As President Barack Obama's health care reform package worked its way through Congress in 2009 and early 2010, Randy Flem kept a close eye on the proceedings. When Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010, Flem knew it was time to dive in. A veteran of the political process, "I had this belief that I could make a difference," says Flem. "So I just moved forward."

He had good reason to believe. In the mid-'90s, Flem successfully lobbied Congress to remove the penalty tax at age 65 from what are now known as health savings accounts. A few years later, he worked with Washington State Representatives on both sides of the aisle on individual market reform.

So when the state of Washington began to put together a committee on creating state health exchanges in April 2010, Flem reached back out to the state legislature to get involved. He's been serving on an advisory committee to the Joint Select Committee on Health Care Reform Implementation since July 30, 2010, and helping to shape the future of not only his own 13-employee business, Pacific Underwriters, but that of brokers and advisers across the state.


History of involvement

Flem has been a co-owner of Pacific Underwriters for the majority of his 26 years with the company. The Seattle-based business specializes in the small-group market, particularly dental offices and public utility districts. Flem first got involved in politics when he realized that new products he was developing with the local BlueShield office would require legislative action at the federal level. That's when his efforts took him to Washington, D.C., to lobby for changes to the medical savings account tax structure.

New to the game, Flem didn't know much about organized lobbying, so he went to the House of Representatives' Ways and Means Committee by himself to get the legislation introduced. "I wasn't very experienced at how to get other people's help at the time," says Flem. "But it did give me an attitude of 'anything's possible' because I did it all by myself - just studied up on the bills, set up my own appointments ... It gave me the belief that if you work hard and you set up the appointments, you can do it. Nobody told me I couldn't do it, so I just went and [did] it."

Since then, Flem has learned that he doesn't have to go it alone. He's worked in leadership roles with the Washington Association of Health Underwriters and done some behind-the-scenes negotiating in Washington, D.C., for the National Association of Health Underwriters.

It's always been Flem's goal to propose creative rather than obstructive legislation and focus on fiscal realities over political ideology, he says. His work with the state legislature at the turn of the century gained recognition from then-Governor Gary Locke (now U.S. Secretary of Commerce), who invited Flem to work on individual market reform with both the Democratic and Republican leadership in the Washington State House of Representatives. State Senator Linda Evans Parlette (R) got to know Flem through the individual market reform committee, when she was a state Representative. "I considered him a good resource because he's part of the broker community," says Parlette.

A decade later, the connection Flem made to Parlette and her Democratic counterpart Eileen Cody gave him an "in" when it came time to develop PPACA's health insurance exchanges. "I believe in building relationships with people and as long as I maintain them over time and am consistent in what I do, [I'm] able to build influence by being effective and involved," he says.

Over the years, Ross Baker became acquainted with Flem through several avenues, including Baker's former role as manager for legislative and regulatory affairs for Regence BlueShield of Washington, as well as through WAHU. Baker appreciates Flem's willingness to not only share his opinion on issues but actually get involved in addressing them. "He's very interested in, very knowledgeable about and very passionate about public policy and how it affects the broker community as well as his clients and potential clients," Baker says, "and that is something I found very encouraging."


Committee (in) action

Flem has his work cut out for him with Washington's Joint Select Committee on Health Care Reform Implementation, which has met at least four times since its implementation last summer, in addition to numerous subcommittee meetings, says Flem. He serves on the Exchange and Insurance Reforms Advisory Group subcommittee. Having a broker participate in the process is significant, says Parlette. "I think it's important as we discuss federal health care reform - and the exchange is only one part of it - that we have folks from the market out there earning a living be resources as we try to make these decisions," she says. "Because they can tell us what's going on out there in the private market. So that's the value that Randy brings to the discussion when we talk about the exchange."

PPACA calls for the establishment of two health insurance exchanges in each state, the American Health Benefits Exchange (in the individual market), and the Small Business Health Options Program (in the small group market). However, states have the option to combine the two. There is legislation pending in Washington to formally establish the state's exchange system, but according to Parlette, there is a fundamental difference in opinion among state legislators as to how quickly PPACA implementation should move. "Many people feel that this is not the year to make hardcore decisions because there is so much uncertainty with this whole federal health care law," says Parlette, while others want to "go ahead and get the structure all ready and then we'll be more prepared next year."

At the end of January, the Department of Health and Human Services announced an unspecified amount of additional funding to help states implement the exchanges - in addition to the $49 million in grants HHS awarded in July 2010. (See sidebar above for states that have made the most progress so far.)

As for Flem's role on the committee, he and other members are charged with following other states' exchange activity and progress level. "It's taken a considerable amount of reading time to keep up on the material and what's going on around the country," says Flem. "It's just volumes of information."

Adding confusion, Flem reports that executive summaries from committee members reporting on the same states would often result in conflicting information. Because states are used to more direction from the federal government than PPACA provides, Flem says that "it's pretty hard to move forward when much of the legislation says, 'You must do this and if you don't then the federal government will do it.' Well if the federal government does it then how it will look? The answer is, 'We don't know yet, we haven't developed that. We'll only develop ours if we don't like what you develop, so go develop something.'"

PPACA mandates that exchanges be operational by Jan. 1, 2014. Three years is "absolutely not" enough time, Flem believes.


What's at stake

Meanwhile, of immediate concern to employee benefit brokers and advisers is the "navigator" provision in the exchange legislation. Section 1311(i) of PPACA addresses the role of navigators, the duties of which include conducting public education activities, distributing information on enrollment in health plans and facilitating enrollment, among other responsibilities. The legislation addresses standards that call for the navigator to be "qualified, and licensed if appropriate" - but also prohibits receiving compensation directly or indirectly from insurance providers in connection with enrollment in health plans.

Whether brokers and advisers eventually become the exchange navigators or rival them remains to be seen, says Shawn J. Nowicki, director of health policy for both the Northeast Business Group on Health and the New York Health Purchasing Alliance (HealthPass), a commercial health insurance exchange. "Obviously navigators can't be paid directly by carriers, which is the compensation structure that brokers currently use," says Nowicki. "So, there's still some kinks that need to be worked out in order to ensure that there's a level playing field and that competition is allowed to drive the process in the most effective way possible. I think states will have to figure out exactly how the broker-navigator relationship will work."

It's Nowicki's sense that navigators will eventually focus more on the individual market than the small group market. "I think the small group exchanges will leverage brokers more so than navigators," he says. "But that's state-to-state."

Through his experience with HealthPass, Nowicki's seen first-hand the benefits of an exchange-broker relationship. "The way in which we've benefited from their participation in our model is that we've seen them as our business partners in that they help to educate the employees and the employers," he says. "They provide them with support throughout the year. We work in tandem, hand in hand with each other to make sure that all the groups are getting the best customer service and support they can."

There's general consensus among the members of Flem's committee that products for sale in the exchanges will have to be sold, but some discrepancy as to how that process will work, he says. "I think the politicians and staffers on the exchange committee think that consumers are just going to flock to the Internet and buy on their own and I don't think that will happen," he says. "Some will, but I think you still need to have agents involved to help in that process and I don't think there's a recognition in general of that yet."

Mark Rose, WAHU's legislative director, spent time discussing health reform strategy with Flem at NAHU's 2010 Capitol Conference. His company, Baldwin Resource Group, is also located near Pacific Underwriters in Belleview, Wash. At the conference, the two discussed the problems agents often have working effectively with state and federal government branches and came up with a strategy to work together to keep informed on PPACA's progress in Washington. Rose has attended the majority of Flem's committee meetings and is impressed with his colleague's approach. "I think most of his ideas are more insightful than just about anyone else - including the senators and representatives who are on the committee," he says.

The mistake people often make, says Rose, is to try to push forward their agenda while making it clear that they do not like health reform or PPACA. "Most of the time, someone who's tasked with the job of implementing, like a regulator with the OIC, they're not interested in somebody who's got a political cause," he says. "They want somebody who's going to try to help them get it implemented."

It doesn't help that a common perception is that employee benefit agencies spend the majority of their time on sales, Rose adds. Of the 11 people in Baldwin's benefits department, two focus on sales while the rest provide account management. "One big misconception is that we spend an inordinate amount of time in sales," he says, "but the vast majority of our time is spent on service."

At HealthPass, Nowicki says brokers are "crucial to the success" of the company, and he sees the potential for them to play a similar role in PPACA's exchanges. "When health reform first passed there were some in the industry who thought that cutting out the brokers and their related compensation was low-hanging fruit and might be an easy way to realize some savings," he says. "But in fact I think in reality it's the opposite of that in that the broker absolutely - and in some markets more so than others - will continue to play a role going on to 2014 and beyond."


Nonpartisan approach

Through his work with BlueShield, Baker witnessed firsthand the valuable support both small and large clients get from brokers. "The carriers need to find a way to be able to utilize broker services [in the exchanges] because it will benefit not only their customers, their clients but also society as a whole," he says.

Baker has much respect for Flem's knowledge level and passion for the industry. "It really is gratifying to see someone take the time not only to learn the strengths of a position he may have initially held but to take the time to talk with and learn about the other side of the issue so that he's willing to grow and be flexible depending on the research he does and the points of view that he hears," he says.

Flem credits much of his ability to work well with others to his fiscal perspective. "If you look at things from a fiscal perspective it doesn't matter if you're Republican or Democrat. You don't talk about what your political affiliation is, you just talk about the ideas from a non-philosophical perspective," he says. "I just talk about it from a financial perspective. Is it affordable? Will it work? And what are the incentives to the consumer if we do that?"

Born in Oregon, Flem moved to the Seattle area at age 10 when his father's job with a life insurance agency was relocated. After college at Oregon State, Flem joined his father in the life insurance business, but soon was drawn to the broader product base and better hours at a property and casualty firm that also sold employee benefits.

Through an acquaintance of his father, Flem met his soon-to-be wife, Lorrie, on a blind date. After a theft, she requested to meet with Flem to discuss property insurance. "At the end of lunch I told her I didn't actually sell that kind of insurance so she'd have to talk to somebody else," he says.

Twenty five years later, the Flems have eight children: five boys and three girls ranging in age from 23 to eight. It's easy to wonder how Flem finds time for family, work and helping to shape health reform. He credits the support of his wife, being an agency principal with flexible hours, and a true belief that "what we're doing is really critical to our country and to our industry."

Mrs. Flem is proud of her husband's involvement in shaping PPACA's impact. "What I notice most about him and I think is very impressive about him is that he has really an uncanny ability to see past things and find ways to fix them," she says. "Other people say, 'This is my mountain and I'm going to stand here and die on it' and they just keep saying the same thing over and over. But he doesn't do that."

Rose gets together over lunch with Flem to discuss health reform and other business activities. He's impressed with the level of dedication Flem has for both his family and industry advocacy. "I have three kids myself, and we've shared about how some of the agents will come to us and say, 'Oh, I just wish I had time like you guys do to get involved.' It's not that either one of us have a lot of time," he says with a laugh, "it's that we see this as something that if we don't get involved and have a voice, there won't be an industry for us to protect or to work in."


Importance of involvement

Despite his efforts to stay informed and involved in PPACA, Flem, like most everyone, is still not sure what the health care market will ultimately look like in the next few years. Much remains to be contributed in shaping PPACA's implementation, but Flem believes there is not currently enough broker support and involvement because most people simply don't know how to do it.

Flem invited about a dozen people to attend his committee's last meeting. Six or seven came. "The first place to get involved would be to attend the exchange meetings to learn what is going on," he says. "Because every state is having these kinds of meetings and I think they have to be public meetings. If nothing else, just attend the meetings so that you become familiar with what is being developed. That is the most critical thing. Then volunteer to help."

It's especially important for agents to remain engaged and involved, says Rose. "The laws are changing daily because so much of this bill was left up to the interpretation of Health and Human Services and individual states as they enact it," he says. "I would encourage agents and their clients to stay very engaged and be ready to voice their opinions when there's a public comment period and such because nothing is finalized yet."

Nowicki also encourages brokers to keep the pressure on their local association chapters such as NAHU and the National Association of Insurance and Financial Advisors. "Make sure that those organizations are ensuring that there's broker representation on the exchange work groups and also as states develop their legislation, that there's broker representation on the governing board for the exchange as well," he says.

In the end, Flem believes that brokers across the country will be paid in some manner to distribute group health insurance plans within PPACA's exchanges. "But how much they're paid and in what manner will depend on the broker involvement at each state," he says. "If they're not at the table when these things are negotiated, they won't like the result."



States making waves on exchanges

California: Signed the first legislation to implement a health insurance exchange under PPACA on Sept. 30, 2010. The state is moving forward to create an independent, fully-transparent California Exchange Benefit, including appointing a board.

Maryland: Created the Health Reform Coordinating Council to work with stakeholders and the public on how to best implement a health insurance exchange. The state has carried out research to understand Maryland's health insurance marketplace and health expenditures, as well as how to make health care costs and quality more transparent.

Colorado: Conducting extensive research and economic analysis of its health insurance markets to help policymakers understand the potential impacts of different options for structuring the exchanges.The state is also holding regular community forums and making information available to the public.



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