Two years later, Obama health reform law fuels instability, questions


The federal health reform law, a landmark piece of legislation passed by the Democratic-controlled Congress and President Barack Obama two years ago today (March 23), has delivered on its promise to change health care in the U.S.

Barack Obama

However, some of the change is unintended, including the up to 50% cuts to agent and broker compensation that is the subject of an ongoing campaign for exemption, which includes a bill before Congress.

Much of the bill’s effects could be fleeting, if the U.S. Supreme Court rules the law unconstitutional or if Republicans can muster the votes in the next Congress to kill the law. As unstable as the health reform terrain is today, the defeat of the law, after health insurance companies and governments have invested millions into meeting its requirements, could be even less stable.

The Supreme Court has scheduled oral arguments for three days, starting March 26, on the legality of the law, especially its individual mandate. That mandate, the main source of controversy in the Patient Protection and Affordable Care Act, calls for every American to either buy insurance or pay a fine, starting in January 2014.

The attorneys general of 26 states, mostly Republican, will argue against the individual mandate, saying it violates the provisions of the Commerce Clause in the U.S. Constitution. Some critics of the law argue that if Congress can force people to buy health insurance, then it can force them to buy anything else.

The law’s proponents argue that the cost of paying for health care for the uninsured makes it a national crisis worthy of Congress’ action. Congress has no choice but the confront the costly situation, they argue.

Experts say that without the individual mandate an other $18 million people will be uncovered when the law takes full effect in 2014, and some insurance executives say without the individual mandate, the risk pool is too small and costly to support the entire system.

Chet Burrell, chief executive of CareFirst, a Blue Cross Blue Shield affiliate serving Maryland, Northern Virginia and Washington, D.C., said just after the law’s passage that it will “atomize” the small group market in the country. He even suggested CareFirst might leave the small-group market because of the law.

The Supreme Court’s ruling, expected in late June or early July, virtually insures it will become an even larger part of the debate over the next president. The justices’ approval of the law would allow Obama to claim a key victory in what he calls his signature legislation of the first time, while his Republican opponent, based on the statements of his challengers so far, would use it to rally those who oppose the law to elect a Republican president and Congress to overturn the law in January 2013.

Meanwhile, each state continues to use federal grant money from the U.S. Department of Health and Human Services and staff time to develop its plans for a state-based health exchange. The law mandates that each state create a system for people to compare health insurance policies, buy coverage and obtain federal subsidies online. States that fail to perform the task cede control of the exchange to the federal authorities.

And the key driver for the now-four-year-old discussion of health reform – containing costs – remains largely unaddressed. Mandates imposed by the law, including the end of annual and lifetime caps, as well as the requirement that insurers cover dependents of members until they are 26 years old, has added cost.

Under the law, federal officials now challenge any proposed health insurance rate increase of 10% or more, deeming them “excessive,” which further adds to insurers’ costs. The challenges to premium hikes, according to regulators, has been ensure health insurers’ aren’t lining their pockets with excessive profits at the cost of health care.

To further ensure no profit-taking, federal officials imposed a new medical loss ratio (MLR) formula, starting Jan. 1, 2011. That formula forces insurers to invest at least 80% of individual and small-group premiums and 85% of large-group premiums on medical costs, leaving the remainder for administrative costs.

Those administrative costs, so far, have included agent and broker commissions, which have dropped by as much as 50% since the MLRs were imposed, according to the U.S. Government Accounting Office, a nonpartisan research arm of Congress.

Insurance agent trade groups, including the National Association of Insurance and Financial Advisors and the National Association of Health Underwriters, have lobbied for two years, seeking to exempt their commissions from the MLR formula. A bill before Congress would also accomplish the exemption.

However, their ongoing pleas, like many since the passage of the landmark legislation, remain in limbo.


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