With the rollout of the Affordable Care Act, there have been winners and losers.
“It has been a godsend for people who were unable to afford coverage without a subsidy,” said James Newhouse, founder of Newhouse Financial and Insurance Brokers of Rye Brook.
But for those working in the private insurance brokerage industry the ACA has been anything but a godsend.
“For a lot of people it really has not panned out in a way that anybody had anticipated,” said Newhouse, whose insurance and employee benefits firm serves Westchester and Fairfield counties. “I think there was a disconnect between what people were told to expect and what really ended up happening.”
The sentiment that the ACA has not worked out the way people expected is one held by many in the industry, and understandably so, said Angela Mattie, professor and chair of health care management and organizational leadership at Quinnipiac University.
“The brokers have been hit hard in this,” said Angela Mattie, professor and chair of health care management and organizational leadership at Quinnipiac University. “Your broker used to be your educator and now you have individuals purchasing insurance and the Internet providing information. Yes, you are disrupting the market ”” it”™s is a whole different market.”
This dramatic shift has not been well received by small private insurance firms, said Andrew Cavaliere, president of Keystone Financial Advisors in White Plains.
“The result has been a tremendous loss of income, tremendous loss of clients,” he said. “Every broker in the health insurance business is taking a huge financial hit and most of us are not going to recover from it.”
Both personally and professionally, Cavaliere said he has been negatively impacted by the ACA ”” from losing his coverage and providers when they were needed most to significantly impacting his firm and its clients.
“The resulting economic pressure of the mandates from the health law squeezed insurance companies to cancel coverages, alter coverages or get out of the marketplace all together,” he said. “This resulted in less choice for members. It resulted in lots of people losing their coverage ”” a vast majority of my clients lost their coverage.”
Both Cavaliere and Newhouse point to drastic reductions or outright eliminations of broker commissions by health insurers that are damaging, if not driving brokers out of the health insurance industry.
“Many brokers have given up trying to work with the exchanges, they are so cumbersome and time consuming to assist anybody you discover it is simply not worth the time investment needed,” Newhouse said. “If it takes an hour or more to sign somebody up and then you are responsible to service their needs ”” it is very difficult to run a business if you are making $6 a month on that transaction.”
“I could make more money busing tables,” Cavaliere said.
For firms that have not been hit hard financially in the wake of the ACA, the law still poses challenges for the industry, said Brian Eifert, president of the Pelham-based insurance agency Eifert, French & Ketchum.
“It is creating more of a hectic marketplace,” he said. “It is creating more regulation and compliance issues and more cost in the system, which is ultimately forcing the carriers to change their compensation scale.”
Family-owned Rey Insurance of Sleepy Hollow has been providing property, professional and at times health insurance to customers in Fairfield and Westchester counties for more than three decades, but co-owner Linda Rey said she divested her company from health insurance following the enactment of the ACA.
“I didn”™t want to wake up to a lawsuit,” she said. “All of a sudden all these laws came up ”“ when to apply, how to apply. Plan dynamics changed. All that I knew about health insurance after doing it for ten years went out the window.”
While health insurance was a “nominal” segment of her company”™s profits, Rey said she doesn”™t think the disruption has reached epidemic proportions and believes it would have by now.
Others, like professor Mattie of Quinnipiac, suggest that while the ACA has brought disruption to the traditional health insurance broker model, the net benefit countrywide is far greater.
“Whenever you have a shift and something new introduced there is going to be disruption in business practices,” she said. “Is it a perfect solution? No, but is it the right thing to provide insurance coverage for our citizens? Yes.”
She referenced statistics by the U.S. Department of Health and Human Services stating that since the passage of the Affordable Care Act in 2010 about 16.4 million uninsured people have gained health coverage ”” the largest reduction in the uninsured in four decades.
In addition, 12.3 million people are enrolled in Medicaid and the Children”™s Health Insurance Program as of April 2015, compared to before October 2013. As a result of the ACA marketplace coverage and Medicaid expansion, hospital uncompensated care costs were reduced by an estimated $7.4 billion in 2014, compared with what they would have been in the absence of the coverage expansion, according to Health and Human Services.
“If we don”™t want to do it because it is the right thing then we need to think about it as the most cost-effective thing,” Mattie said. “Is it fraught with implementation issues? Yes. Are they solvable? Yes. Do we expect when we implement wide-scale projects like this to have implementation issues, of course, but the bottom line is we have to find a way to cover these individuals and if we don”™t want to do it because it is the right thing, then we need to think about it as the most cost effective thing.”
Yet for those industry insiders hardest hit by the ACA, the disruption is much more than a shift to be adapted to, it is a sea change that has dramatically altered business models that have supported small family brokerage firms for generations.
“The government has effectively displaced all the insurance brokers who have been serving the community for decades,” Cavaliere said. “When you do something for 20 years and build all these little plans for hundreds of people and within a few years they are all gone you just can”™t flip a switch and recover.”
Of course an out-of-touch academic would believe going to a government office of ill-trained part-time government office clerk bureaucrats would be a good thing in comparison to going to highly trained market-based entrepreneurs who are experts in the field and give proper counsel. Just an FYI, most of those cited as newly insured have been enrolled in Medicaid, a Johnson-era welfare program that’s not even insurance.
We were replaced by “Navagators”, in NM, Navs are 1/7 convicted felons. Little wonder Navs have been little help. In a recent conf call VP Biden asked us to chip in for the team and go sign up everybody !!