OPINION: Health insurance ‘producers’ about to be on life support

Introduction

A recent story out of Oklahoma shows just how vital investigative journalists are—and how health insurance agents and brokers may be anything but vital in just a matter of months.

For decades, many individuals and small business owners have sought out the help of agents and brokers — known as “producers” in the insurance world — to help them find coverage for themselves, their families and their employees.

People have had to do this because, until recently, the information provided by insurance companies about their policies has been incomprehensible. Producers — they’re called that because they “produce” business and, consequently income, for insurance companies — have been the middlemen many of us have relied upon to interpret benefit plans and advise us on what to buy.

As a result, our premiums are higher than necessary because insurance companies pay agents and brokers a lot of money in commissions to “produce” the business they want: young and healthy people who are not very likely to need much medical care. And insurance companies pass along the cost of those commissions to policyholders.

The need for producers’ services diminished earlier this year when an important provision of Obamacare kicked in. Insurance companies can no longer get away with descriptions of plans so complicated you need a third party to decipher. They now have to provide prospective customers with information in simple language and in a format that enables us to make apples-to-apples comparisons among various health plans.

The producers’ world will be rocked even more on October 1 when the states’ online health insurance marketplaces — or “exchanges” — will be up and running as mandated by the reform law. And this is where that Oklahoma story is so enlightening.

Oklahoma is one of 26 states to tell the federal government it has no interest in operating its own exchange. As a result, the U.S. Department of Health and Human Services will operate it (and the 25 others) with no help from state officials. Seventeen states and the District of Columbia will operate their own exchanges and seven will partner with the federal government.

Oklahoma officials indicated initially that, even though they didn’t care all that much for Obamacare, they would nevertheless accept several million dollars from the federal government to help build the state’s exchange. A few weeks later, however— after hearing from conservative critics of the reform law and from agents and brokers — Gov. Mary Fallin and Insurance Commissioner John Doak, both Republicans, did a 180 and said “no thanks.”

Curious about what led to their change of heart, reporters at The Oklahoman filed an open records request. The state eventually complied and, months later, handed over thousands of emails and other documents that show just how much pressure Fallin and Doak received from President Obama’s political opponents and from insurance agents and brokers worried about preserving their handsome incomes.

A number of emails from producers complained that they would not be able to “maintain a level playing field” if the exchanges did what they are intended to do: provide consumers for the first time with the tools and data they need to make informed decisions about buying health insurance.

One Tulsa producer’s candor attracted the reporters’ attention enough to make it into The Oklahoman story verbatim. He complained in an email that:

“Buying direct via an Exchange will cost the consumer less than through an agent or broker. Unless Comm. Doak and our friends in the State Legislature can design a state Exchange that requires accessing broker services before an applicant can purchase health insurance, our profession is doomed.”

In other words: “Can you believe what Obama and his cronies are trying to do here? They’ve figured out a way for consumers to buy coverage without going through us, and people will be able to pay less than they’re paying now because they won’t need us. You’ve got to fix this! If you don’t, people will catch on right away that they don’t really need middlemen anymore, we won’t make as much money, and we won’t be able to contribute as much to the campaigns of our friends in the State Legislature. Rig this thing or we’re all doomed!”

It’s clear that when certain constituents and ideological compatriots talk, politicians listen. Doak announced later that he was returning $54 million the state had received to set up an exchange in Oklahoma. He apparently decided that the state wouldn’t be able to design the exchange without following certain guidelines from the federal government. And that was just unacceptable.

The irony is that by letting the Feds run the Oklahoma exchange, Fallin and Doak and the producers’ friends in the legislature will have no power to even try to rig things so that brokers can continue to get their piece of the pie. Maybe it’s time for those producers to consider another line of work, or at least other lines of business, like car insurance. The health insurance cash cow is about to run dry.