Health industry officials say Obamacare premiums will likely double, and in some cases triple, in certain parts of the country next year, in part because of the flawed launch of the new exchange marketplaces mandated under The Affordable Care Act. Announcements of rate hikes could come within months, with the most significant cause of rate increases related to projections about the number of young healthy individuals and families who would enroll, which have proved to be way off the mark.

The projection of double or triple-rate increases fly in the face of remarks by HHS Secretary Kathleen Sebelius, who said that “the [rate] increases are far less significant than what they were prior to the Affordable Care Act,” in testimony before the House Ways and Means Committee last week. This runs contrary to the way health insurance industry officials view rates in the coming year.

We’ve all been hearing about how younger people aren’t signing up in anywhere near the numbers needed or projected. So, why are young people important? In a phrase: adverse selection, which means, far more older, sicker people than younger, healthier ones in the pool, which creates – wait for it – higher claims costs that are almost certainly not supportable by current premiums.

In an article entitled Young Invincibles Are Killing Obamacare, Megan McArdle writes for Bloomberg View: “Young healthy people, and a lot of them, are needed to keep the market stable and premiums low. As we head into the final few weeks, we have a pretty good idea of how many young healthy people there will be, and the answer is: a whole lot fewer than the healthcare wonks were expecting.” Unfortunately, her dismissive analysis of the coming “death spiral” of Obamacare was flawed, even if she herself says that reaching anywhere near projections for young enrollees is “not likely”. Surprisingly, she concludes: “… it is now probably impossible to achieve the demographic mix that the government has been forecasting. And keeping it from happening may well prove very expensive for the federal government”.

How expensive? In his blog ACA Death Spiral, Seth Chandler, a law professor at the University of Houston Law Center, writes a thoughtful analysis on the Kaiser Family Foundation study of early, low enrollment of younger participants in Obamacare, cited by Ms. McArdle in her column. His analysis and conclusion is posted as “The Kaiser analysis of ACA enrollment has problems”, and is a good, if somewhat dense, analysis of how difficult it is to make an accurate projection, and why the projected deficit in insurer profits isn’t 2.4%, as projected by KFF, but “rather a  [deficit] projection of 4.5%”.

This is not good news for premiums, or for costs related to Obamacare that the federal government will be required to pay for. With rates for 2015 likely being filed this summer for approval prior to 2014 open enrollment, it increasingly looks like Obamacare will be the election year issue of 2014.

Kaiser Health News is reporting that the Obama administration is preparing to implement yet another rule change in the rollout of Obamacare that would relax the enforcement of the medical loss ratio (MLR) provision for health insurers.

To review:  The MLR provision, which took effect in 2012, requires all insurers in the individual and small-group  health insurance market to spend 80% of every insurance premium dollar (85% for insurers in the large-group market) on medical care and expenses for customers, according to specific guidelines developed by the government. Only the remaining percentage of 15-20% can be used for administrative costs and profits. If an insurer does not meet its minimum-loss ratio, it must issue a rebate to its customers.

From Heritage.org: “In the Federal Register, the Department of Health and Human Services signaled it may give insurers a temporary break on the ratio requirements, citing “the special circumstances” of the disastrous launch of Obamacare’s federal exchange website (HealthCare.gov). The administration also made other last-minute political changes during open enrollment, which ends on March 31.”

The minimum-loss provisions have been roundly criticized in this and other forums, as insurers would have little reason to manage claims costs below the MLR, since they will be penalized for doing so. It essentially sets the allowable limit for profit, regardless of how efficient or how successful a carrier is. In other words, health insurance carriers are regulated as utilities (a concept I first ran across in a well-known industry publication more than fifteen years ago).

The issue appears to be that insurer costs relating to the botched launch of Obamacare will make it difficult if not impossible to meet the MLR. Of course, at that point, if losses due to claims and other costs exceed revenue (likely, in my opinion), then the next big crisis will be “risk corridors”, which will compensate health insurance carriers for unanticipated losses. An understanding of this can be found here. And yes, it is a bailout, since the government agreed to compensate insurance carriers, who are required to meet claims and loss guidelines mandated by the government, for losses under The Affordable Care Act.

That it is considered to be a bailout by conservatives and not-a-bailout by progressives is a given. The reality is that the taxpayer is on the hook for outflows from companies who agreed to participate in the health insurance exchanges, if inflows don’t meet requirements for claims and costs (very likely, given that much lower numbers of previously-uninsured applicants, as well as applicants who are in the younger ages that the plan requires, have actually enrolled in Obamacare). In fact, many in the media get it completely wrong, as detailed here.

It is puzzling to me why some Republicans are quick to introduce legislation forbidding insurer compensation (known as the risk-corridor provisions) for losses incurred in meeting the requirements of Obamacare. They’d be better off simply allowing the Act to come apart on its own, which is what will happen, given the amount of panicked fiddling that is occurring with its implementation, and replacing it with something that will work, minus all of the social re-engineering. Eliminating the risk corridor provisions of Obamacare will simply bankrupt most carriers who agreed to participate in the exchanges, since they will be unable to sustain the losses that will occur given the conditions as they exist “in real-ville”. It’s been obvious for some time that the estimated number of uninsured, by most left-of-center pundits and think tanks, including FamiliesUSA, was optimistic; those numbers were used to justify and support all of the projections needed to make Obamacare work. That it isn’t working shouldn’t now be a surprise, and bankrupting insurers will simply provide Democrats with the end game they’ve always wanted: the death of the private health insurance market. Republicans should brandish the “no bailouts!” banner with great trepidation.

Today, The Wall Street Journal reports on  Obamacare’s secret mandate exemption. An amazing read!

A few choice quotes below:

“last week the Administration quietly excused millions of people from the requirement to purchase health insurance ..”

“the mandate suspension was buried in an unrelated rule that was meant to preserve some health plans that don’t comply ..”

“shifting legal benchmarks offer an exemption to everyone who conceivably wants one.”

The article concludes: “The larger point is that there have been so many unilateral executive waivers and delays that ObamaCare must be unrecognizable to its drafters, to the extent they ever knew what the law contained.” Indeed.

OK, there – I said it. It will be an unmitigated disaster. The relationship between The State and The Citizen has now been forever altered. I’m of course speaking of Obamacare, a.k.a. The Affordable Care Act. But, from now on, we’ll just call it Obamacare for short. Has such a great ring – after all, hasn’t The Prez himself now embraced it?

It will not be our place, going forward, to rail against the excesses of the great unwashed masses who really did vote for “stuff”, including “free” health care, such that it is. Rather, it will be our  pleasure to point out all of the unintended (really – unintended? but I jest) consequences of the greatest piece of social engineering that has ever hit a nation, short of the Russian Revolution. Stay tuned, as this is going to get really entertaining – or, perhaps not, depending on your viewpoint (you small business owners, who have just been reclassified as a “large business” – you know what I’m talking about).

Obviously, I’m no fan of this legislation (thankfully, having an opinion isn’t a hangin’ offense – yet). Obamacare is, of course, the opening gambit in the final throes of a complete government takeover of the health care sector – whether five years or twenty years from now. In spite of the near-complete abdication by the media of their responsibility to report what is factual and accurate about Obamacare, some truths have filtered out. So, one of our responsibilities will be to elaborate on these “truths”, in spite of the near-total blackout you’ll get from most in the media, so that you, my dear readers, can begin to understand the enormity of what one-party rule and flagrant “gifting” to minority coalitions can create. Havoc, in other words.

(My sympathies in advance of those who will look back fondly on these pre-Obamacare days of full-time employment – meaning, forty hours a week, that is. Working two part-time jobs is really going to be stimulating!)

Beyond that, there will be numerous changes (hell, I might as well say it – changes in the thousands!) to health insurance, health insurance regulation, health insurance markets, health insurance policies, health insurance coverage, health insurance taxes – you get the idea – over the coming five years, as we rush headlong into the full implementation of Obamacare, which doesn’t fully  land on everyones doorstep until 2018. We will be here, barring some unforeseen event, giving you all of the gruesome details, so that you can watch the unfolding train-wreck with us. Get the popcorn. Lock the door.

By the way, as of this writing, SCOTUS has decided that the Liberty University lawsuit, essentially about religious liberty and the new contraceptive mandates, should be heard, and apparently will be tracked to eventually wind up with the Justices. This may or may not be a side-show: it may give the Court a second bite of the apple when it comes to the constitutionality  of Obamacare. Yawn. I don’t think this is going to change much – I mean, what are we now 0 for 3? – not counting an election. I feel somewhat better about the Courts’ recent decision (9-0) regarding religious liberty, but beyond that, I don’t see this impacting the roll-out of Obamacare except in certain narrow ways – and this Administration will just do what it wants anyway. And besides – who ever said that Obama wants religious groups, such as the Catholic Church, delivering health care anyway? Better to turn it over to non-profit and completely controllable Accountable Care Organizations. They’re easier to unionize, anyway.

Next week I’ll talk about the new federal health plan option for states that have decided to back-hand the feds and refuse to start their own exchanges. Yes, we finally now have a “public option”. Stay tuned…

Media reports suggest that today (or, at, least, this week) the Supreme Court will hand down its decision on The Affordable Care Act. To briefly recap, dozens of states sued the federal government to overturn the act; the reasons for that suit are varied, such as the individual mandate, but include such issues as Medicaid funding requirements, which is a huge unfunded liability for states.

I’ve resisted the urge to handicap the forthcoming possibilities, but I do have an opinion. Right or wrong, I’m going to publish it today; one way or the other, the debates between Mr. Obama and Mr. Romney about health care in the upcoming general election will be fascinating to discuss in light of what the SCOTUS decides.

There are four possible outcomes: to do nothing and leave the entire Act standing; to narrowly strike down just the mandate provisions; to strike down the mandate and two other major provisions (which is the position that the Obama Administration said should happen if the Supremes conclude that the individual mandate is unconstitutional), and the fourth: declaring the entire Affordable Care Act unconstitutional.

I have no idea what the “Vegas line” is on this decision, so, I will take my shot-in-the-dark and lay odds:

Do nothing: 12 to 1. Not likely.

Strike down just the individual mandate: 6 to 1. Too narrow, and creates a bigger problem.

Strike down the mandate and the provisions relating to it (the position argued by the Administration if the mandate is unconstitutional): 4 to 1. The Administration wins, and the remaining Act becomes a rallying cry for progressives who always wanted the single-payor option (and this decision almost guarantees it).

Strike down the entire Act: 3 to 1. The most sensible solution of all.

My reasons for giving the best odds for striking the entire Act lay in the unprecedented suit brought by a coalition (frankly, a majority) of states against the federal government. I’m unaware of any action brought against the government by so many states, and this alone should prompt an unprecedented examination of the role of the federal governments’ power to pass legislation that intrudes on the right of the states to govern themselves. It also bears pointing out that the federal government is, technically,  a government of limited powers (the term “states rights” is not a pejorative for discrimination, despite what liberals have always said) with the remaining powers reserved exclusively to the states. With the individual mandate exceeding any rational understanding of the purpose and use, even in liberal hands, of the Commerce Clause, the demand by the states to be relieved of a burden they clearly feel is unconstitutional has to be carefully considered. The strange manner in which the Act was passed, the lack of ANY bipartisanship (or, of that matter, any input from anyone except the Progressive Caucus in the bills ultimate form) the distorted cost projections, not to mention the majority view of the Act across the nation by voters – all of these things must be taken into account by the Justices. Never mind that they are legal scholars who pass judgment on constitutional issues at the highest level; there is and always will be a political element to every controversial Supreme Court decision. Couple this with the lack of a severability clause, and my opinion is that the Supremes err, not on the side of caution, but on the side of good sense: telling Congress that this legislation is so flawed and so intrusive that it would be best to just start over.

And that is what I think the Supremes will do. If they don’t, they will be performing a major disservice to the country, by leaving in place a huge entitlement program that completely remakes the social contract between the government and its citizens (or should they now be called subjects?) without any rational means to pay for it (assuming that the Commerce Clause doesn’t allow the government to tell you what you must buy), while dooming a portion of the insurance industry to almost-certain extinction or, worse, outright nationalization or regulation as a monopolistic utility, with the government calling ALL the shots, while re-distributing massive tax increases to pay for it.

Whatever they decide – it’s going to be interesting. And don’t forget that, in the absence of any new federal legislation, states, including Colorado, will be in a position to craft their own solutions, which is how it should be in the first place. The fact is that Colorado state Republicans control the House by a slim one vote margin – and history shows that in the early 90’s, Colorado’s Governor Roy Romer (D) threatened to pass a single payor system unless “health reform” was enacted, which set us upon the very path we now walk.

Let the games begin! Quoting Rep. Michele Bachmann: ““The decision on Obamacare goes well beyond health care,” she wrote. It “will determine whether or not the court believes the government has a right to mandate that Americans buy a product or service, a direct impact on our freedom and liberty.”

As I’ve written before, one of  the central defenses for the Affordable Care Act, as put forth by the Administration and echoed by all of it’s supporters, is the case for uncompensated care. Briefly stated, the Administration argued that uninsured patients drive up the costs of the delivery of health care sharply, and that cost is borne by all who are insured – hence, the primary reason for Obamacare.

I’ve also stated that this is, in fact, a canard – the total cost of uncompensated care is a scant fraction of the cost of Obamacare, now estimated by the Congressional Budget Office at somewhere around $1.76T for the first ten years (and this figure will rise, probably rise to more than $2T within the next year or so, unless the entire statute is declared unconstitutional or repealed). Spending the functional equivalent of $2T to fix a problem of less than $100B is not efficient – it’s one that only the federal government would develop, support, and champion.

The data that was used to make much of the argument around uncompensated care comes from a study done by FamiliesUSA, an ultra-left wing group that is on record as supporting a single-payor system. In that study, published in 2009, the cost of uncompensated care was estimated at $43 billion, the figure used by the Obamacare lawyers in it’s brief before the Supreme Court.

But as it turns out, there are major flaws in that study, and it should come as no surprise to anyone who follows how the left uses suspect statistics and shady reasoning to advance an agenda, the flaws inflate the costs to arrive at a foregone conclusion. David Hogberg, writing for Investors Business Daily Online, details the specifics here.

Researchers, led by Jack Hadley at the Urban Institute, examined uncompensated care and arrived at a different conclusion in the Kaiser Commission on Medicaid and the Uninsured: that uncompensated care was “most likely about $8 billion. Given that total private health insurance expenditures in 2008 are estimated to be $829.9 billion (from NHEA projections), the amount potentially associated with cost-shifting represents less than one percent of private health insurance costs.” Documented here.

If the feds were really serious about “uncompensated care”, they’d look no further than their own under-compensated reimbursement scheme for Medicare, which dictates what Washington pays for its care under Medicare and other social welfare medical programs – which is in fact a far greater cost-shift to the private market than the care that is delivered to the uninsured. The accounting gimmick used – price fixing by Medicare through the HHS – transfers billions in costs directly to every American with a health insurance policy, and dwarfs any amount spent for uncompensated care that the Administration is touting as its primary reason for Obamacare.

The Department of Health and Human Services (HHS) has just announced that any and all FDA approved “contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity,” will be provided under ObamaCare “without cost” in college/student-based health plans, and for women of college age but not attending school.

Senators John Barrasso, R-WY, and  Sen. Tom Coburn, R-OK, have co-authored a report detailing the disaster known as Obamacare. Senators Barrasso and Coburn have a unique perspective on the emerging octopus of centralized/federalized health insurance: they are both physicians.

Some excerpts from the 38 page report:

• Warned the health care law could eliminate about 788,000 jobs. CBO Director Doug Elmendorf confirmed in Congressional testimony that the health care law would reduce the workforce by approximately 800,000 jobs.
• Concluded the Medicaid expansion’s “extra costs forced upon state taxpayers and state governments could climb into the hundreds of billions of dollars”. In fact, according to a tally of state estimates, the law will impose about $120 billion in additional costs on states, just in the first few years of the law’s implementation.
• Explained the Community Living Assistance Services and Support (CLASS) program was “a budget gimmick to appear to offset new spending” and warned the program could “expose taxpayers to tens of billions of dollars of loss” because it was would eventually collapse. The Department of Health and Human Services (HHS) has admitted CLASS was unworkable, and shuttered the program.
• Cautioned “the appearance of Medicare‘s extended solvency is actually only a mirage. In reality, under the new law, Medicare‘s unfunded liabilities will grow worse”. The Medicare Actuary late concluded that Medicare’s unfunded liabilities are made worse by about $2 trillion under the law.
• Warned that “as the new law is being implemented, millions of Americans are in danger of losing their current health insurance.” HHS concluded that, under the law, between 39 and 69 percent of businesses will lose their status as “grandfathered health plans”—plans largely unaffected by the law’s new mandates. HHS estimates by 2013, up to 80 percent of small businesses will lose their grandfather status.
• Noted that “rather than fixing an issue everyone in Congress agreed was a problem, Congressional leaders left the doc fix out of the final health bill” because of “budgetary shenanigans” to decrease the appearance of the bill’s cost. We warned that this policy omission “could endanger access to care for millions of seniors. In fact, Congress has already had to intervene several times to prevent severe cuts to physician reimbursements that would harm seniors’ access to care.

An eye opening report that every employee worried about their employer abandoning their health care, and every employer worried about the spiraling cost of benefits, should read.

Quote: 

“When I say ‘If you have your plan and you like it,… or you have a doctor and you like your doctor, that you don’t have to change plans..”

“What I’m saying is the government is not going to make you change plans under health reform.”

(Editors note: unless you have an HSA!)

These are well-known comments from POTUS Obama in the time leading up to the passage of The Affordable Care Act, and afterwards as he flew around ginning up support for an incredibly bad piece of legislation. We now know that these comments aren’t accurate, or even, strictly, truthful. And they directly impact so-called Bronze plans, of which HSAs should be a component. Only, they won’t be.

It should come as no surprise that Democrats despise Health Savings Accounts (HSA for short). Their leading left-wing think tanks routinely lambast them. It’s been somewhat hard to understand why the Administration hasn’t been dissing them openly since the passage of Obamacare; now we know why. They are simply going to eliminate them without a shot being fired, due to a complex series of rules and regs that could only be interpreted as willful, and involve the actuarial percentage of benefits paid in each Gold, Silver, and Bronze plan, and the confusing effects from a price control enacted for political purposes.

The Medical Loss Ratio (MLR) Rule is the culprit. HSAs, under this regulation, cannot qualify.

The MLR Rule requires insurers to spend no more that 20% of premium on administration in the small group and individual markets and 15% in the large-employer market. This spells trouble for high-deductible health plans in exchanges, since only 5% of those with an HSA qualified health plan in a year have any claims paid by their insurance.

HSAs, in summary, are high deductible plans that allow cash to be set aside in a fully tax-deductible savings plan to be used to pay for out-of-pocket expenses before the deductible is met. HSA-qualified health insurance policies are usually lower cost than many fully-featured health plans, and are especially well suited for many small business sole proprietors, or others who believe saving money to pay for their own out-of-pocket costs is better than giving it to an insurer, who is in essence subsidizing other health insurance claims with their dollars.

Here’s part of the problem: payments made by an insurer for health care expenses count towards meeting the MLR Rule; payments by individuals out of their health savings accounts do not. Taking into account the complex rules for “credibility adjustment” and “cost-sharing adjustment” for companies that sell high-deductible plans, HSA-qualified or not, it appears that, given the lower claims-paying of HSA  or other high deductible plans, it is mathematically impossible for any plan to meet the MLR of 80%. This would mean no Bronze plans in the Exchanges, since they cannot meet the complex and required Minimum Loss Ratio Rules.

Obviously, plans with higher deductibles are being intentionally disadvantaged by this arcane formula because they cannot count claims incurred below the deductible. Since Bronze plans under the PPACA cover 60% of the benefit costs of the plan, it seems unlikely that HSA plans will be eligible under this scenario, even though the original guidance showed HSA plans as being eligible based on their deductible range (See here). Further, the carrier must still process claims below the deductible to track deductible expenses, but no cost of that processing can be applied to the MLR’s.

I draw my final conclusions from this study prepared by the HSA Coalition:

“Clearly, the MLR adjustment factors for cost-sharing and credibility help companies offering high deductible plans but only if they have low enrollment. Most [insurance] companies will likely see little benefit because the adjustments end up being minimal and ultimately disappear because of the way the MLR formula is constructed. In the short-term, this could limit future growth of HSAs in the fully-insured markets (individual, small group, large group) and put extra pressure on premium pricing to minimize potential rebates. Insurance companies (especially the current market leaders) may be encouraged to sell more expensive plan designs with more first-dollar coverage (e.g., HMOs and traditional PPOs)because it will be easier to meet the MLR requirements. The result could be a future market dominated by more expensive plans, dramatically reducing affordability of coverage and adding significantly to the costs of income-based subsidies provided under the law, since the subsidies are based on the weighted average premiums for Silver plans in the “market area.”

The end result will be that the exchanges will likely be dominated by high-cost health plans with few lower cost options available, leaving people out of the market – until they desperately require health insurance coverage. This will quickly drive up the cost of coverage, expanding the subsidies needed to pay for it.

A summary of the problem is here. And, here is a detailed article on MLR’s Potential Effect of HRAs and HSAs.

UPDATE on 2/26/12 – Quote: “The obstacles Obamacare creates for consumer-driven health plans could lead to their extinction, even though they are an affordable form of coverage that is gaining in popularity.” See this link.

We tried to tell ’em, but no one on that side of the aisle listens: health reform inevitably drives health insurance rates even higher due to mandates and required coverage benefits on every policy (in Colorado, this was made worse by action at the state, not federal, level, when the Democrat ‘super-majority’ passed mandatory maternity coverage for every individual health policy sold or renewed in the state). This year, the average premium nation-wide rose 9 percent, higher than the last two years combined.

Want the whole story? go here.

And, before you think this report is biased, read this: the Centers for Medicare and Medicaid Services (CMS) estimates the growth in health insurance costs will increase 10 extra percentage points in 2014 because of health reform – a 14 percent increase, versus 3.5 percent without the law.

An interesting comment on what agents and brokers bring to their clients:

“The thing many people don’t know about our industry is that health insurance agents are in the business of saving lives. Like family physicians or ER surgeons, agents are intimately connected with their clients’ quality of care — and are often exceptionally hands-on in fighting for a treatment or surgery to be approved by the insurer so that it can be performed by the doctor.

This same hands-on guidance is needed before coverage is in place. Choosing a health care plan is no easy task, as anyone who has shopped for an individual health plan will tell you. It is also frequently not an affordable task. In a struggling economy, one of the biggest challenges agents now face is convincing people that health care coverage is a necessary expense, not an expendable one.”

I thank the contributor for an industry newsletter for this observation. This commitment to the client is a hallmark of all good agents and brokers. Somehow, Washington misses the point when they pass legislation that specifically excludes agents from assuming their rightful place as a trusted advisor to the public, and instead empowers entities with an agenda not wholly in keeping with the best interests of the general public (or, private-sector employees!) to do the job that trained and ethical insurance agents have been doing for decades. How so, you say? Believe it or not, under the Affordable Care Act, agents and brokers may not be compensated, and aren’t recognized as traditional insurance licensees for the purposes of placing health insurance. In essence, your health insurance agent or broker, whether you use individual or group insurance, will be out of business on January 1st, 2014. He most likely won’t be able to assist you – and, assuming you need to use an exchange-based product (a good bet for many people) you won’t be allowed to use him.

Of course, the conventional wisdom from HHS is that agents and brokers will of course be allowed to assist their clients and prospects through the exchanges. And this is about as far as the mainstream media will take it (they really don’t want to get involved in the details, you see). What HHS is really saying is that if a state wants to allow agents to enter the exchanges, they can do so, under new rules announced recently. But under the AFA, they still can’t earn a commission for the placement of a health insurance policy or group plan. We can however, receive “grant money” through the health insurance exchange, known as a “Navigator” grant (but the funding for these grants cannot come from federal funds). What’s really interesting is that agents and brokers are a long way down on the list of specific “entities” are are allowed as navigators, and, as I recall, weren’t originally included in the Navigator section under Obamacare, and this is telling: included in this list are groups and organizations whose primary focus isn’t in serving the public with accurate insurance information: consumer-based nonprofits and unions lead the list. I’ll let you, the reader, figure out why unions would be allowed to act as navigators with employees of primarily non-union employers.

Of course, HHS will allow the state exchange to “enforce existing licensure standards, certification standards, or regulations for selling or assisting with enrollment in health plans and to establish new standards or licensing requirements tailored to navigators”. Color me sceptical, but I foresee some Insurance Departments making it easier, not harder, for previously unlicensed entities to act as navigators, and harder for traditional agents and brokers, who primarily work as independent contractors with a cottage-industry business model. It’s simply a matter of scale – a union or a non-profit is very familiar with the way government works, and can easily acquire any expertise required to achieve navigator status and apply for grants to enroll large numbers of eligible individuals – they themselves have the resources to hire employees, under a broker license, to do just that. As a national operation, they are tailored-made for the kind of large scale enrollment activity that Obamacare requires. Individual agents work alone, sometimes in larger agencies, but rarely with more than a few dozen agents. Inevitably, there will be problems with compensation for agents and brokers. We don’t receive salaries from a union.

There are other hurdles that agents will find hard to meet – almost as if they were specifically being targeted for extinction through the use of the navigator process. For instance, navigators must “provide information in a manner that is culturally and linguistically appropriate to the needs of the population being served”, along with other heretofore nonexistent requirements for agents and brokers working in the private-sector insurance market. While, again, the devil is in the details, I doubt that many agents, assuming a strict interpretation of these requirements to receive navigator grants, will be able to meet these onerous requirements, especially given the nature of the lack of any clear compensation path. It’s another matter entirely if the governing board of the health insurance exchange, empowered with granting navigator status, is anti-broker, as will almost certainly happen in some (most?) states. As proof of the politics involved, consider the number of state insurance commissioners who continue to insist that agent compensation not be excluded from the Minimum Loss Ratio rules as a pass-through cost – almost ensuring the death of the traditional insurance agent in the role he’s always played in the delivery of health insurance policies to the public.

In Colorado, exchange legislation was adopted in May 2011, with the passage of SB 11-200, The Colorado Health Benefit Exchange. The legislation as passed and adopted does not address any issues regarding navigators in Colorado, and in fact does not mention agents or brokers in any way shape or form.

I can only draw the conclusion that, barring a Supreme Court decision invalidating The Affordable Care Act in it’s entirety, or the election of a super majority of Republicans in the House and Senate at the federal level (and the election of a Republican President in 2012) my role as an agent/broker advising the public as a licensed insurance agent on health insurance and group benefits will most likely come to an end in 2014. This isn’t anything new, of course: Hillary Clinton, who headed up her own scheme for a government takeover of health care, was asked by an agent in 1993 what would happen to health insurance agents under her plan. The Wall Street Journal quoted Clinton as saying, “I’m assuming anyone as obviously brilliant as you could find something else to market.”

Spoken as a true central planner. One wonders what else they will “nationalize”.

In a bulletin issued March 15th, 2011, the Colorado Division of Insurance has “changed its interpretation” of their previous bulletin, issued in December of 2010, regarding maternity coverage for individual health policies issued in Colorado.

The controversy stems from a difference between the “applicability clause” in the enabling legislation, HB 10-1021, and the statute, as enacted. The applicability clause states that maternity coverage was to be provided for both issued and renewing policies, while the statute, as enacted, calls for maternity coverage to be provided only for “issued policies”. The Divisions’ initial guidance under the previous Bulletin did not require the coverage on renewal policies.

In it’s new bulletin, the Division, after “further statutory review”, finds that, in its opinion, the provisions of HB-10-1021 does indeed require coverage for maternity expenses for issued and renewing individual sickness and accident insurance policies and health care coverage contracts, reversing in toto it’s previous position, without showing any specific reason or legal basis for the change in its position.

Now, it’s no secret that this Bill was controversial, rammed through a Democrat-controlled legislature without any input from either the industry or the minority, and signed by the Governor post-haste. While touted as a “reproductive services” bill that ensured fairness, in actuality there is no fairness in requiring males of any age, children, and females of non-child bearing years to pay for this expansion of maternity coverage. Certainly, purchasing individual health insurance with maternity coverage was available in Colorado – so, what was the point of the legislation?

Colorado’s Democrat legislators have been attempting to recast the individual health insurance market as the mirror image of the small group market for years, and this legislation is one result of that thinking. The downside to this, and the biggest problem, is the cost to such a policy. Anyone who looks at group coverage, as compared to individual coverage, is aghast at the price, a point most Democrats seemingly ignore, and which has contributed to the decline in Colorado’s small group insurance pool, especially since the repeal of risk-based premium provisions in the small group market.

A quick analysis of the rates now being charged for individual health policies shows that the legislation has, indeed, made individual health insurance policies more expensive, and will have a negative effect on new policy issuance in Colorado. One wonders if that was the intent of the legislation – after all, with higher premiums, a certain segment of the population is locked out of the market, just simply based on price. If one can only buy Cadillacs, rather than something cheaper, does one simply not buy? This has the effect of increasing the pool of un-insureds in Colorado,  rather than expanding the pool of covered individuals, regardless of what the PR coming from Democrats would suggest.

Let’s not forget that Colorado residents lost a strong carrier when Aetna withdrew from the Colorado market due to this legislation. Will we have others withdraw, as well? One only needs to look at the disastrous outcome of the Kentucky health insurance market (and others, notably New Jersey) to see what will transpire as more and more carriers flee the state because of their inability to expand the risk pool because of high premiums, mandated benefits, and hostile regulatory and legislative actions.

Of course, Democrats have us covered there, too: their real solution is to get rid of all carriers and saddle the residents with a single-payor system. I shudder to think what that will cost in higher taxes and job loss.

Lastly, to add insult to injury, the Division, in its decision requiring maternity coverage in all policies renewing after January 1st, 2011, has authorized carriers to retroactively charge additional premium for the coverage, assuming the carrier has filed and has approved such premium. Even if the carrier has not filed for rates relative to renewal maternity coverage, the Division will allow such retroactive charges, once rates are approved, to the policyholder.

I’ll research and comment on the average rate increases this latest exercise in “fairness” will cost the average Colorado health insurance consumer in another post, assuming that such information is even available.