D.C. board votes to close private health insurance market to brokers


CLARIFICATION, Oct. 26, 2012: Clarifies that the market would be closed for the purchase of health insurance through brokers, that individual residents will also be affected if the law is enacted, and the need for Council approval continues to remain uncertain.


Washington, D.C., officials are attempting to effectively terminate the sale of private health insurance through brokers to small businesses and their employees, and District residents.

The D.C. Health Benefits Exchange Board unanimously approved closure of the private insurance marketplace through health insurance brokers for both individuals and small businesses, requiring them to purchase health insurance through a city-run online health insurance exchange.

It remained unclear to observers and the board whether the move required D.C. City Council approval to take effect. The board oversees the city’s online health insurance exchange, which was mandated as a part of the Patient Protection and Affordable Care Act.

The law would be take effect in 2014. It would also apply to those who work for small businesses in the District but live in nearby states such as Maryland or Virginia.

The decision by the board was met with opposition from the small business community.

The law would apply to any business in the District with 50 or fewer employees, including those domiciled outside of Washington, D.C., but having a location within its borders. Employers could stay with their current health insurer if that insurer is part of the exchange, but reportedly would expect to see an increase in premium of up to 3%.

The D.C. Department of Health Care Finance reported that that in 2010 the District had about 7,300 small group employers that offered health insurance to their workers, which totaled 125,000 employees. The U.S. Small Business Administration estimated that in 2004 there were 25,600 small group employers in the District; those that do not currently offer health insurance to employees will be forced to when PPACA is fully enacted.

Washington, D.C. has a population of about 617,000, with about 19,000 of those residents purchasing health insurance coverage, according to the finance department report.

While a D.C. exchange board subcommittee called the closure “market consolidation,” small business owners called it a drastic and unnecessary change to the marketplace.

Mohammad Akhter

A coalition of more than 150 small businesses and organizations sent a letter to Dr. Mohammad Akhter, chairman of the D.C. Health Benefit Exchange Board, expressing clear opposition to the move. The coalition argued that small employer budgets already are stretched thin, and that the proposal doesn’t expand options; instead, it substitutes one market for another.

“Eliminating choice by forcing individuals and small businesses to purchase standardized coverage through a government-run entity greatly increases costs and reduces competition,” said Scott Golden, a spokesman for the coalition and principal of insurance brokerage Golden & Cohen.

According to the coalition, the District’s proposal is unlike anything any other jurisdiction is considering. Dismantling and restructuring the marketplace leaves small business owners left with too many unknowns and is too disruptive, the coalition wrote.

The D.C. board did lower the threshold from 100 to 50 the number of employees that would be considered a small business, thereby allowing insurance brokers and agents the ability to continue servicing those firms with more than 50 workers in the District.

The decision would also destroy long-standing relationships between coalition members and health insurers, and benefits advisors, and force coalition members to buy “cookie-cutter coverage that will be offered through a government exchange.”

The D.C. exchange is being created with federal funding of about $73 million. [See how other states are dealing with their exchanges here.]

The coalition’s letter to the D.C. board stated that the new law outlawing private insurance purchases in the District betrayed “President Obama’s repeated assurances that, ‘If you like your health plan…you will be able to keep your health care plan. Period.’”

RELATED: D.C. regulators take over city’s largest Medicaid contractor


29 Responses

  1. Insurance Wholesaler Says:

    WOW!! Another LIE uncovered!!! If have coverage and you like your coverage, you can keep your coverage!! We all knew this was coming, just thought the Democrats would wait until after the election to start showing their spots!

  2. MD P&C retailer Says:

    Obama socialism at its best. What industry is next for takeover? Where is the uproar?

  3. Archer Jordan Says:

    As an independent broker I find this exclusion of private brokers to be contradictory to the wellfare of small businesses. To expect a government run exchange to be considerate of all the individual circumstances that we in the brokerage community have encounterred and dealt with over many years in the business is a reckless disregard for sound advisory service.

  4. Allen Crenshaw Says:

    Small business owners in D.C. (and everywhere else) should simply cancel their health plans and send employees to the exchange(s) directly. Since U.S. employers with less than 50 full-time employees are exempt from the penalty-tax for not providing health insurance, this is a no-brainer decision for them!
    -Allen in Chicago

  5. David Noel Says:

    Based on the comments from Allen Crenshaw, he has clearly never run a successful business before.

  6. civisisus Says:

    confusing “article”. the reporter variously calls the edict a “law” and a “proposal”. which is it? Further, no links to either the proposal nor the council’s letter. Hmmm…..

  7. chuck Brooks Says:

    Allen lives in Chicago. He’s used to the gansta approach to business. You don’t ‘run” the business, you make sure you are on the “take” side with the city officials.

  8. JB Says:

    Oh well, I hope DC is prepared to lose businesses as the move out of the city to VA&MD.

  9. Larry Shirley Says:

    This is why our country is going down the drain.Is the former Mayor Berry still there because that would explain this.Iwould call it “Going Up Your Nose”

  10. J E Maxwell Says:

    Perhaps Obama thinks he’s already won the election and in his usual arrogant, bullying and bulldozer-style is going proceeding with his agenda.

  11. Michael Flagg Says:

    The errors in this piece are so many that It’s hard to know where to start correcting them.

    Let’s begin with the very first sentence, which says, without offering proof or attribution, that the District of Columbia is trying to “terminate the sale of private health insurance.”

    The plain fact is that private insurance companies will continue to sell policies; the only difference is they’ll sell them through an exchange mandated by the Affordable Care Act.

    People who sell insurance don’t like the idea of an exchange because it will bring transparency to what is now a murky market. Their customers will finally be able to compare policies meaningfully and make informed decisions on what to buy, and that’s why these sales people are so opposed to it, and why they have frightened their clients into opposing it, too, using the kind of disinformation in this article.

    Yes, the District, like Vermont, is requiring all individual buyers and small businesses to go through the exchange because D.C. is simply too small to support an exchange otherwise and because the benefits the exchange will bring to insurance purchasers are worth it. The brokers have focused solely on this provision and cried that the District is somehow killing off free enterprise.

    Nothing could be further from truth, despite the distortions in your piece. We believe, and our consultants tell us after more than year of study, that there will be still be a role for brokers in the exchange; that insurance companies will continue to prosper, and that we are likely to bring in still more, meaning more competition; and buyers will get a truly level playing field between them and the people selling them insurance, the kind of transparent and open market that capitalism embodies.

    This is just plain shoddy journalism. You didn’t talk to anybody from the exchange or even state our arguments. As a journalist, you should know better.

    Mike Flagg, spokesperson, D.C. Department of Insurance, Securities and Banking

  12. AH Says:

    Mr. Flagg. Your ideology that a “government filter” or “involvement” results in a better, more competitive end product is ridiculous.

    The issue is, and has been, escalating costs. Would you not agree? So adding another “layer” makes zero sense. I can only imagine how extensive your “extensive 1 year of research” truly was.. Funded by tax money.

    We do need a solution. It’s just seems that a major part of that conversation, the part that says the solution needs to actually work, has been left out of the conversation completely. Obama’s approach, “if you don’t like my solution, you are not for a solution.” What a joke. In business, unlike politics apparently, poor thinking and decisions put you out of business. In politics, unrealistic and poor thinking seem to be the norm.

    JB is right, watch the businesses and jobs move out of DC.

  13. Will L Says:

    There is only one thing to do based on this article, get out and vote for the person who will run things to the benefit of the business owner and not the benefit of government!

  14. Tony Ondrusek Says:


    You are correct that private insurers will be able to sell health insurance to District residents and small employers, through the District exchange.

    It was not clear from our lead sentence nor our headline that the private health insurance market through brokers will be eliminated should the law be fully implemented.

    We have clarified that and updated the story.

    Thank you for pointing out the need to clarify that portion of the story.

    Tony Ondrusek

  15. Rob Berger Says:

    Mr. Flagg, I find it heartwarming that the D.C. Health Benefit Exchange Executive Board places more value on the opinions of it’s self-serving, high-paid, consultants than the opinions of the 7,500 business owners who currently provide coverage today in the District.

    The board, for the reading public’s benefit, is stacked with policy people, their high-paid consultants, academics and shockingly, the Commissioner. Link to their biographies at end of my entry.

    No business owner representation. No agent representation. No carrier representation. Why would you want the opinions of those people most directly involved in any of your decision making? That’s right you wouldn’t want dissenting, logical, opinion, now would you? That might jeopardize the master plan.

    Outrageous and disgraceful.


  16. david Says:

    Mr. Flagg,

    You must think that we are stupid and we should just accept your wisdom. As I see it small business can still have relationships with there brokers but we cannot interact with the exchanges to enroll the group or individual and we are not allowed to work with the exchange to resolve any administrative issues. what a joke you know that is our main function, so I’m going to ask you a direct question ‘ what do you see the role of brokers beginning in 2014’ as i see it you want us out your committee has not one entity that is directly involved in the business of selling insurance my god how do you get away with your actions!!! I would love to be just able to make one decision that could affect your job as much as you have affected ours.

  17. Dave G. Says:

    I am still confused, even after Mr. Ondrusek’s “clarification.”
    So are brokers blocked from participating in and being compensated through the Exchange or not??

  18. David Says:

    To reply to what Michael said,he obviously works for the gov’t so he wants a gov’t run health care system..the fact remains that the gov’t cant run the post office efficiently, how can it run health care!??!… it simply cannot!!!…if the gov’t takes over the health care industry, then it FORCES citizens to buy their product, AND WILL ELIMINATE ALL OTHER COMPETITION,PERIOD!!!!!

  19. Insurance Wholesaler Says:

    Michael Flagg, how dare you say,

    “People who sell insurance don’t like the idea of an exchange because it will bring transparency to what is now a murky market. Their customers will finally be able to compare policies meaningfully and make informed decisions on what to buy, and that’s why these sales people are so opposed to it, and why they have frightened their clients into opposing it, too, using the kind of disinformation in this article.”

    The mere tone of that paragraph is indicative of the districts view of agents! I am an insurance wholesaler and I can tell you the agents I work with go to great pains to study the market and do research to make educated and informed recommendations for their clients.

    My Mom had to sign up for Medicare because of her age. She was so upset because she couldn’t make heads or tails of the government website and the different plans. I had to get an agent to sit down with her gratis to explain all of her choices. My Mom is a real estate agent, had the rep meet her at her office and when the agent showed up, the conference room was packed with people all wanting answers from an agent.

    I don’t agree that, ” the District is somehow killing off free enterprise!” The Affordable Care Act itself did that. Remember, if you have insurance, you get to keep insurance. I work for a very large insurance company and we just got the notice that due to the Affordable Care Act, our insurance is changing!! SURPRISE!!

    Family coverage on the exchanges is more than my mortgage payment. The train wreck is happening right before our eyes and now there is nothing we can do to stop it! We have beaurocrats making decisions for us that have no vested interest in our health and an electorate whose only skin in the game is further redistribution!

    Buckle up all, its going to be a bumpy ride!!

  20. PB Says:

    Echo David’s comments about the gov’t can’t run the post office……go deeper. The gov’t can;t run the gov’t period. it’s why we have 16 trillion dollar to other nations. In the end as written in the Constitution, the gov’t is not to run anything but assist in effectively and efficiently regulating the private businesses in thei country.

    We all know what the answer will be – we have lived it for the last 5 years. it will simply get worse.

  21. maxine casalbore Says:

    I guess I should be shocked at what is happening in DC regarding the exchanges now that the Affordable ACT is in full swing. Alas, I am not! This country re-elected a president who believes that governemnt is the almighty and should control everything. The party he ran under should be Socialists not the Democrats. It is everywhere from the understatement of the real unemployment to the way the federal employees maintain ALL of their rich benefits, take their pay hikes and live on their fat penisons, but scrutinize the private sector! Some Gov’t employees who may invest from inside information while performing their professional duties and then leak information to lobbyists who then legally bring that information to their companies who make hedge bets on stocks! That is what I consider MAJOR insider trading, but our Federal Gov’t somehow skims over this.
    Our governement has still not been able to explain in a clear concise way how to choose a Medicare or Medicaid plan so how is this new program going to be any different? I had to sit for almost 7 hours taking certifiations (CMS REQURIED) on how to explain Medicare to the average person. Then each carrier required their own certification for the products which are all mandated benefits by the CMS!!! We brokers do all this for $300 to $400 per person. How is the average person going to understand the Federal excchange??? Small business brokers receive anywhere from $5 to 3 1/2% per month per person to enroll, explain, compare and manage benefits throughout the year. Now there will be Navigators who will become goverment employees who will need benefits and pensions etc. Guess who will be paying for this?? Socialized medicine here we come. Talk to the doctors and hostpials who are being forced to take huge cuts in their reimbursements. This is just the tip of the iceberg! The term democrat used to mean something….Democracy for all….Freedom to choose as one sees fit…Now just means SOCIALISM and as a registrered democrat, who has not voted in any major primary for someone running on my party ticket, I am angry and you all should be to!!!

  22. Chris Carroll Says:

    I have not validate taht Mike Flagg is actually a representative spokesperson for the Dept of Insurance of DC but if he is, I hope someone within their department evaluates he effectiveness as a spokesperson. I have forwarded my thoughts to the legal counsel and complaint division within said organization.
    As for the comments themselves, Flagg’s statements clearly have outlined the battle lines between government run exchanges as a new deliver system vs. the traditional deliver system most carriers use (private agents). I will not go into lengths concerning how ignorant and possibly libelous the blanket statements Flagg makes towards all agents who fear his agency’s presence will be the guiding light into the murky world of health insurance. However, I will tell you a few things about the market and about how consultants work, if you are willing to put the crayons down and listen to an adult analysis. One – the market uses the current delivery system because up to now, it has been the most cost effective way to deliver their products. If there was a less expensive way to do it, carriers would already be doing just that. They don’t pay agents as co-conspirators to go out and trick consumers. They also don’t pay agents because we are collectively part of some secret club. They do it, because it is cheaper than managing their own sales force, back office and tech support. The article outlines some stats, which I have not checked independently, but for the sake of this review, let’s assume they are accurate. The figure states the fed has given DC $73 million to create the exchange and the Dept estimates 125,000 people are currently insured in this market place. I assume the $73 million is just that, federal funds for creation. The Dept will also provide matching DC funds, and will need continued financial support annually to maintain and run it. They will find out at some point, they will also need a marketing budget, feet on the streets, lunch and learns, web hosted enrollment sessions, oversight, compliance, management, etc… This is all for the deliver of health insurance, not delivery of health care. So let’s look at the starter: $73,000,000 divided by 125,000 members = $584 per member. That is $48.67 per member per month just to create something that already is functioning at around $23-25 in commission per member per month!!!! That is your opener? And you say that agents will still be included in the compensation model or paid navigators? Doesn’t look efficient at first review? You would have done a lot more for those consumers if you would have just spent the $73 million on either their current premium or on something to actually impact the 8% compounding medical inflation costs. A government run approach makes sense in socialist text books, but in no other situation that I am aware of. But then again, the government fall back is a single payer health care system that the government runs, so… It must be like being the house in Vegas – it’s a win win. Two- The goverment is going to make things simple and clear for consumers. Really? Have you read a medicare part D summary. 43% copinsurance for tier 3 meds, until you hit the magic mudslide, then you have to go over the bridge, no around the doughnut hole, yeah that’s it the doughnut hole, then after $4,970 you will have coverage again. How do I know it’s tier 3? Depends, go to our governemnt website and after 30 minutes you can print 300 pages on the top 3 companies formularies and look for it. What if my meds change? Too complicated, have a cookie and pick a plan. They government takes a team of lawyers and 20 pages on non-sense to explain what the average person gets in 1/3 page chart given to them by a live agent. Three- A quick note on consultants, they are hired to consult based on a set of assumptions that the group hiring them gives them. The numbers are easy, based on the assumptions and the desired conclusions. The issue is it doesn’t work that way in real economics. Smart employers will make moves. Some smart consumers will self-fund avoiding paying any insurance premium when the tax is only nominal. Really smart consumers will find the holes. PS My customers know what those strategies are because I advise them effectively. You want health insurance reform, simple expansion of Medicaid to include both people in real financial crisis (not just people leaving below a $12,000 poverty level) and include coverage for people who are uninsurable with premiums associated with affordability. You can use 9.5% of after tax income as the affordability test as that seems to be a number you like. You want health care reform, bigger challenge to answer in this blog but PS ACA is the earlier not the later. http://www.ascd.net

  23. James Says:

    I’m not a lawyer, but this decision appears to violate Obamacare’s section 1312(d)(1), below. I don’t understand how a panel authorized by Obamacare could not be subject to / bound by the plain language of its provisions.


    Public Law 111-148, 111-152, (Obamacare), section 1312(d)–

    EXCHANGES.—Nothing in this title shall be construed to pro-

    (A) a health insurance issuer from offering outside
    of an Exchange a health plan to a qualified individual
    or qualified employer; and
    (B) a qualified individual from enrolling in, or a quali-
    fied employer from selecting for its employees, a health
    plan offered outside of an Exchange.

    MENTS.—Nothing in this title shall be construed to terminate,
    abridge, or limit the operation of any requirement under State
    law with respect to any policy or plan that is offered outside
    of an Exchange to offer benefits.

    in this title shall be construed to restrict the choice of
    a qualified individual to enroll or not to enroll in a qualified
    health plan or to participate in an Exchange.
    Nothing in this title shall be construed to compel an indi-
    vidual to enroll in a qualified health plan or to participate
    in an Exchange.
    A qualified individual may enroll in any qualified health
    plan, except that in the case of a catastrophic plan
    described in section 1302(e), a qualified individual may
    enroll in the plan only if the individual is eligible to enroll
    in the plan under section 1302(e)(2).

  24. Tony Ondrusek Says:

    James, I agree that it is illegal, according to Obamacare, for DC to require everyone to purchase their insurance exclusively through the exchange, particularly as it is noted in 3.B.
    In addition, I have read through the parts of the Affordable Care Act several times, and found nothing there granting the president the authority to delay any portion of the employer mandate, including enforcement of the law. When the law says the government “shall” or “will,” it does not mean that the president can delay or postpone.
    In Maryland, we have a new law that went into effect Oct. 1 that forbids handheld cell phone use while driving. What would have been the ramifications if the governor, on Sept. 30, would have decreed that he was delaying enforcement of the law for a year, even if he was compelled to enforce it by mandate?
    We are on a slippery slope when our leaders are allowed to pick and choose which laws they will enforce or not enforce.

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