Joseph Totah
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Joseph Totah is a former independent insurance agency owner and founder of, an informational website for agency principals, executives and producers. He also wrote “Guide to Starting an Independent Insurance Agency.”

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Joseph Totah is a guest columnist for

David Allen Coe’s song “Take This Job and Shove It” was a big hit on the country charts for singer Johnny Paycheck in 1977. And that sentiment towards oppressive employers seems to have taken hold among state governors in most of the country.

A majority of states – 26 of them, with mostly Republican governors – rejected the chance to spend their own money and set up exchanges. Only 17 states decided to go ahead with implementing their own state version of the exchanges. Florida and Utah did not respond one way or another by the Dec. 15, 2012, opt-out deadline the federal government imposed, which is itself illustrative of the blessings of our classical federalist system.

Recall that Florida’s attorney general, Pam Biondo, led the 26-state challenge to the Obamacare mandate that resulted in the monumental Supreme Court decision last summer that narrowly upheld the constitutionality of Obamacare on the Chief Justice’s shaky reasoning that the mandate penalties are a tax – and Congress has unquestioned constitutional power to levy taxes, whether they are a good idea or not.

The remaining states are implementing a hybrid approach, combining the federal and state effort.

Why did a majority of the country reject the Obamacare exchanges?

A combination of factors, including fundamental opposition to an unfunded mandate, and worries that the exchange operators would have to rat out state citizens and small businesses to the feds for not complying with the federal regulations.

“When job creators and Wisconsin families are facing difficult times it doesn’t make sense to commit to a federal health care mandate that will result in hidden taxes for Wisconsin families, increased health care costs and insurance premiums, and more uncertainty in the private sector,” said Scott Walker, the Republican governor of Wisconsin, earlier this year, flatly rejecting the premise of using state money to build an online health insurance exchange.”

Kansas – where the Secretary of Health and Human Services Secretary Kathleen Sebelius once served as insurance commissioner and governor – received a $31 million dollar “early innovator grant” from the Federal government that would require them to set up an exchange. They sent it back.

So that leaves the Obama Administration and his Department of Health and Human Services to do it – and some people are wondering if they can pull it off. Indeed it is looking increasingly as if the Administration has painted itself into a corner.

Dropping the Ball

Meanwhile, the Obama Administration, having created this system, is having tremendous difficulties creating the massive information technology backbone required for their insurance exchanges to work. Current estimates are that they are running at least three months behind an already tight time schedule just trying to write software. That’s hanging up everyone waiting on the Feds to come up with their solution, because the states still have to make it work.

(See related story: Exchange launch, operation questioned as fed is late with new rules)

So where does that leave agency principles? In limbo. All carriers whether in states that rejected the exchange or not, are still wondering how they need to package their data and have developers write code that will be compatible with whatever exchanges come up.

A project this size takes years in the private sector; in the public sector, with its nearly universally-unionized employees and Byzantine approval systems for even small decisions, the timeline will be even longer.

Meanwhile, the clock is ticking. All these exchanges must be ready for enrollment on October 1, 2013. That’s just eight months away.

The looming sequestration could throw off the Administration’s timeline even further. The across-the-board spending cuts threaten to furlough federal workers involved in the project, slowing the process further.

So what can agency heads do? Well, first, find out if your state will authorize your agency as a “navigator entry.” According to Families USA:

“Navigator entities” receive grants from the exchange to carry out a number of duties: (1) they are experts in eligibility and enrollment through the exchange, and they provide public education about the exchange; (2) they provide fair, accurate, and impartial information and services that must “acknowledge other health programs” (We understand that to include Medicaid and CHIP, for example, in addition to plans sold in the exchange.); (3) they facilitate selection of a qualified health plan…

They refer to consumer assistance programs and appropriate agencies when enrollees have a complaint, grievance, or question about their health plan, covered benefits, or a determination made by their plan; and (5) they provide culturally and linguistically appropriate information to consumers. Navigators must receive training that is specific to their duties. Exchanges must award navigator grants to at least two types of entities. One must be a community- or consumer-focused nonprofit group. The other entity may be any of seven other types specified in the rules, one of which is “licensed agents.”

However, remember the conflict of interest rules: If your agent or broker works as a navigator, that individual can’t receive compensation for enrolling people in plans via the exchange.

Also, keep an eye on how regulations evolve. For example, it is quite possible that regulators will insist that all licensed agents must be able to sell any of the plans offered on the exchange – a move that would all but do away with the captive agent system for health care.

Looked at more broadly, though, the exchange system seems to us like a dagger pointed at the heart of the agency system. This isn’t unexpected. Indeed, it’s been a long time in coming. Insurance carriers have long wanted to be able to bypass the agent and sell directly to the consumer. The problem: Insurance isn’t canned tomatoes. It is sold, not bought. Few consumers wake up, go down to breakfast, and then buy insurance on their own. They buy it because they were solicited by an agent who showed them they needed it.

Will the mandate overcome the natural reservations Americans have about taking initiative to buy insurance? It’s too early to tell. But agencies that rely on medical insurance sales need to be quick on their feet, and be ready to position themselves as navigators and educational resources.

Ultimately, there’s no substitute for the agent/client relationship. It’s just going to take a while for policymakers to figure that out. In the meantime, hang on.

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See also: Health insurance costs could rise $500 per month for smokers on Jan. 1

Ohio health insurance company sues state, feds

11 states get extra $1.5 billion for online health insurance exchanges

Republicans push for extension of health exchange rules comment period



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