Congressional Republicans want to repeal the Affordable Care Act in its entirety. But a more serious threat to the law may be the lawmakers trying to pick apart the new law, piece by piece. And the latest effort along these lines is an effort to preserve the fees that insurance agents and brokers make on sales.
At the moment, brokers play a critical role in our private health insurance system. Large businesses typically have large benefits departments, staffed by experienced hands, to navigate the world of coverage and negotiate the best arrangements for employees. But individuals and small businesses rarely have such expertise at their disposal, even though the insurance market they face is, if anything, more complex.
Individuals and small businesses have a harder time finding affordable and comprehensive coverage, because they are the consumers that insurers screen most aggressively for poor medical risks. In fact, just figuring out what kinds of plans are available can be a struggle. States regulate these products inconsistently, insurers come and go all the time, and critical information about coverage can be hidden deep within manuals that even the most diligent readers would find incomprehensible.
Brokers try to fill this need, by helping individuals and small businesses to figure out this market. Many brokers do a fine job. They are frequently worth the price we pay for them, individually and collectively.
The problem is that there’s a much simpler way to make insurance comprehensible, and secure, for individuals and small businesses. You can create a standard benefit package that all insurers must include in their plans, regulate insurance business practices so that carriers must offer coverage to all people regardless of pre-existing medical condition, and then create an electronic marketplace--complete with quality information about the plans--so that even a relative novice could shop around for solid, reliable coverage.
That, of course, is precisely what the Affordable Care Act does. But where does that leave the brokers? And their fees?
It’s more than a hypothetical issue, because the Affordable Care Act limits the amount of money insurers can spend on administrative costs. In wonkspeak, it’s called setting a minimum for the medical-loss ratio, or MLR. Acting on the advice of state insurance commissioners, the administration rebuffed lobbying by the brokers decided that their fees count towards the MLR. In response, insurers are likely to demand brokers take lower fees or try to bypass them altogether.
But the brokers haven’t given up. They’ve been lobbying Congress to rewrite the law itself, so that it takes away the administration's discretion and explicitly protects their fees from regulation. They may succeed. Brokers are more a more powerful lobby than they might seem, given their relatively small numbers. Among other things, they have their ears, and trust, of their clients, which include doctors, lawyers, and other professionals that have clout of their own. Politico’s Pulse reports today that the broker amendment has a decent shot of passing. And Pulse is usually right. Among other things, Senator Ben Nelson of Nebraska has taken up the cause.
Politically, picking a fight with brokers may not be the wisest thing for the law’s backers to do. Substantively, brokers may still have value to add, depending on how well the new exchanges work (particularly if some states don't get the exchanges right on the first try). But making the health care system more efficient is going to mean paying less for some things and, truth be told, I’d rather spend less on broker fees that reduce insurance subsidies for the working poor.
To be clear, I’m sympathetic to the plight of brokers, as I am to anybody whose livelihood is threatened by changing markets. Then again, I work in journalism. To borrow a line from Ezra Klein, things used to be better for us, too.