Consumer Power Report #237

Published September 3, 2010

I was in Santa Rosa, California last week talking to the North Coast Association of Health Underwriters. The speaker before me told them not to worry – if they work really hard they’ll be okay under health reform. He also said the European countries spend less than we do and have longer life expectancies, so they must be doing something right.

I told the group that I hate to be disagreeable (actually, I lied. I don’t mind being disagreeable if I can back it up), but life expectancy has little to do with medical care and a whole lot to do with poverty, violence, education, drug abuse, and so on.

I also told them that the intention in Washington is that they should be put out of business. I said that is exactly what Washington means when it complains about “administrative waste” – broker commissions. Central planners always hate “middlemen.” They think middlemen add no value, and the whole purpose of minimum loss ratios and state-based exchanges is to do away with the “waste” of brokers and agents.

I also explained that NAHU has been focused on getting the insurance commissioners (the NAIC) to give brokers a pat on the head with a resolution declaring that producers are swell, while the knife in the back was the NAIC decision to include broker compensation as an administrative expense under the loss ratio standards.

Then I got back to my office and found several articles supporting what I had just told the brokers. See below.

The saddest part is that many producers supported the individual mandate, thinking it would be nifty if people were required to buy what they sell. In fact, NAHU’s main complaint about the law was that the penalties for not buying were not severe enough.

But look, folks, if people are required to buy it, nobody needs you to sell it. You have cut your own throats here. The only hope for your profession is outright, complete, and total repeal of the entire legislation.



Merrill Matthews, former executive director of CAHI and a friend of insurance producers, wrote in Forbes, “The first casualties of ObamaCare will be health insurance agents. That proud army of tens of thousands of Americans whose calling was to help individuals and employers work through the maze of available health insurance policies to find one that met their clients’ needs.”

This is not a new phenomenon. He remembers way back in 1993 Hillary Clinton telling an insurance agent, “I’m assuming anyone as obviously brilliant as you could find something else to market.”

Merrill says, “Once the health care reform debate got underway, I began to warn health insurance agents in speeches and on conference calls that when Obama referred to administrative waste, he was talking about them.” He adds that carriers are already cutting broker commissions and in some cases making those cuts retroactive. All that will be left to sell, he says, are MedSupp and LTC coverage – if you can make a living on those lines.

SOURCE: Forbes

Time magazine also weighs in with an article by Kate Pickert headlined, “The First Victims of Health Care Reform.” She writes that most of the health reforms don’t kick in until 2014, but “by then, a few major players in the health care industry might have already experienced a real downside of the massive overhaul, so much so that they may no longer exist.”

The article notes what we wrote above about the producers lobbying the NAIC for a nice resolution, but then adds, “The resolution was passed just as the NAIC was debating a much-anticipated set of recommendations on how insurance companies should calculate their medical and administrative expenses, known as medical loss ratios. The NAIC counted agent and broker commissions, which can make up 5% to 20% of premiums, in the administrative category. Most experts, therefore, predict these commissions will be on the chopping block as insurers scale back administrative expenses to comply with the new rules.”

She adds smaller carriers to producers as the likely losers. We’ve already seen part of that with the demise of nHealth, a promising start-up company in Virginia. But then she quotes a couple of university professors as saying things like “small insurers will be able to adjust to the new paradigm.” Oh, thank you, professor. I will take your assurance all the way to the bank.


Meanwhile, the Orange County Register reports, “Gov. Arnold Schwarzenegger soon may sign two bills politicians claim will provide affordable health insurance to millions. Actually, they would create a bureaucracy to launch onerous Obamacare mandates that will drive up costs, reduce and ration health care and likely result in one-size-fits-all coverage from the federal government.”

The article says California will be the first in the nation, but cites Cato’s Michael Cannon as saying it may be wasted effort since the federal law will probably never be implemented. But, that’s okay, California is rolling in dough, so a little wasted money and effort won’t be noticed. Right?

SOURCE: Victorville Daily Press


HHS announced this week that 2,000 “groups” are eligible to receive money for “reinsuring” their retiree health programs. Only a third (32 percent) are private businesses, the rest are state and local governments (26 percent), unions (22 percent), “education” (I guess public universities) (14 percent), and non-profits (5 percent).

For years these organizations have been giving in to union demands for generous retirement benefits, but they haven’t been funding their promises. Hmmmm. What to do? What to do? I KNOW! We’ll have the Feds bail us out. They’ve got plenty of money!

So, Obamacare appropriated $5 billion to offset some of the costs for a few selected organizations. The Feds will pay 80 percent of the claims costs for expenses between $15,000 and $90,000 for retirees between the ages of 55 and 65. But only if the groups “have in place programs and procedures that generate or have the potential to generate cost savings for participants with chronic and high-cost conditions.” In other words, only if the group is pleasing to the administration.

In explaining the program, HHS noted:

“The percentage of large firms providing workers with retiree health coverage dropped from 66 percent in 1988 to 29 percent in 2009. Many Americans who retire before they are eligible for Medicare without employer-sponsored health coverage see their life savings disappear because of medical bills and exorbitant rates in the individual health insurance market. Health insurance premiums for older Americans are over four times more expensive than those for young adults, and the deductible these enrollees pay is, on average, almost four times that in a typical employer-sponsored insurance plan.”

Of course, this program does absolutely nothing for any of those folks. Instead it gives extra money to the fat cat unions and giant employers that are currently enjoying very rich benefits.

SOURCE: HHS Fact Sheet with links to the list of benefiting organizations


Kaiser Family Foundation’s monthly tracking survey has long been an outlier among the national surveys because it has stood alone in finding a plurality of support for Obamacare. Of course it is widely quoted in the media because it has found such friendly results. Many of us have scratched our heads wondering how it gets to these numbers. Granted it surveys “adults” instead of “registered voters” or “likely voters,” but still it seems skewed. KFF never reveals much about its methodology or does much to profile its respondents. Obviously, if it polls a large number of Democrats it will get more favorable results than if it is more balanced. But KFF never bothers to explain any of that.

In any case, its latest survey shows a significant drop in support from a month ago. In July 2010, it found 50 percent had a favorable view of Obamacare, 35 percent were unfavorable, and 14 percent had no opinion. In August it found 43 percent favorable, 45 percent unfavorable, and 12 percent with no opinion.

Most of the media has written alarming stories about a drop off of support of 7 percent in a month. But that understates it considerably. In fact, the margin of support was 15 percent in July, which turned to a 2 percent margin of opposition in August, for a swing of 17 percent in one month. That is astonishing. Nothing has happened in the past month to cause such a dramatic reversal. The reality is more likely to be that the survey methodology is and has always been flawed. It is simply not a reliable poll.

The fact that KFF tries its damnedest to spin the results doesn’t help, either. In this case, our friend KFF President Drew Altman tries to downplay the significance. In a press release, Altman was quoted as saying, “Public opinion on health reform has been stuck in a fairly narrow band and is not changing dramatically. And with concerns about the economy and jobs dominating the public’s agenda and local issues always so important in midterm elections, it is not clear that health reform will play a significant role in the polls in November.”

That is known as whistling past the graveyard. If a 17 percent swing in one month isn’t “dramatic,” I don’t know what is. And Drew’s very own survey found that health care is the third most important issue, after “the economy and jobs” and “dissatisfaction with government.” And, btw, I would say health care and dissatisfaction with government have a fair amount of overlap.

Just one more thing before we leave this. In breaking down the specifics of people’s attitudes, the survey found the most popular provision is “subsidy assistance to individuals,” at 76 percent favorable, while the very least favorable is “individual mandate/penalty,” at 70 percent unfavorable. Are you listening, brokers?

SOURCE: Kaiser Family Foundation


Fire Dog Lake is one of the best of the left-leaning blogs. Its author, Jane Hamsher, is quite liberal but she is also independent-minded. So, unlike Drew Altman, when she says, “As Jay Cost of Real Clear Politics notes, it’s pretty obvious that the Democrats’ electoral woes are directly tied to the passage of the health care bill,” she has evidence to support the thought. She quotes Jay Cost as saying,

“It would be difficult for any strong partisan to admit that such an accomplishment was so deeply unpopular. Yet the polling is pretty unequivocal on the relationship between the Democrats’ fortunes and the health care bill. It was during the health care debate that the essential building block of the Democratic majority – Independent voters – began to crumble. It was evident in the generic ballot. It was evident in the President’s job approval numbers. It was evident in Virginia, New Jersey, and Massachusetts.”

She goes on to say, “FDL did polling at the first of the year that indicated that the health care bill was extremely unpopular with independents, and warned that the Democrats were living in la-la land to ignore it.”

Jon Walker, another blogger on Fire Dog Lake, also looks at the KFF poll and at Missouri’s referendum and says, “The individual mandate is deeply and extremely unpopular. Why Democrats fought so hard to include this provision which could have been replaced by far less objectionable alternatives is beyond comprehension.”

You see, these people would like to get Democrats elected and it kills them that Obamacare has made that extremely unlikely.

Meanwhile, Sam Stein in the Huffington Post is reporting that Ron Wyden is trying to get his home state of Oregon exempted from the law. Stein writes, “One of the most innovative voices in the health care debate, Senator Ron Wyden (D-Ore.), is accelerating the process of exempting his state from some of the national reforms passed under President Barack Obama.”

SOURCE: Sam Stein on Huffington Post; Jane Hamsher on Fire Dog Lake; Jon Walker on Fire Dog Lake