Let’s pretend you choose not to pass Senate Bill 1661. What happens next? It’s my contention that failure to pass Senate 1661 will have a significant “adverse impact” on the people who most need the advice and guidance of a professional health insurance broker.
Senate bill 1661 addresses a problem which was created by a provision called the Medical Loss Ratio provision.
This part of the ACA means that the insurance company must spend 80% of all premium dollars on medical claims. This leaves a total of 20% for operations, marketing costs and profit combined.
More about the MLR provision is available here in my Letter to US Senators #3:
Senate 1661 is really a very simple bill. All it does is move insurance broker compensation out of the 20% of the Medical Loss Ratio and into the 80% and preserve a very important industry at a time when it is most needed.
Now, let’s pretend as I stipulated that Senate 1661 never makes it out of committee or fails to pass. What happens?
Well, first — a whole lot of brokers will go out of business.
Not only the broker but the entire support staff as well. These brokers may be good people with good hearts but you can’t work for free for very long. Again, back to basic economic principles.
Those brokers that remain will begin to charge consumers directly for our services. We aren’t expensive really for the amount of work that we do, but the average cost would be in the neighborhood of $300 per year.
Now, let’s examine who really needs the services of an expert.
I’d like to ask you who you think needs help more: a family of 4 who makes $100,000 per year and has not been uninsured for a single day in their lives? Or an African American working in a small restaurant who makes $16,000 a year and has never had insurance in his life? Or a brand new immigrant who scrapes by with a salary of $20,000 for his family of 2, barely speaks the language and knows nothing about the US Healthcare system, to say nothing of the intricacies of tiered networks and confusing prescription drug formularies.
I don’t think it’s at all a stretch to say that the working poor would be hit much harder by the lack of expert brokers available to help. Now, let’s foray into the ethical realm.
Insurance brokers are running a business. Like any business, the ultimate goal is to stay in business. To stay in business, you need to cover variable costs, contribute to fixed costs, and make an acceptable profit.
If you have to charge the client directly for services, it will become very clear that some clients really need you but do not have the capacity to pay. Is it ethical or moral to refuse to help someone who really needs you but can’t pay? If you help too many people who can’t pay, you go out of business. Due to opportunity cost, the time spent helping people who cannot pay is by definition time not spent helping people who can. Next, is it ethical to gouge people who can afford your services to offset the business impact of those who cannot pay?
I would submit that for those with a clear moral compass the stark answer to these questions is “No.”
In Human Resources, the term “adverse impact” refers to “the rejection for employment, placement, or promotion of a significantly higher percentage of a protected class when compared with a nonprotected class.
Additionally, when pursuing an adverse impact claim, an individual is alleging that the employer’s selection practice has unintentionally discriminated against a protected group.”
“One of the biggest reasons that there are disparities is that African-Americans & Latino Americans are much more likely not to have health insurance. And so if we set up a system in which everybody’s got health insurance, some of those disparities are immediately going to be reduced. Folks who are working but don’t have health care benefits- those groups are disproportionately minority… There are some particular issues within the minority community that I think we can address in a targeted way.” — President Obama
And who is it exactly that still does not have health care in the United States today? Take a look.
Conclusion: Failure to pass Senate 1661 will eliminate an industry at precisely the time when that industry is most needed.
This will affect the entire individual market for health insurance uniformly, but it will also have an unintentional but very significant adverse impact on minorities.
At The Insurance Source, we try to treat each customer with respect and honor.
No matter whether they are a CEO or work as a cleaning lady. I think people really appreciate that and that’s why we have been successful and celebrated our 10 year anniversary last year.
As someone who tries to live his life by a moral code, I am not comfortable with running an insurance business where people who need my help the most may be least able to afford it and simply can’t pay me for my help. I can neither charge that person money they don’t have nor gouge those who could pay me.
Dr. Martin Luther King Jr taught us that “Life’s most persistent and urgent question is: What are you doing for others?” http://bit.ly/1X8BhFY
That’s precisely why I do what I do. I get the opportunity to help people with something really important. I have the opportunity to help make peoples lives better.
Senators, It is my sincere and fervent hope that you will allow me to continue that opportunity by a unanimous passage of Senate 1661.