us all? Is the ACA a dire threat to the employer-sponsored group health insurance marketplace? Of course—on all those fronts. But sometimes gridlock is not such a bad thing.