Another week, another shot at repealing — or at least mortally wounding — Obamacare. The major difference with the news out of Washington, D.C., this time in regard to the proposed Alexander-Murray healthcare legislation is that something might actually happen that could be pretty significant for how benefit brokers and advisers work. This bill, in addition to some recent executive orders by President Donald Trump, may change the role of advisers outright, or at least lend more credence to the value of an employer working with an active, trusted benefit professional.
Let’s take a look at these potential and real actions and judge their effects on the community.
What would the Alexander-Murray legislation mean to brokers and their clients? As of this writing, Senate Minority Leader Chuck Schumer (D-N.Y.) says there are enough votes in the Senate for the bipartisan bill to both avoid a filibuster and override a Trump veto. If that statement holds true and Senate Majority Leader Mitch McConnell (R-Ky.) allows for a vote (far from a foregone conclusion), then there are two major impacts to health insurance and, therefore, benefit brokers and advisers: CSR payments and Section 1332 waivers.
The 1332 waivers, while important, are something much less tangible right now, so I’ll focus on the CSR payments. While CSR payments are strictly for individual coverage, they are payments that are going to the working poor, which is important to keep in mind. Employers with low-wage, hourly workforces may find that if the payments are stopped, concerned employees will be looking to them for something to make up the new gap in ability to pay out-of-pocket expenses. And even if Alexander-Murray ends up passing and the CSRs get paid, brokers and advisers are well-positioned to help employers help the working poor.
A new wave of companies, such as HealthSherpa and Lockton Marketplace’s GetInsured for individual coverage and Med-Enroll for Medicaid eligibility and enrollment assistance have expanded beyond just targeting individuals for their services. Pragmatic employers are adopting these solutions because they see the benefit to their employees is also a benefit — with real ROI — to them as employers.
Trump’s executive orders
It’s significant that Trump made the executive orders that he did, not only because it speaks to his belief that the legislative process has failed but also because his administration has made clear that they want to both undo Obamacare and implement some long-standing GOP healthcare policy favorites.
Let’s take a look at how each executive order may impact brokers, advisers and employers:
First, association health plans are a concept that brokers and advisers have worked with and/or promoted for years. With Trump’s executive order, we may finally get to see if AHPs can live up to ambitious promises.
Some brokers I’ve spoken with did decent business with AHPs prior to the ACA administrators limiting their use out of concern that it would lead to widespread avoidance of offering “essential health benefits” plans and short-term plans (more on that below). One adviser in Washington state noted the “air-breathers association” as one extreme interpretation of potential membership.
What’s different, and potentially transformative for brokers and advisers, in Trump’s order is the express desire to let associations expand beyond state borders.
It’s been noted that there’s already widespread multi-state health insurance in the group space. But it’s largely limited to much larger companies. Now, theoretically, a mom-and-pop shop in California could join the Mom-and-Pop Shops Association and get their insurance from a health carrier based in Arkansas — without having to adhere to “essential health benefits” coverage. That would also theoretically mean that a broker in California is losing that business to the broker that services the association, which may be based in Arkansas or may be based in New York City and simply selected Arkansas because that’s where they found the cheapest plan.
It also means that, as in the state health plan market, there could be a shift in leverage from independent brokers and advisers to the associations and their designated buyers and negotiators. Could the U.S. Chamber of Commerce start an association plan for its members and become the most influential private insurance customer in the nation? Or TurboTax or USAA for that matter? The answer will be in the definition of associations once the final regulatory language is drafted and approved.
Next, the executive action expanding short-term, limited-duration insurance (STLDI) is really just a “back to the future” move. The Obama administration thought of STLDIs as “junk plans” that encouraged individuals to pay a lot for catastrophic coverage as opposed to paying significantly more for real health insurance.
I tend to agree and think their application should be very limited — not seen as the “better than Obamacare” coverage that Trump claimed during his announcement of the order. But that’s all academic. If advisers sold these plans before, they’ll be able to sell them again.
Finally, the order to expand use of health reimbursement accounts may be truly disruptive. Some of us have been waiting for a move like this since we first heard of what Zane Benefits did several years ago by advising small employers to send their employees to public exchanges but give them tax-deferred dollars to spend there. That way of business was prohibited by Obamacare regulatory guidance. But then it passed into law, via the use of HRAs, this past December as part of the 21st Century Cures Act.
Now, Trump appears to want to expand that idea — let employers of all sizes use HRAs to fund employee purchases of individually underwritten health insurance.
While I feel we should think on a 10-year-minimum time horizon for this order to become widespread because of the historically slow pace of change in our business, if this HRA rule goes into effect with broad usability for individual coverage, it could usher in the true “defined contribution” era in employer-based health benefits.
Shopping for coverage
Employers are paying billions of dollars in administrative fees alone every year for their health plans, and we’ve seen healthcare costs rise much faster than inflation for decades. If employers could wipe out both the cost and the burden of that administration in exchange for simply benchmarking the right tax-preferred defined contribution to give their employees and then letting them shop for their own health insurance — and have their employees be happy with that arrangement — then you’d be hard-pressed to find employers who would not opt for that approach over the current system.
Clearly, the impact on brokers would be significant. It would change the role from one of doing all of the things that come with selling group insurance — helping to design plans, negotiating with carriers, etc. — to one of financial planning. The key question would shift from “how do we control our benefits costs?” to “ how much is the right amount to give our employees, and where do we direct them for the best individual coverage?”
It could also potentially make the prognostications on AHPs above moot. Who needs a strong association when the largest and most stable risk pool becomes the individual market?
Such a profound change could easily fizzle out with a couple of bad experiences widely published, or hype that exceeds value, like we saw with the private exchange frenzy. But in the end, money talks. Never forget that the employer-based health insurance system we have is unique in the world. Whether we believe it is exceptional or abominable is irrelevant. What matters is that it must change to address exploding costs and declining value.
The broker/adviser who recognizes these challenges and seek pragmatic, data- and consumer-driven solutions is the broker that will do well by doing good.
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