Congress is like the late comedian Rodney Dangerfield. Sometimesit passes laws, only to have them interpreted into somethingdifferent by the federal bureaucracy charged with implementingthem. Considering this, it would be understandable if lawmakerswere to complain that they "don't get no respect." A fewexamples:

1. Congress places language in the healthcare law stating thatindependent agents and brokers are to be included under the newlyreformed system. But the Dept. of Health and Human Services (HHS)takes steps to ensure agents won't be fairly compensated.
2. Congress has not contemplated imposing price controls on theprivate sector. But the Federal Crop Insurance Corp. (FCIC) is nowdictating how much private sector insurance companies cancompensate their insurance agents.
3. Congress wisely decided in 1981 that direct government sales ofcrop insurance are inefficient and producing losses, so it turnedto private sector insurance agents to deliver crop insurance. Thelosses turned to gains and the program is making billions for theTreasury. Now, a union of federal employees is lobbying to turn theclock back 31 years and throw private sector agents under the bus,so the union members can immunize themselves from potentialcutbacks.

Crop Insurance

Employees of the U.S. Dept. of Agriculture's Farm Service Agency(FSA) are lobbying the USDA to be the sole agency to handle theprocessing of crop insurance claims and collecting acreagereports.

Related: Read the another article by Ted Besesparis"Potential Frankenstein."

FSA's employee union, the National Assn. of FSA CountyEmployees, has asked its members in a bulletin to contact USDA andtell them that "FSA of the USDA should be the sole designatedentity to take the acreage reports for all USDA purposes." Further,"agents have a motive for selling policies that are based uponacreages" and that "it does not make sense to pay a crop insuranceagent to take the report on insured crops and FSA take acreagereports on all other crops."

With continued pressure to cut funding for farm programs, theFSA's employees union has apparently decided it can protect itsmembers' jobs by attacking private sector crop insurance agents andtaking over agents' functions. Moving certain parts of the cropinsurance program back to the FSA would set the program back threedecades to a time when the program was inefficient, underused andadministrative costs were significantly higher.

The union said, "the more involved FSA becomes in crop insurancefunctions, the greater the potential cost savings andefficiencies."

The public/private partnership that has developed over the yearshas been critical to the overall success of the crop insuranceprogram. Removing functions provided by the private sector from thecrop insurance program and replacing them with federal employees ispoor public policy and risks increasing, rather than reducingcosts.

Price Controls and theFCIC

It must come as a big surprise to members of Congress that thefederal government is imposing price controls in the privatesector. The last time this happened was when President RichardNixon did it in 1971. It was quickly abandoned because it was adisaster. So why is the FCIC doing it now?

FCIC, which administers the crop insurance program, includedarbitrary caps on agent compensation in the Standard ReinsuranceAgreement (SRA) for crop insurance that it negotiates with privatesector insurance companies offering coverage through the program.Prior to this, these companies had determined how best tocompensate their insurance agents. But now, this federal agency isdictating caps on agent compensation to carriers in the SRA. Thismeans that for the first time since 1971, an agency of the federalgovernment is imposing federally mandated price controls on privatesector insurance companies and producers. This is very bad publicpolicy. On other lines of insurance like flood, the governmentsuggests voluntary controls on agent compensation, but carriers arenot obligated to adhere to them and can pay their agents more.

Related: Read the article "Comity in Congress?" byTed Besesparis.

Over the last ten years, the Federal Crop Insurance Program(FCIP) has generated an unprecedented net gain of $3.9 billion thatgoes directly to the U.S. Treasury. The ongoing success of thisprogram should be incentivized, not subjected to continued cutsthat will jeopardize its proven success. FCIP is not a cost center,it is a revenue generator for the U.S. Treasury. Beyond that thereis a philosophical question: should the federal government bedictating prices to private companies? PIA firmly believes theanswer to that question is a resounding "no."

A De Facto Public Option by Fiat?

Grassroots opposition is building around the country to federalaction that threatens the ability of agents and brokers to continueselling health insurance.

When Congress passed the healthcare reform law in 2010, agentssucceeded in getting language inserted in the bill stating thatagents and brokers will be full participants in the new system.

Under the new law, insurers must spend at least 80 percent ofindividual and small-group premiums and 85 percent of large-grouppremiums to medical costs, leaving the remainder for administrativecosts. HHS then issued an interim regulation saying agent andbroker commissions must be calculated as administrative expenseswithin the medical loss ratio (MLR), which is limited to 15 percentor 20 percent of premiums.

The upshot has been that many agents have seen theircompensation from health insurers decrease by as much as 50 percentsince the MLR regulation went into effect Jan. 1, 2011, accordingto the nonpartisan Government Accountability Office.

After studying the issue for a year, theNational Assn. of Insurance Commissioners (NAIC) finally endorsed alegislative resolution that would preserve consumer access toagents and brokers. NAIC also urged HHS to take immediate action tomitigate the adverse effects the MLR rule is having on the abilityof insurance producers to serve the demands and needs of consumers.HHS summarily dismissed the NAIC's recommendations.

Resistance to agents and brokers remaining involved—and properlypaid—under the health insurance reforms enacted in 2010 is comingprimarily from HHS. But efforts to counter the HHS rule aregathering steam across the nation.

• Ohio: Lieutenant Gov. and Dept. of InsuranceDirector Mary Taylor recently co-sponsored a resolution urgingmembers of Congress and HHS to change federal law that would harmagents and brokers who sell health insurance. She called attentionto her action by issuing a guest column(http://www.insurance.ohio.gov/Newsroom/Pages/01092012AgentsRole.aspx)which is a ringing endorsement of the value of agents andbrokers.
• Florida: Insurance Commissioner Kevin McCartyis continuing the work to free agent commissions from the deathgrip of the MLR. McCarty—who is president of the NAIC this year—gotthe NAIC in December 2011 to urge HHS to exempt agent commissionsfrom the MLR. HHS rejected the request a few days later. Workingwith agents in Florida, McCarty has formally petitioned HHS toreconsider.
• Maryland: a group tasked with implementingfederal healthcare reform is recommending that insurance agents andbrokers continue to sell small-group health insurance when healthexchanges begin operating in the state. The recommendations weremade by the Maryland Health Benefit Exchange, which was set upunder Maryland law to help implement the exchanges. The group saidthe council wants to "build on the existing" system for small-groupinsurance because duplicating those services with unlicensednavigators would be expensive and inefficient.

Congress made it clear that agents should continue to deliverhealth insurance products under the Patient Protection andAffordable Care Act (PPACA) when it included specific language inthe law to that effect. But apparently this conflicted with theview of some at HHS who seem to think that consumers need only tobe sent to a government-built website to purchase healthinsurance—and that the only assistance available to them shouldcome from either an unlicensed "navigator" or an online FAQ.

Related: Read the article by Ted Besesparis "StillAfloat."

The departure of former Pennsylvania and Oregon insurancecommissioner Joel Ario from his job at HHS supervising the buildingof health insurance exchanges turned out to be a big negative, asArio appreciated the critical role played by independent agents andbrokers. Now HHS is left with people who, when they think ofinsurance delivery systems, seem only to think in terms of websitesand geckos. It is conceivable that some in HHS may think they canignore the will of Congress and lay the groundwork for an eventualde facto public option in health insurance through regulatory fiat.This could be brought about with regulatory steps calculated toreduce competition, driving smaller insurance companies and theagents who represent them out of business.

There is a common thread running through all of this. HHS iselbowing agents and brokers out of health insurance, federalemployees are trying to eliminate agents from servicing croppolicies and another federal agency dictates agent compensation.All of these actions are being undertaken by government employeeswho believe that the government is more efficient and effectivethan the private sector.

Congress already has gone on record saying it wants agents andbrokers involved in health insurance, it supports private sectordelivery of crop insurance, and it has not endorsed federal pricecontrols. The problem is, bureaucrats tend to march to their owntune. That's when lawmakers must repeat what they already havestated, so that the unelected will get the message and not attemptto undo what Congress has already done. It's a matter ofrespect.