The public option is back in the discussion about health insurance — and the agent community fears it would further hamper their ability to serve clients, while doing nothing to rein in costs.
The public option — the idea of creating a government-run health insurance plan to compete with existing carriers — was included in the Democratic Party platform. President Barack Obama also spoke out in favor of the concept in an article he wrote in the Journal of the American Medical Association, saying consumers should be able to buy health insurance directly from the government.
Meanwhile, Democratic presidential candidate Hillary Clinton has said if elected she would work with interested governors to implement state-based versions of the public option. She also favors allowing consumers to enroll in Medicare at age 55.
Public option supporters say a government-run plan would add another element of competition to the health insurance marketplace and would lower premiums, especially if the government is able to dictate low reimbursement rates to doctors, hospitals, drugmakers and other medical care suppliers.
But those who represent the agent community told InsuranceNewsNet that a public option actually would decrease competition rather than increase it, and would hinder consumer access to professional advice.
“Our concern has always been that a public option — a government plan — reshapes the playing field and makes it less of a level playing field for private plans,” said Michael Keegan, senior vice president with Health Agents for America. “We’re concerned about consumers’ ability to have plans to choose from. Are you going to have a marketplace that is geared more toward the government? When government comes in and ends up the big player, will this crowd out competition? Will this crowd out private insurers? Will consumers have the choices that they would not have otherwise?”
In addition to its pushing out competition from private insurers, another concern raised was the cost of running a public option. A price tag has not yet been put on a public option, but nearly all discussion of such a proposal emphasized that the program would have to be self-sustaining.
Keegan pointed to the health insurance exchanges and health insurance co-ops that were established under the Affordable Care Act as examples of why a public option would end up costing the government more money. A number of insurance carriers whose products were sold on the exchanges have cited enormous financial losses from their ACA business, while 16 of the original 23 co-ops have shut down because they could not afford to remain in operation.
“Health insurers already have a head start in terms of creating provider networks,” he said. “To be a new entrant in that market really is very difficult. It does require a lot of money if you’re going to get a robust plan in place and create these networks.”
A public option that is financially self-sustaining “is a great idea in theory, but if you want to put it into practice, I don’t think those numbers will add up,” said Diane Boyle, senior vice president of government relations for the National Association of Insurance and Financial Advisors. “Would it throw more competition into the mix and drive costs down? If anything, it would exacerbate cost shifting and drive prices up. How can it be self-sustaining? Where does the money come from? Nobody is saying.”
NAIFA President Jules Gaudreau echoed the concerns about cost in a statement in which he said a public option “would impose a huge economic drain on states. The potential loss of millions of insurance-related jobs and billions in annual state premium tax revenues would be devastating to our already financially strapped state economies.”
Health insurance agents already are struggling with reduced and eliminated commissions from policies they sell on the exchanges. Throw a public option into the mix and agents could be squeezed even further.
“This will further squeeze compensation,” HAFA’s Keegan said. “There is an assumption by some in the state and federal governments that agents are just salespeople. Certainly when you look at what goes into servicing clients, it’s much greater than that. At what point will agents and brokers even want to stay in this business? If agents and brokers leave, consumers will be hurt.”
At NAIFA, Boyle said part of what is fueling the public option discussion is the perception that agent commissions are driving up the cost of health insurance. “What is missed is the value that the agent brings to the system,” she said. “How do you replace that service? How do you get access to a professional who offers guidance?”
Would a public option go so far as to eliminate health insurance agents altogether? Boyle said it depends on how the option is structured. “The devil is in the details,” she said. “Look at the exchanges. When they were first proposed, the question was, would the exchanges put agents out of business? Depending on how they’re designed, absolutely they could.”
Boyle said she doesn’t believe the public option will gain momentum, “but if it does, do we step in and ask if there is a role for the agent within that structure? Access to professional advice even in a government-run plan is going to be necessary. How is the government-run plan going to enroll individuals, how is it going to provide consumers with access to advice? Even in that scenario, could there still be a role for the agent? Will it be a meaningful, fairly compensated role? Probably not.”
The National Association of Health Underwriters is dusting off the position paper it issued against the public option back in 2009 and updating it as it prepares to do battle against the proposal again. In that position paper, NAHU cautioned that a government-run option would lead to unequal competition and long-term market damage.
“Since the public plans reimburse providers at lower rates and account for other administrative costs differently, the playing field would never truly be level. For example, private health insurers pay providers upfront while Medicare merely reimburses them based on what Medicare is willing to pay out for any given procedure,” the NAHU paper said.
“It is a fundamental insurance principle that unequal competition in the market over time will lead to adverse selection and long-term market damage.”
NAHU also is concerned about the cost impact a public plan option will have on all Americans.
“If Congress creates a public health plan option for the under-65 population, privately insured people will be forced to bear significant indirect costs due to its existence,” according to the NAHU position paper. “Existing public programs like Medicare and Medicaid pay providers a reduced rate as a financing mechanism. There is a great deal of evidence to show that providers then shift these costs onto the private payers. Any expansion of a public program or buy-in plan would only increase the amount of cost being shifted to the privately insured.”