P/C Insurance Agents Battle Public Health Care Reform Option

Lobbyists for property/casualty insurance agents have elevated health care reform to the top of their political agenda.

P/C agents have addressed health insurance legislation in the past but the issue has taken on new urgency for several reasons.

First, after years of talk in Washington, the Obama Administration and a Congress run by Democrats appear serious about actually adopting major health care reforms. President Obama wants a bill by the end of the year.

Second, many P/C agencies that write commercial accounts also sell group health insurance.

The third, and the biggest concern, is that the proposals under consideration include a possible government-sponsored health insurance plan that would compete with private health insurance plans —a development that agents fear would eat into their slice of the health insurance pie.

“Healthcare reform is our top issue at this year’s legislative conference. It’s actually tied for first with insurance regulatory reform, which is our perennial top issue. But it’s important for us because it’s at the top of President Obama’s agenda this year. It’s also at the top of the Congressional agenda,” said Charles Symington, senior vice president of government affairs and top lobbyist for the Independent Insurance Agents and Brokers of America (Big I)..

Earlier this month, more than 1,400 members of the largely P/C-oriented Big I were on Capitol Hill to meet with their elected representatives. These agents from cities and towns across the country were armed with their familiar talking points about preserving state regulation and reforming the federal flood insurance program that they talk about every year. But this time they also took along their arguments on health care reform.

The Big I and another P/C agents group, the Council of Insurance Agents and Brokers, also joined health insurance agents from the National Association of Health Underwriters and the National Association of Insurance and Financial Advisors in a letter urging congressional leaders to exclude health care reform from budget reconciliation instructions that would require only 51 votes to pass a measure in the Senate, rather than the usual 60 votes.

The groups said they were worried that “the spirit of bipartisan cooperation will be lost if regular order is put aside and the reconciliation process is utilized to fast track health care reform legislation.”

The procedural move by Democrats to require only 51 votes was a signal that health care reform could move quickly and agents feel there may not be a lot of time to get their message out.

“You need 51 votes in the Senate and that means that pretty much health care reform is going to follow what the Obama administration wants,” said Bob Rusbuldt, president and CEO of the main lobby group for P/C agents, the Big I, in a recent interview with Insurance Journal’s Andrew Simpson.

“I am not giving up hope and nor should independent agents or insurance companies, but we have a lot of work to do between now and September,” he said.

The health care reforms being considered by Democrats are varied but the one that concerns Rusbuldt most is one that would add a government-sponsored health plan to the mix.

“My concern is that if we have a government option in health care reform, over a very short period of time, it will crowd out the private sector,” said Rusbuldt in comments echoed by Republicans, conservative think tanks and private health insurers.

Rusbuldt argues that if private health plans are squeezed out of the market, it follows that insurance agents will be as well, and that would be a major loss for his association’s members.

According to the Big I, more and more P/C agencies are offering employee benefits including group health insurance. “It’s one of the fastest growing parts of their book of business– employee benefits in general,” Rusbuldt said.

“Almost all the group insurance– mid-market group insurance, small group insurance, even larger– is written through independent agents. We want to make sure Congress doesn’t do anything that removes us from the system, and removes that value that we believe we add for the customer,” he said.

Symington says it’s a little known fact that about 14 percent of a typical IIABA member’s book of business is health insurance sales.

Among the largest independent agencies, the percentage of their business that is employee benefits related can be 25 percent or more, according to a survey of Insurance Journal’s Top 100 agencies.

For one of the Top 100 agencies, Missouri-based global broker Lockton, employee benefits is about 28 percent of its U.S. business.
According to Mike Brewer, president of Lockton Benefit Group, the system of agents working with employers to provide benefits is one aspect of the health care system that works and he hopes Congress doesn’t do anything to mess with it.

“While we support broad health care reform that expands coverage and reduces cost, a large “public plan” as envisioned by some will undermine and potentially destroy the employer-sponsored health benefits system as we know it. Today, 160 million Americans receive health insurance through this system. It is effective. It is competitive. It works well for a majority of Americans,” said Brewer.

The Big I is focused on preserving the role insurance agents play in health insurance delivery.

“If that is taken off the table, and independent agents are no longer the distribution force for health insurance, that will be a huge hit for independent insurance agents. So we want to make sure we inform Congress and educate Congress on the value that we add for our corporate and individual clients,” Rusbuldt said.

P/C agents are not alone in their concern, of course. Their fellow health insurance brokers have also ramped up their lobbying against a government plan that might compete with them.

The Association of Health Insurance Advisors (AHIA), the health insurance division of the National Association of Insurance and Financial Advisors, says it is especially concerned because it sees the public plan as a “major step” down the road toward a single-payer, government-run health care system.

“Promoters of the government run plan option always state or imply that a government-run plan that eliminates the role of the agent will lower administrative costs. But administrative costs are not reduced simply by switching administrators — a government plan will not be less expensive unless services are reduced in some as yet ill-defined way,” according to AHIA President Robelynn H. Abadie.

“Experience of agents has shown that most consumers benefit from access to professional assistance,” said Abadie.

The argument that reducing agent and broker involvement could save money was addressed in December in an analysis from the Congressional Budget Office (CBO) that looked at various health care reform options. The CBO report concluded that achieving “substantial reductions” in administrative costs would “probably require the role of insurance agents and brokers in marketing and selling policies to be sharply curtailed and the services they provide to be rendered unnecessary.”

The CBO report found that certain administrative costs, such as those for claims and customer service, vary, while others are fixed and are similar whether a policy covers 100 enrollees or 100,000. The average share of the premium that covers administrative costs varies considerably—from about 7 percent for employment-based plans with 1,000 or more enrollees to nearly 30 percent for policies purchased by small firms with fewer than 25 employees and by individuals, according to the CBO report.

The CBO also noted that some administrative costs would be incurred under any system of health insurance, but proposals that shift enrollment away from the small group and individual markets could avoid a portion of the added administrative costs per enrollee.

The cries of agents and brokers who are concerned about being cut out of the market and those of Republicans opposed to a public plan appear to be having some effect. Some Democrats, including Sen. Charles Schumer who serves on the influential Senate Finance Committee, have indicated that they are open to rethinking the role of a government option, if there is to be one, by making it abide by all the same rules that private plans must follow —a sort of “level playing field” requirement.

“The bottom line is you need somebody who is not a private insurance company to be in the mix, and there are many of us who feel very strongly about that. I don’t think the public plan should have an unfair advantage, but it would be giving all of you in the insurance industry an unfair advantage not to have a public plan,” Schumer said in remarks at the most recent finance committee roundtable on health care.

But insurance interests, including Scott Serota, president of the Blue Cross and Blue Shield Association, held firm in their opposition, maintaining that it’s impossible to structure a health care system with a government plan without an unfair advantage and that any such public involvement would eventually force out the private market, stifle innovation and hurt the effort to extend coverage to all Americans.

“Creating a government-run plan — in any form — to compete alongside the private sector for non-Medicare/Medicaid eligible individuals is unnecessary to achieve comprehensive reform and would have devastating consequences,” Serota told lawmakers.