What’s the future look like for the Affordable Care Act? Springfield Business Journal Editorial Director Eric Olson sat down with Benefits Unlimited Inc. President Darren Coffman, Connell Insurance Inc. President Tim Connell and Croley Insurance and Financial Inc. President Trevor Croley. They talked Affordable Care Act repeal and replacement, premiums and fundamental changes.
Eric Olson: How would you describe the insurance industry in one word?
Darren Coffman: Dysfunctional.
Trevor Croley: Unpredictable.
Tim Connell: Changing.
Olson: What’s been the net effect of ACA?
Coffman: If you’re getting a big subsidy from it, you think it’s great. If you are a business owner, especially one over 50 [employees], you don’t like what’s happening.
Connell: This unfortunately has created a winner and loser situation. Ironically, I think when the press talks about “Obamacare,” the 20 million people they refer to, that’s the individuals and not the total population. There are other issues that they need to attend to not on the forefront that are not being discussed at all. It’s the 20 million people receiving subsidies that they are focusing on.
Croley: And the 20 million people also breaks down to those who were uninsurable before due to pre-existing conditions. Now, we want the rates to stay flat or reducing, yet we’re adding a population that is an unknown.
Coffman: It violates all the principles of insurance as far as adverse selection. It welcomes health problems, and when you cover that it is impossible to keep the prices down. From an employer standpoint, it’s driving them to put in part timers; it’s prohibiting them from growing. I’ve actually helped employers put their workers on part time and jack up the prices so much they can’t afford their health plan. It’s changed how I help people. I don’t really care for it that way. You’ve got three carriers, maybe four carriers left.
Olson: Are you guys working with more of the winners than the losers?
Croley: We run these retail stores on an individual basis. These retail stores were designed to help people come into the marketplace. I have to tell you at the beginning of this whole thing, I was very much against the Affordable Care Act because there’s really not any affordability in any of it. It’s just again, for those people who qualify for the tax credits and the subsidies, it’s become affordable for them. The winners in this are those people who meet the criteria. As taxpayers, we’re funding all of that. In addition, if you aren’t eligible for those tax credits on the individual side, you’ve seen your premiums go up double, maybe more. There also was a compression of the rates. In fact, a big issue is that if something is not done by 2018, all of these employees who had their old plans – they’re called grandmother and grandfather plans – those plans have to fall into the Affordable Care Act. We’re going to see huge increases in these premiums that people are accustomed to dealing with. All of the paperwork on the backend, it’s been the greatest nightmare in the world.
Olson: For the insurance companies?
Croley: No, the companies.
Coffman: Exactly. It’s the businesses.
Croley: We’re learning at the same time as everybody else is learning, and unfortunately the learning curve is great. We’ve had to add staff to come up with the administrative part.
Coffman: The money really isn’t there to do it when you think about it. A lot of folks like us are getting out of it totally and waiting for it to be gone. One of the things I see is the deterioration of customer service. There is so much going on that you find yourself fixing the insurance companies and the government’s mistakes because the two won’t even talk to each other.
Olson: The million-dollar question: Yes or no, should it be repealed?
Coffman: I don’t know if it needs to be repealed, but they need to look at each problem. They have so many weird things that make no sense in reality. They expect these lay people to understand this stuff. If I ran my business like this has been run, no one would come to me.
Connell: The consensus is something needs to happen, but for them to say they’re going to have this four-point plan, but they’re leaving off two or three points of it isn’t good. Also, what we’re starting to see in the recent past, the Republicans are talking about cutting taxes. Let’s not forget the national debt is at $20 trillion. The Republicans have pledged to cut $6.2 trillion out of the budget. There already are costs going around, like that it will cost $350 billion to alter or repeal “Obamacare.” You are starting to get into reality. We want to get rid of it and we hate it is the Republican stance, but then most of the people including the American Medical Association and the 20 million people who got coverage – I don’t think they’re going to go quietly into the night. There needs to be an altering of it, but there needs to be a business plan.
Coffman: It could be political suicide if they do it. They tout numbers that really aren’t what they seem. They tout a small number of people receiving benefits while the rest of us bear increased costs. Last year, I had a 24 percent increase, this year I got a 25 percent and I’m a small group. When you add another $1,000 a month onto something, that’s $12,000. That’s half of a salary for a support staff person.
Croley: None of what we’ve seen in the past five years has done anything to help the affordability part of health care.
Olson: For some it does, right?
Croley: No, it doesn’t. The affordability issue of health insurance has really to do with contractual obligations with providers, less cost for administration. Eighty percent of these premiums go to pay providers. As the premiums increased, the 80 percent has to continually pay these providers. As these premiums increase, the insurance carriers get paid more. Their 20 percent keeps on growing. You’re not going to hear a lot of rebuttal from the insurance companies. In perspective, when you’ve got a family who is paying $1,200, $1,500 a month because they don’t qualify for tax credits, the net effect is the people who don’t get those tax credits are looking at this and saying they can’t spend $15,000 a year on premiums.
Olson: Any ideas on where to start?
Connell: There’s a lot of factors in that, but one that doesn’t even get to the table is tort reform. From the medical malpractice right now, 1 in 14 doctors get sued every year. Missouri actually went backwards. They used to have a cap on it, but now there is no cap for what you can sue a doctor for. That’s another aspect of the 80 percent of the cost passed on to the consumer. There is just a lot of factors.
Coffman: There was a 115 percent increase in premiums in New Mexico alone. The overall average stated by HealthCare.gov is 25 percent nationally. What goes up like that? You can’t have three carriers in southwest Missouri and get a competitive rate – they own it. One carrier in particular owns most of it – Blue Cross-Blue Shield.
Olson: Ten, 15 years ago, how many carriers were there?
Coffman: It used to be that you had 12 or 13 carriers and I had to reach into my back pocket and pull out a spreadsheet with the different options. Now, I just go, “Well, here’s your three companies.”
Olson: Not much variance?
Croley: Your plans have to be standardized. You have to run the math through a financial calculator and the federal government is going to judge based on where they fall – bronze, silver, gold plan. Again, the Affordable Care Act created some thresholds about what a health plan can do. You have to have certain essential health benefits and clauses like no pre-existing conditions. I get plenty of calls asking if they can get a high deductible health plan. There aren’t $10,000 deductibles any more; it’s set in stone by what the government says.
Olson: Would you guys say it’s working as intended, at least?
Coffman: It’s having some very surprise consequences that we’re seeing now. You didn’t get to keep your doctor, keep your plan.
Croley: I have to tell you, again, as a naysayer going in on this, there are an awful lot of people who probably didn’t have health insurance before who have it now. Is that a great thing? Yes. We have people who cry, who say, “Oh my God, I’m glad I have this, because I had a medical condition or couldn’t afford this or that.” And that’s great, but I hate to tell you that most of the arguments people have are economic in nature. Am I paying for it? Yes. And we’re all paying for it in premium percentages. Do we all feel like we’re being taken a little bit? Yeah, but insurance is that in nature; it’s a pooling effect. The question is if we all have to pay for the unfortunate situations of probably a tiny few.
Connell: Whenever you have some new product, whether it be from the government or private practice, it’s shiny, it’s new, it’s a utopia, it’s a great thing. However, with those shiny new things, medical has a tail to it. Whether it be workers’ compensation or it’s property and liability – anything that touches medical has a tail of three to five years. That is where it may change even more.
Coffman: They also hurt, not to be selfish, but a lot of insurance professionals in terms of being compensated for things. It’s your time and resources and there is no reimbursement for that. That adds up. I pay my people pretty good to sit there and do that. We also hurt the customer in terms of support, customer service, counseling, you just can’t do it.
Olson: So there was a reduction in commissions written into the plan?
Coffman: Huge. In 2011, I watched 38 percent of my company disappear.
Olson: Has it become difficult recruiting salespeople?
Coffman: Who wants to make pennies? As premiums go up, we used to think that was a great thing. When you got 15 percent of that you felt great, but when it’s $18 per family, per person in a group, it’s very difficult. The margins are very thin now in that area.
Olson: If I understand you right, you are talking about replacing pieces of the ACA rather than outright repealing it. Is that right?
Croley: I think it would be a mess if a repeal took place without a plan to back it up. It would be absolutely ridiculous. It would be a bigger mess. The other issue I’ll point out is that we’re only talking about the health care aspect of it. You’re also tied into the tax aspect, insurance contracts, hospital related issue; there’s an information act involved in that, measurements for doctors and hospitals, so it’s not just insurance. If we do away with this, we better know what we’re doing. When this whole thing started, there were so many things that we did not know how to handle. I can’t imagine all of a sudden one day saying it’s all gone. Do we look back at the old way? I don’t think our premiums are going to return back the way that they want. Honestly, I don’t think insurance carriers want that either; they’ve already redone all their systems.
Coffman: There’s a lot of fear right now. They’re afraid this thing is just going to drop on them. Whatever they do, they’re going to have to keep this thing running. It would be naive to think this is going to happen quickly.
Olson: What about group plans?
Coffman: Mine just went up 25 percent.
Croley: There is more stability in the group market, but that’s going to be a big thing if they don’t address that issue. If you think of where we live, roughly 80 percent of the employers that have group health plans are small employers. If that crumbles, you’re going to see 40 percent increases if that section has to roll into the Affordable Care Act.
Olson: I understand workers’ compensation is coming down in Missouri. Is that an anomaly?
Connell: The thing is, in property and liability we’re in an age of automation where they now have computer programs. A carrier will tell me they will not insure more than so much in a city block because of what we’ve seen in weather patterns over the past 20 years. They have that data, but when you talk about ACA, we’ve thrown this ball in there that is so unpredictable, carriers cannot tell where the ball is going.
Interview excerpts by Features Editor Emily Letterman, firstname.lastname@example.org, and editorial assistant Barrett Young.
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