As the deadline looms when Illinois’ insurance exchange must be up and running under the Affordable Care Act, Illinois continues to see an exit of major health insurance providers.
Although Illinois recently predicted as many as 16 carriers would be participating in its health insurance exchange, as of press time that number had dwindled to only six. On July 15, UnitedHealth Group - the second-largest insurance company in Illinois’ non-group market - had dropped out.
Steve Klingel, an employee benefits specialist with Cassens Insurance Agency in Edwardsville, says the reason for the exodus of major health providers is simple: the new healthcare law eliminates competition rather than fostering it.
“This law (the Affordable Care Act) that they said was designed to increase competition is doing exactly the opposite, because no one wants to be the cheapest,” said Klingel. “If you wind up being the cheapest carrier, you’re going to get everybody’s bad health risks. That’s why you’re seeing these companies saying, ‘We’re not going to take part in these exchanges.’ That’s the opposite of what real competition in any marketplace should be. Competition should be providing the best product for the least amount of money. But the provisions of the ACA prevent this from occurring.”
Klingel compares it to an analogy wherein the federal government would write a law to govern the sales of automobiles, but with the same competitive restrictions as the Affordable Care Act.
“Let’s say you had Mercedes, BMW, Cadillac and Yugo dealerships,” Klingel said. “Under the same logic as the Affordable Care Act, the government is saying, ‘Mercedes, BMW and Cadillac, you’ve got to get rid of all that fluff and offer the same thing that the Yugo has, and you have to sell your models at the Yugo price.’ That eliminates benefit and quality competition right there. Just as in this example, we’re going to see some very strong niche players in the health insurance market who can’t hang in there anymore or who simply choose not to.” Assurant is one example of a solid player in the Illinois market, says Klingel. The health provider currently still offers maternity care for small groups. Blue Cross Blue Shield had offered maternity coverage as a rider on individual health insurance policies, but made the recent decision to drop it for new and existing policies in Illinois effective July 15.
Klingel says there’s no telling how many - or how few - health providers will choose to remain in the exchange. “I don’t know where the bottom is going to be,” he said. “Some are fighting back. They’re telling clients to reapply by the December (2013) renewal date to get them through all of 2014 in the hopes that this thing (ACA) will blow up on itself.”
According to the Illinois Dept. of Insurance at press time, no major players have left Illinois’ individual healthcare marketplace; Kimberly Parker, communications manager for the IDI, says the department sees “vigorous competition here.”
Illinois has yet to disclose premiums for plans offered on the exchange, which is scheduled to begin enrolling individuals in just two months; under the new healthcare law, the exchange must be established and operational by Oct. 1.
“There will be no adverse impact on the citizens of Illinois,” said Parker. “The Health Insurance Marketplace, previously known as the Exchange, will provide robust options for small businesses and individuals. No major carriers are leaving the marketplace, so there will be no adverse impact on small businesses,” she added.
Where does the traditional insurance agent fit into this new national healthcare dynamic? One thing’s for sure: proponents and opponents of the ACA agree that this role is changing dramatically.
“Before this law, as agents we could design a health plan to suit our individual client,” said Klingel. “Someone could say to me, ‘I take blood pressure medication and need a policy with prescription coverage,’ or ‘I only need catastrophic coverage.’ But we can no longer help our clients in that way. The very nature of our role has changed.”
Under the ACA, a new occupation known as an “in-person assister” or “navigator” is coming into being. According to federal government sources, these positions are currently being filled by individuals and small businesses that are being trained to guide applicants through the mandatory online ACA registration process. Mark Brown, a certified financial planner, accredited investment fiduciary and president/owner of M. Brown & Associates, says among other duties, navigators will be tasked with helping the public review and choose a health insurance plan in states like Illinois that have elected to participate in an insurance exchange.
“These are government employees who will be earning approximately $48,000 a year,” Brown said. “Many of them are being trained now as we speak. They will be responsible for explaining to you, your parents and your neighbors across town how to use your computer, how to navigate the health exchange Web site and how to enroll online - which is required. Illinois alone is hiring thousands of them. Medicare is probably the simplest thing in the world to do (enrolling online), but a lot of people don’t understand how to do it. This enrollment process is going to be much more complicated.”
Brown tested the theory on his under 26-year-old daughter, who works for one of the major hospitals in Chicago. “She’s got all these wonderful coverages from which to choose. It’s not easy,” he said. “There are four to five medical plans. It took the experience of my 26 years in the industry to make sure I knew what I was looking for. Now imagine what it will be like if you’ve never even had health insurance and aren’t familiar with the difference between a deductible and a co-pay?”
One type of insurer who could be positioned to fare well in the new, nationalized healthcare environment is the voluntary or indemnity insurance provider, says Klingel. These companies - one example is Aflac - pay a flat amount of money directly to the insured individual for a specific occurrence that would not be covered under his health insurance plan. Aflac has been offering its products in Japan for four decades, according to Mark Barbier, the company’s Illinois state sales coordinator.
“Aflac has an opportunity to emerge from the evolving healthcare system more vibrant than ever before due to the niche we fulfill in the marketplace,” Barbier said. “As we’ve seen for 40 years in Japan, which has a universal healthcare system, healthcare reform and increasing healthcare costs continue to drive demand for voluntary benefits - and for good reason. As the cost of health insurance rises, employers continue to struggle to control their company’s healthcare expenses. Many have already passed more of the premium costs to employees and have increased deductibles, copayments or out-of-pocket limits. For many organizations, voluntary benefits may help solve a number of concerns and challenges that have surfaced during this time of health care financial insecurity,” he added.
Companies like Aflac who sell voluntary insurance policies- including critical illness, short-term disability, accident, dental, life insurance and more - pay the policyholder directly for unexpected costs associated with serious illness, injury or loss.
Barbier says many of these costs are not covered by major medical insurance and families often do not have extra cash for these emergencies. He sees his company as continuing to etch a very strong identity in the U.S.’s new universal healthcare arena.
Michele Thornton, past president of National Association of Health Underwriters Illinois and a health insurance and benefits consultant with ThorntonPowell, is more optimistic than ever about the future of her profession. Her company’s offerings include individual and group health as well as voluntary benefits coverage.
“With more people able to access healthcare coverage under the (Patient Protection and) Affordable Care Act - both due to insurance reforms like guaranteed issue regardless of preexisting conditions, and financial help in the form of premium tax credits - this has broadened my pool of potential clients,” Thornton said.
Compliance issues for employers of all sizes are mounting, says Thornton, creating more need than ever on the part of employers for sound, impartial guidance. “Costs are projected to rise, at least in the short term,” she said. “As a result individuals and businesses will still need customized, smart and affordable strategies that meet their unique needs.”
Thornton says that even with some of the standardization in place - such as developing a set of essential health benefits that all plans under ACA must cover - health insurance remains a mystery. Examples of essential health benefits are emergency services, hospitalization, maternity and newborn care, and prescription drugs. “There are caveats to each plan and company. Deciding between coverage options will continuing to be challenging for many,” she added.
The days of “selling insurance” are long gone, according to Thornton. Insurance brokers and consultants need to adapt, she says.
“Continued education in our industry is imperative, as is keeping up with the daily news,” Thornton said. “Things change by the moment as more regulations are clarified and parts of the ACA are modified.”