When California Gov. Arnold Schwarzenegger in late September signed bills creating the nation's first state exchange under PPACA, the move was a "disappointment" and "clearly dangerous" to health insurance brokers and advisers, say those who have been following the legislation's development.
The California Health Benefit Exchange will be governed by a five-person independent oversight board with the power to determine how the exchange will operate in time for the January 2014 deadline imposed by PPACA. The two bills establishing the exchange make no mention of a role for brokers. "While the governor is well aware of who brokers and agents are and what they bring to the table, the bills that were written do not include agent language in them," says Neil Crosby, VP of public affairs with the California Association of Health Underwriters. "It is a disappointment to us; however, it's not the end of the world."
Schwarzenegger did mention brokers in the press release announcing the legislation, but placed them on a par with PPACA-created "navigators" and others.
Reportedly omitted from the legislation late in the process was a provision that would have required navigators to be fully licensed. Keeping navigators unlicensed is "potentially problematic," says Lambert Hsu, principal of San Diego's Benefit Pro Insurance Services Inc. "I would think that most consumer advocate organizations might have an objection to that," he says, "because when you're dealing with health insurance you're dealing with a financial planning mechanism ... If a navigator didn't know what questions to ask or really even know the market quite well they might make recommendations that would be pretty disastrous to someone's finances."
With Department of Health and Human Services guidelines on state exchanges yet to come, it is expected that there will be a need for "cleanup legislation" in California once further regulations are released - at which time CAHU will seek to clarify the role of the navigators, says Alan Katz, principal of the Alan Katz Group and past president of both the National Association of Health Underwriters and CAHU.
"The fact is, brokers have survived a lot of challenges over the years ... we've always found a way to make it work," says Katz. "My guess is we'll do the same with this. But, unlike those other circumstances where we were just able to take what came down the pike and deal with it, we're going to have to make some tweaks here. But if we do it right, we'll have a role to play helping our clients and we'll still have a profession."
This is not California's first attempt at a state exchange, and CAHU's Crosby sees the mistakes of the past playing out again. When the Health Insurance Plan of California went live in the early '90s it too did not include brokers and advisers. Instead, after so few employers signed up for HIPC on their own, it was altered to allow brokers into the plan with a suggested commission amount visible on employers' billing statements, much like a tip line on a restaurant bill, Crosby explains. "So many employers wrote in the entire suggested commission amount because they saw the value that the agent brought that the HIPC ended up folding the commissions into the rates just like we see today," he says.
After evolving into a nonprofit co-op run by the Pacific Business Group on Health, the operation eventually closed its doors completely in December 2006, Crosby adds. "This new exchange will not be any different than what's already been tried and failed," he says.
Katz believes that the creation of the California Health Benefit Exchange is a strategic move by the lame-duck Gov. Schwarzenegger, whose term expires Jan. 3, 2011. "I think it's a legacy thing," he says. "He's very proud of the fact that California was the first to act. The way they describe it is it's the first exchange under federal health care reform. Utah has an exchange. Massachusetts has an exchange. But they were done without reference to the Obama bill. So he's very proud of that fact."
After Katz posted information about the exchange on his blog, a few brokers and advisers responded with comments implying they may soon be out of business. "I would say there's no need for pessimism," says Katz. "This is a clarion call for vigilance and for engagement. There will be plenty of opportunities to tweak and to shape what the exchange actually becomes. What brokers need to do is avoid getting caught up in the outcome of every single skirmish, every single battle. It's a long slog and we'll have advances, we'll have setbacks. This is definitely a setback the way the navigators are defined. But that's all it is, it's a setback, it's not the end of the game."
