This is not a good time to be trying to predict with accuracy how the insurance industry will fare in the wake of the 2016 elections. Much remains unknown.
One factor that will come into play is the extent to which President-elect Donald Trump differs on some specific issues from the Republican Congress. Usually, when the same party holds the presidency and majorities in both houses of Congress, the picture is clear. This time, Trump's inexperience in the political arena makes the insurance industry's future uncertain.
An altered landscape
Controlling both houses of Congress, Republicans are likely to concentrate on reducing regulations, cutting taxes and generally pursuing business-friendly policies that promote economic growth. Trump, a businessman, can be expected to support these broad goals.
Under this rubric, an issue such as tax reform should be a no-brainer. Another area in which change is likely to proceed smoothly is the effort to roll back portions of the Wall Street Reform and Consumer Protection Act (Dodd-Frank).
The National Association of Professional Insurance Agents (PIA) supports such a rollback, as Dodd-Frank has given too much power to federal entities to regulate insurance companies; this excessive federal involvement was on display particularly with its creation of the Federal Insurance Office, which the PIA opposes. Hopefully, the elimination of the FIO would be included in any roll-back of Dodd-Frank — but here's where things get more complicated.
A Dodd-Frank rollback bill, the Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act (H.R. 5983), was passed by the House Financial Services Committee this year. But buried in it was language that bolstered rather than reduced the federal oversight of insurance. The provision would create a new federal office in the Treasury Department called the Office of the Independent Insurance Advocate. That office would merge with the FIO. Rather than being headed by an employee hired by Treasury — as is the case with the FIO — the independent insurance advocate would be a presidential appointee, subject to Senate approval, with a six-year term. The bill authorizes the Independent Insurance Advocate “to employ attorneys, analysts, economists and other employees as may be deemed necessary” to assist the office in carrying out its duties and functions.
All bills that have been introduced but not passed will die before the 115th Congress convenes in January 2017. The Financial CHOICE Act is likely to be reintroduced, either in its current form or an altered one. As a staunch supporter of state insurance regulation and opponent of federal insurance regulation, PIA will remain vigilant in its efforts to ensure that no new paths to the federal regulation of insurance are created as part of any Dodd-Frank rollback.
The National Flood Insurance Program is up for reauthorization on Sept. 30. Efforts are underway to secure a five-year reauthorization, which PIA supports. President-elect Trump has yet to comment on the program.
There's widespread bipartisan support to the "Cadillac Tax" provision of the Affordable Care Act, making its repeal likely. (Photo: iStock)
Obamacare: Repeal or replace?
By far, the biggest question is what will be done about Obamacare.
Trump made repeal of the Affordable Care Act a major plank of his campaign. Days after his election, Trump reversed himself on completely eliminating the ACA, saying instead he would like to keep two of its popular features. He said that the ban on insurers denying coverage to individuals who are sick “happens to be one of the strongest assets,” of the law. He also said he would try to keep Obamacare's provision allowing adult children to stay on their parents’ plans until the age of 26. Trump said he plans to repeal the law and replace it with new law “simultaneously,” so coverage would not lapse.
One issue that straddles both tax policy and healthcare is the “Cadillac Tax,” a provision in Obamacare that imposes a 40 percent excise tax on so-called “overly generous” employer-provided health plans. Initially set to take effect in 2018, Congress voted this year to delay it to 2020. Essentially, the Cadillac Tax is a back-door attempt to ration health care and raise funds to pay for the ACA. It applies a disincentive to employers in an effort to reduce the benefits of people who already have good coverage, to help finance a lower level of coverage for more people. The Cadillac Tax is a health policy time bomb that would begin to destroy the private sector's system of employer-based coverage upon its detonation in 2020. There has been widespread bipartisan support for the elimination of the Cadillac Tax, making its repeal likely.
Another part of the ACA is a regulation that classifies producer compensation as an “administrative expense” in the calculation of total administrative expenses, which are limited to 15 percent or 20 percent under the act. As a result, health insurance agent and broker compensation has been slashed by health insurers in the small group and individual markets, leading to an exodus of qualified, licensed agents and brokers capable of serving people covered by ACA-backed plans.
Looking ahead to the 115th Congress, there is cause for continued but cautious optimism. The unexpected election of President-elect Donald Trump will bring issues to the forefront that would not have been under consideration otherwise.
Ted Besesparis is senior vice president of the National Association of Professional Insurance Agents in Alexandria, Va. Any opinions expressed are his own.