Gridlock & Gridluck
Despite gridlock on Capitol Hill,
there is some good news for brokers.
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
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 this year.
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, released in the spring, was very encouraging
regarding the use of 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 quote of the White House health czar 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 that 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.
Broker studies have shown that 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
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. For two
years, the state response to this straightforward law was
chaotic. Ultimately, 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.
Again, this is an area where the threat has not been eliminated
and 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.
Wood is The Council’s senior vice president of