Position of Insurance Agents and Brokers of Pennsylvania on State Health Exchange

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1 Driving members to distinction. Position of Insurance Agents and Brokers of Pennsylvania on State Health Exchange Lauren E. Brinjac Government Affairs Director Nicole W. Grear Government Affairs Assistant 5050 Ritter Road Mechanicsburg, PA (FAX)

2 Insurance Agents and Brokers (IA&B) is a professional trade association for independent insurance agents doing business in Pennsylvania. Headquartered in Mechanicsburg, our membership is comprised of approximately 1,300 member agencies located throughout the state, representing a cross-section of small businesses providing primarily property and casualty insurance coverage to their clients. Many of our members are multi-line; that is, they also offer life and health group insurance services which make up a significant part of their overall business. Our members provide a well-rounded point of view as participants in the insurance industry, as business owners, and as employers. Overall, IA&B believes that establishing a health insurance exchange in the state as required by the Patient Protection and Affordable Care Act (PPACA) should not negatively disrupt the private market or compromise the crucial role agents and brokers play in serving as a trusted advisor to their clients on health insurance matters. As agent Fayez Elias from Beneficial Insurance Services in Newtown Square, PA explains, Businesses and employees know and trust that we have their best interest at heart, and that they can concentrate on their livelihood for their employees, helping their business grow. Included herein are the viewpoints of the association, having taken into consideration the expertise of our member agents from around the state. State versus Federal: Pennsylvania Should Take Control First and foremost, we believe it is in the best interest of insurance consumers and producers alike for Pennsylvania to take control of creating the health exchange. A federally-run exchange would not take into account the particular attributes of the Commonwealth s insurance market including different demographic, regulatory, and budgetary challenges. Pennsylvania should take the initiative to design and implement an exchange that meets its specific needs. And although much of the format of the exchange will be left to legislators and regulators to decide, the Department of Health and Human Services has yet to release any information about what a federal exchange might look like. Who will pay for federal exchanges? Will federal exchanges need to be financially self-sufficient, as is the case with state-run exchanges? How will enrollments for state-run insurance programs, such as Medicaid or CHIP, be dealt with? If several states opt-out of creating their own exchanges, will the federal government have the capacity to adequately run them all? A state-run exchange is the only way to ensure that Pennsylvanians interests are safeguarded. Our member agents across the state feel that given their experience with other federal health care related programs (e.g., Medicare), a federally-run exchange would only create confusion on the part of the consumer and additional burden on the agent as he or she tries to navigate that system. Public versus Private: Privately-run Exchange Controls Costs Given the Insurance Department s and the Commonwealth s concern over cost, the exchange could easily be state-specific, but take a more free-market approach, as is the case in Utah. There, other than initial start-up costs, the state incurs only modest costs related to the exchange

3 Utah s health exchange is set-up to allow the private market to compete with limited regulation from the state. It is managed on a day-to-day basis by a staff of two in the Utah Office of Consumer Health Services (an existing agency) within the governor s Office of Economic Development and works with a modest budget of about $600,000 allotted to it by the state. In addition, the exchange is aided by a risk adjustment board. According to the Commonwealth Fund in its February/March 2011 States in Action newsletter, The exchange has a risk adjustment board comprised of carriers, business owners, and governmental agencies, and its decisions are subject to the approval of the insurance commissioner. The board s role is to come up with ways to manage risks, define processes, and monitor rates to ensure parity in and out of the exchange. Role of the Exchange: Supplement Current System, Not Overhaul IA&B strongly believes the introduction of a state exchange should supplement, not supplant, the health insurance marketplace in Pennsylvania. The marketplace is strong and continues to work well for millions of Pennsylvanians. The primary objective of an exchange must be providing coverage to those who are presently uninsured. This, we believe, was the underlying goal of federal health care reform and should be reflected in the state s approach to the exchange. Additionally, to prevent unfair competition in the market, the exchange must be bound by the same regulations currently governing the industry. Direct solicitation of those already served by the private insurance market should be prohibited. The exchange should be limited to providing health insurance and related products only, and it should not be authorized to provide any other insurance products or services. A supplementary exchange will also help to curb any potential adverse selection. The purpose of the exchange is to help those who typically have difficulty in securing insurance coverage. If the market drove the highest-risk individuals into the exchange it would not be able to sustain itself. The exchange cannot be all things to all people. Pennsylvania must focus its efforts on meeting the requirements as set forth in PPACA to meet the federal deadline of January 1, By limiting the scope of the exchange, Pennsylvania can keep better control of costs associated with its implementation and the health care system overall. We do not believe that it is the role of the exchange to cure problems related to the increasing costs of health care and health insurance. Improving health insurance in other ways such as creating a universal application or standardizing underwriting criteria as is done with property and casualty insurance may better control costs. Other cost-saving measures include tort reform, improving service delivery, or increased focus on wellness and preventative care, which cannot be addressed through the exchange. The Role of the Agent: Vital to Success Most importantly, IA&B supports the role that agents and brokers play in the health insurance marketplace. Agents touch all facets of health insurance, from patients and doctors to insurers and hospitals, to employers and billing companies. Because they see it all and handle it all, agents can provide a unique, overarching perspective about how the exchange can work best

4 We believe that the agent is integral in helping individuals and small business customers navigate the complex landscape of health insurance with its many plans and options. Because of their typical client base (businesses), agents often have a keen knowledge of laws regulating private insurance, e.g., HIPAA and COBRA, and may serve as a human resource provider for those businesses where needed. Small businesses and individuals simply do not have the expertise or the time to select the best insurance plan, so they rely heavily on insurance producers to help them. Insurance, particularly health insurance and its myriad of levels and coverages, is much too complex a product to leave the consumer to shop for himself. In a related capacity, agents act as consumer advocates for their clients. They are the individuals calling the hospital and the insurer to handle disputes or get a claim paid. The agent is the individual a health care consumer turns to in a time of insurance-related crises. Two of our agents, Jay Mahoney of Gallen Insurance and Jeff Glass of McConkey Insurance & Benefits, both from the York, PA area, described for us the various duties they perform outside the scope of merely securing a policy. They include, but are not limited to: Contribution modeling Agents help businesses to determine how to split the premium cost between employer and employee. Compliance Agents ensuring that the employer is abiding by all labor laws as it relates to health insurance coverage. Communication Agents not only educate the decision-maker, but all employees about the plan, its coverages, and any updates or changes throughout the benefit year. Claims adjudication Agents work with consumers on their behalf in claims disputes with carriers. They navigate the system and help to resolve issues quickly, saving the client potentially thousands in lawyers fees. Additional accounts Agents also work to administer flexible spending accounts, health reimbursement accounts, and health savings accounts for employees on the plan. Availability Many agents make themselves available after normal business hours for these issues, as well as for general benefit questions, claim questions, pharmacy inquiries and network questions. All of these additional roles help to save the business and its employees time and money. Attached to these comments is a letter from the Human Resources Director of Anderson Coach & Travel located in Greenville, PA, describing the many valuable services their broker (and IA&B member) Shannon Rieger of Burns & Burns Associates, Inc. provides the company above and beyond the simple sale of insurance

5 Agents versus Navigators: Why Reinvent the Wheel? PPACA outlines a navigator program to assist individuals and small groups in enrolling in qualified health plans through the exchange. However, as we ve described, there already exists in Pennsylvania a workforce of thousands of agents and brokers who have the knowledge and experience needed to assist consumers with navigating through the intricacies of the health insurance marketplace. We believe that any navigator program established by the state should play a limited, supplemental role to that of agents and brokers for the following reasons: Agents are already well-versed in health insurance plans. They spend their days working with their clients to find the plan that best suits their coverage needs and budget restraints. They possess the knowledge that the state or other exchange-operating entity would have to spend valuable time and resources to disseminate to potential navigators. Although PPACA specifically includes agents and brokers as one of the groups that may be navigators, it also outlines a compensation model that directly conflicts with the way agents are usually paid. PPACA envisions the exchanges providing grants to the navigators and prohibits navigators from receive[ing] any consideration directly or indirectly from any health insurance issuer in connection with the enrollment of any qualified individuals or employees of a qualified employer in a qualified health plan. Thus, a person acting as a navigator cannot receive traditional agent commissions, making it difficult for someone to play both the role of navigator and agent. Agents and brokers are heavily regulated by the Insurance Department in terms of registration, licensing, and continuing education requirements. We strongly believe that any person regardless of his/her title, position or status must obtain an insurance producer license in order to sell, solicit or negotiate insurance; offer advice and counsel to consumers concerning the substantive terms of a health plan or competing plans; or engage in enrollment activities. The producer licensing system has protected consumers for many years by ensuring that only competent and qualified professionals are authorized to sell, solicit or negotiate insurance, and these mandates must continue to apply to all exchange-related activities and enrollments. To enable navigators to engage in these activities fundamentally revises the existing game, creates an unlevel playing field, and places consumers at risk. We believe that all individuals who act as navigators should complete appropriate training and educational coursework, undergo a criminal background check, and comply with all applicable marketplace and consumer protection requirements (including state unfair trade practice acts). All applicants for the navigator program should be properly vetted, and grants should be provided judiciously and with proper ongoing oversight. Since the grants awarded by the navigator program will be made from state - and not federal - dollars, it is also imperative that the program includes safeguards that ensure accountability and transparency and prevent fraud, waste, and abuse. Lastly, we believe it is important that navigators are subject to the clear regulatory authority and oversight of the Pennsylvania Insurance Department and that the Department has the authority to - 5 -

6 take appropriate action against individual navigators and the entities that receive navigator grants when fraud or other improper conduct occurs. Conclusion IA&B appreciates the opportunity to provide input on the state health exchange from the agents perspective. Additionally, IA&B would like to continue to serve as a resource for the Department as work continues on the state health exchange. If you have any questions or would like any additional information, please feel free to contact Lauren Brinjac, Government Affairs Director, at (800) or via at laurenb@iabgroup.com. Thank you

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