Imagine this scenario for a moment. The Republican-controlled U.S. House of Representatives considers a bill to reauthorize for 5 years a large government program that has an $18 billion debt. The bill does not address this debt. An amendment to abolish this program is defeated by an overwhelming margin. Then, the bill to extend this program for 5 years is passed on a bipartisan vote of 406-22.
This is not a fantasy. It actually happened. Republicans and Democrats from across the political spectrum came together and agreed that the federal government needs to remain in the business of making flood insurance available to Americans.
Is this widespread support for the Flood Insurance Reform Act of 2011 (H.R. 1309) introduced by Rep. Judy Biggert (R-Ill.), the chairman of the House Financial Affairs Committee, a harbinger for less acrimony and more comity in Congress?
What it does prove is that Congress realizes that the NFIP provides an important service to people and places affected by floods that is not provided by the private market—which has been almost entirely unwilling to underwrite flood insurance because of the catastrophic nature of these disasters. Therefore, the NFIP is the only way for people to protect themselves against the loss of their homes and businesses.
It also demonstrates that there is a broad, bipartisan consensus that the NFIP is a vital component of America’s economic prosperity. Among reform provisions, the bill phases in risk-based premiums and phases out subsidies for certain properties, including high-risk buildings subject to repeat claims, and confirms FEMA’s authority to use private reinsurance in lieu of taxpayer exposure to mitigate risk.
While the process to achieve compromise on the flood reauthorization and reform bill has moved very smoothly to this point, there is concern about the legislative calendar. The Senate must still pass its version of a bill, which then must be reconciled with the House-passed bill. Congress reconvenes just after Labor Day. That leaves only a few weeks for final action before the next scheduled expiration of the NFIP on September 30.
Agents and Healthcare
Agents and Healthcare
When Congress does reconvene, the toxic political poison and gridlock afflicting our nation’s capital could leach into other areas—to the detriment of insurance agents. One issue is whether health insurance agents will be fairly compensated, or pushed out of helping consumers.
Republicans in Congress are planning to take another stab at dismantling healthcare reform. The situation regarding healthcare reform mirrors the partisan gridlock in Washington, D.C., and that—more importantly—also is being played out in the states.
A little over half of the states are moving toward setting up health insurance exchanges, which the Patient Protection and Affordable Care Act (PPACA) requires be done by 2014. A large minority of the states are either dragging their feet or refusing to set up exchanges, running the risk that the federal government will step in and do so, as provided in the law. At the same time, more than a dozen states are participating in various court challenges to portions or all of the healthcare law itself.
One focus of professional independent insurance agents regarding healthcare reform has been trying to ensure that whatever happens, agents do not get shut out. Language in PPACA makes clear that agents are included in the healthcare delivery system that the legislation sets up.
But being included and getting paid can be two different things.
The Dept. of Health and Human Services (HHS), in preliminary regulations, included producer compensation in the calculation of medical loss ratios (MLR) that limit administrative expenses to 15 percent or 20 percent. As a result, many agents across the country tell us that has led to their carriers cutting their compensation by as much as 50 percent.
State legislators involved in insurance matters have provided strong, unwavering support for insurance agents on this issue.
In July, the National Conference of State Legislators (NCOIL) unanimously passed a resolution declaring that the HHS regulations should be amended to remove agent and broker compensation from medical loss ratio (MLR) calculations. NCOIL unanimously endorsed the Access to Professional Health Insurance Advisors Act of 2011 (H.R. 1206) by Rep. Mike Rogers (R-Mich.) that would exclude agent and broker compensation from MLR calculations.
The record of the NAIC on this issue, however, has been mixed.
Last year, it appeared that the NAIC membership was poised to pass a resolution supporting removing agents from the MLR. But then, that resolution was abruptly pulled from the floor and a vote on it was not allowed. Instead, the NAIC passed a non-binding resolution declaring that agents are "indispensable" in helping consumers purchase health insurance through the new insurance exchanges. It also appointed a task force to come up with recommendations on producer compensation.
After months of study, the NAIC’s Professional Health Insurance Advisors Task Force voted overwhelmingly to endorse H.R. 1206. But the NAIC Executive Committee declined to follow the recommendation of the task force it appointed. Instead, it intends to pursue a compromise with HHS.
By not following the recommendation of the task force it appointed to deal with this matter, the NAIC’s Executive Committee seems to have undercut its own position. Endorsing H.R. 1206 would only strengthen the NAIC’s position on this issue with HHS. And passing H.R. 1206 would settle the issue by taking it out of the hands of HHS. We expect NAIC leadership to make their position clear to HHS that agents are indeed indispensible and deserve to be fairly compensated for their services.
Private Sector Successes
Private Sector Successes
Even HHS is being forced to grudgingly admit that independent agents provide value. Enrollment in the federal government’s Pre-existing Condition Insurance Plan fell far short of its goals. So what did HHS do? It lowered premiums and started paying agents an enrollment commission. Several states also experimented with using agents, with good success.
One way to ensure that private sector agents and brokers are full participants in the new health insurance exchanges would be to model their participation on the highly successful delivery system used by the Federal Crop Insurance Program (FCIP). For more than 35 years, FCIP stumbled along with no growth, no new products and no incentive for farmers to buy a policy—until private sector companies and agents were put in place to deliver crop insurance starting in 1981.
The public/private delivery system for crop insurance has been so successful that some federal bureaucrats fearful of losing their jobs are attacking crop agents. A union representing Farm Service Agency (FSA) employees—who are trying to immunize themselves from future federal budget cuts—is trying to get crop agents out of servicing crop policies so that FSA can take over their functions. This would turn the clock back to the pre-1981 period, when the crop program was serviced inefficiently by the federal government.
While the federal government will not back insurance policies offered through the health insurance exchanges, increased federal and state involvement in the marketplace under the Affordable Care Act makes this situation ripe for a public/private delivery system similar to the one used for crop insurance. Simply put, agents and brokers should sell health insurance policies and provide professional advice to consumers—as they do now.
Unfortunately, there is also a mind-set at work within the federal bureaucracy that runs counter to any private sector involvement. This mind-set contends that government, not the private sector, is more efficient and can provide better service.
That’s just not true. The key to the success of any system to deliver insurance products is to embrace the private sector and use independent insurance agents and brokers to deliver the product. That record of success speaks for itself.