There are many things in life that are out of our control. We can complain, muse, become paralyzed or we can choose to find and capitalize on the opportunity. What comes to mind is the Affordable Care Act and the concern, worry and anxiety that it has created for many.
I harken back to 1993 in California. The state legislature just passed AB 1672 … Small Group Reform legislation that was to go into effect July 1, 1993. Prior to the legislation all small group plans in California required underwriting. Carriers could decline new cases thus requiring employers to stay with the current carrier or be unable to obtain coverage at all. Carriers could charge whatever they deemed appropriate for renewals and 60-70-80% renewal increases were possible and frequent.
There was no relationship between new business rates and renewal rates thus allowing carriers to cherry pick the healthy, more profitable cases and decline or charge substantially higher premiums for less healthy or less desirable industry groups. What did the legislation provide and what was the perception by the benefit industry? The legislation provided the following:
- Guarantee issue groups from 2-50.
- New business and renewal rates were the same — no cherry picking.
- The maximum pricing variation from the healthy to unhealthy groups was 20%.
- HIPC was established as a state run exchange with no broker participation.
The industry concern was that rates would explode, agents would be negatively impacted by the exchange and for many the future looked bleak.
The reality was the ability for unhealthy, uninsured groups to obtain affordable coverage, existing groups the ability to change carriers without negative financial implications and the realization by the Exchange that they needed us to market and explain the complexities of the Exchange.
For those of you in Pennsylvania, New York, Illinois and other states where small group reform is need, the ACA could be a blessing. In my humble opinion, there will always be opportunity for those of us that bring value to our clients.
The cards have been dealt — how are you going to play your hand?
Torelli, CLU, ChFC, MSFS is president of Newport Beach, Calif.-based e3 Financial.
Photo: ThinkStock
