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Repealing Reason

Getting down to work and focusing on what’s best for clients. That’s always been the honest and most secure route for success in any field of insurance and financial service.

This month’s feature from Assistant Editor Susan Rupe repeats that lesson, this time in exploring agents’ experience in dealing with the tumultuous changes in health insurance. No surprise that the agents doing best had prepared early and were in a strong position to deal with the cascade of catastrophe that was the Affordable Care Act (ACA) rollout.  While others were fighting and gnashing their teeth, these folks were learning and repositioning their practices.

It’s a lesson the National Association of Health Underwriters (NAHU) learned as well. NAHU initially fought implementation of the ACA, arguing that the law endangered the entire health insurance agent profession. The association had a valid point because at first the law seemed to have left out agents and replaced them with navigators. Later, it became clear that agents would be more important than ever – and that they could get paid under the new system.

NAHU also was isolated because the health insurance company association, America’s Health Insurance Plans (AHIP), had jumped on the reform wagon early. That was a surprise to many who remembered that AHIP was a major player in defeating Hillary Clinton’s health reform campaign when she was first lady. Remember the devastating “Harry and Louise” commercials? They were produced by Health Insurance Association of America, a forerunner of AHIP.

So why did AHIP join up? The association recognized that universal health coverage was coming, so the insurance companies conceded that they would cover everybody regardless of individual factors, including pre-existing conditions. But everybody had to be in the pool to spread the risk, a basic tenet of insurance.

Happily, there were plenty of precedents for this. President Richard Nixon proposed an employer mandate in 1974. The conservative Heritage Foundation in 1989 promoted an individual mandate to require personal responsibility for medical liability. That was a major reason that the mandate was an important part of Republican Gov. Mitt Romney’s 2006 health insurance reform in Massachusetts, which has been considered successful by many measures.

So, you might have expected cheers from conservatives when President Barack Obama and congressional Democrats preserved the role of private insurance in 2010 by including the mandate along with universal coverage in ACA. It might have been especially satisfying because it disappointed many on the left who were pushing for a single-payer system like Medicare.

Of course, we know that “hurray” was not the sound that followed the law. As recently as September, radio show host Rush Limbaugh called the individual mandate a “sign of an oppressive, statist, pure socialist government.” More sober-minded conservatives have articulated their opposition less flamboyantly, but it is clear that the war is still on against the mandate and the ACA itself.

In fact, the entire enterprise may be entering its most dangerous phase. ACA opponents have their fingers on the thread that could unravel the system and the private health insurance industry.

It is the three R’s: risk corridors, risk adjustment and reinsurance. If these sound unfamiliar now, odds are good we will be hearing quite a bit more about them over the next few months. They are part of the ACA meant to help insurance companies through the transition as the law was implemented.

After all, it was not difficult to see companies were facing considerable disruption and uncertainty. This is particularly true because of many concessions to compromise, such as the low impact penalty associated with the mandate and extending non-ACA plans for a year. Companies had to price policies without knowing how many young, healthy people would sign up to offset the old, sickly ones. They had to balance stability with competition for lower rates.

The three R’s are designed to compensate companies for their losses during the first couple of years to ensure the survival of insurers and the ACA itself. But many are decrying this as a bailout, because, in fact, it is.

This is hardly the first time government backstopped the insurance industry. For example, the Terrorism Risk Insurance Act (TRIA) under President George Bush reinsured insurance carriers in cases of terrorism.

The United States has a long history of stepping in to help protect an industry in times of uncertainty. So why is this becoming an issue? Because it can defeat Obamacare. People still bent on doing this do not care that this would damage an industry. They don’t mind that Americans would endure another several years of turmoil as a result. They seem OK with a single-payer system being a possible outcome of the ACA’s failure.

Let’s remember how the ACA came about. A growing number of people were uninsured and underinsured, basically with worthless coverage. In 2010, 81 million people, 44 percent of adults, were either underinsured or uninsured, up from 61 million in 2003, according to the Commonwealth Fund. The United States is routinely at the top of the list of per capita medical expenses but among the lowest outcomes among developed nations. And even health insurance agents complained about trying to get their clients’ treatment covered in the plans they sold.

The system had to change. The answer approved by the three branches of government – Congress, the president and the Supreme Court – was the ACA. It is far from perfect, but the ACA was designed to preserve the private health insurance industry while solving coverage problems. It was a compromise using ideas from across the political spectrum. It seems like a uniquely American solution that preserved the best of this nation.

Isn’t that worth keeping?

Steven A. Morelli

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. Steve may be reached at [email protected] Follow him on Twitter @INNSteveM. [email protected].

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