Filed Under:Agent Broker, Agency Management

Unconventional Wisdom

Supreme Court decision sends healthcare law to voters

While it seems as though every institution in the nation’s capital leaks information like a sieve, the U.S. Supreme Court is sealed tight. No information gets out until all the justices say so. It’s amazing and refreshing.

Going into June, no one knew with certainty how the court would decide a challenge to the Patient Protection and Affordable Care Act of 2010 (PPACA).

Given the court’s proven ability to keep a secret and the ideological divide among the justices, PIA National staff found it necessary to prepare not one, but three analysis pieces in advance: one if the Supreme Court declared the entire healthcare law unconstitutional, another if the Supreme Court threw out the individual mandate but preserved the rest of the law, and still another if the Supreme Court sustained the law.

Conventional wisdom among the professional punditocracy was that the Supreme Court would void the individual mandate and leave most of the rest of the law intact.

To prepare for the decision, PIA reviewed background documents, including an article by a constitutional law professor who laid out a number of potential scenarios. One scenario was that the court could declare the individual mandate unconstitutional under the Commerce Clause of the U.S. Constitution, but then uphold it by declaring the mandate a tax, under Congress’ taxing powers. This was considered unlikely.

Related: Read the article "Lack of HHS Guidance Holding Up State Insurance Exchanges, Regulators Say" by Mark E. Ruquet.

Experts also speculated that the Supreme Court might find the federal government’s required changes to Medicaid eligibility standards coercive, but make them optional and let the rest of the PPACA stand. This also was dismissed as unlikely.

On June 28, 2012, unlikely carried the day. The law that has come to be known as “Obamacare” largely was sustained. The individual mandate was declared a tax and upheld. The mandatory changes to Medicaid eligibility standards were ruled coercive to the states and made optional.

“It is unfortunate that the Supreme Court upheld a bill that has been widely criticized by the public and the insurance industry,” PIA National President-elect Andrew C. Harris said in a press statement issued within an hour of the decision. “But despite this ruling, the nation’s professional independent insurance agents remain committed to providing their customers with professional advice and choices regarding their health insurance.”

What does the Supreme Court decision mean for agents? National Underwriter asked Harris, who is president of Liberty Insurance Associates in Millstone, N.J., that question. 

“The independent agent is an incredibly resilient creature,” he said. “So many times, the small mom and pop independent agent has been counted out, but they just keep adapting and changing and finding ways to be important to their customer.”

Harris said although agents will make less money, they will have to do more work, as there could be more compliance issues to meet and more paperwork to file. He added that new technology will aid agents with compliance issues. “This will force us to be bigger and stronger benefit managers and not just healthcare [insurance] providers,” Harris said. “That is the opportunity. If we look to be something new and different, let’s not do it halfway, let’s do it all the way.”

Related: Read the article "Private Exchanges a Solution, but Not For All Insurance Agents."

 The court’s decision means that the two sharpest points of contention agents have with the law—the participation of agents in health insurance exchanges and the calculation of agent compensation inside the medical loss ratio (MLR)—will remain top concerns.

From the outset, agents have advocated for their continued involvement and fair compensation in the health insurance marketplace. They have opposed attempts to remove them from the process, whether by substituting unlicensed “navigators” or by cutting agent compensation via MLR calculations. 

The MLR issue has caused the most grief. Agents succeeded in including specific legislative language in the final healthcare law that specifies that licensed, professional insurance agents will be involved in selling policies offered through the health insurance exchanges mandated by the law. But being included and getting paid are two different things. The Dept. of Health and Human Services (HHS) has been intent on lumping agent commissions into the MLR, which encouraged drastic cuts in agent compensation.

Related: Read the article by Elizabeth Festa "MLR Calculations to Get Even More Complicated."

 The court’s decision means that state insurance regulators and HHS will continue to play a primary role in implementing the law. A number of states that decided to delay setting up health insurance exchanges as mandated in PPACA hoped the law would be declared unconstitutional. These states must now make up for the time they lost either by setting up their own exchanges or allowing the federal government to do it for them.

“We urge all states to now deal with the issue of insurance exchanges in a manner that guarantees the right of insurance consumers to rely on the expertise of licensed professionals as they make important decisions about their health insurance coverage,” Harris said. Fortunately, many states are more favorably disposed to involvement by agents than is HHS.

We can expect to see renewed federal legislation calling for a repeal of PPACA, but it won’t go anywhere, at least not right away. Because opponents lack control in the Senate and White House, such legislation will fail, unless and until the political dynamic changes.

In the final analysis, the Supreme Court’s decision means that the fate of the healthcare law enacted in 2010 will ultimately be determined by voters in the 2012 election.

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