Chasing Their Tails: The Endless Circle of Trying to Eliminate Costs
Have you ever wondered why insurance policies have gotten so much more confusing over the years? Why a drug may be covered one year, but not the next? Why using a provider network to reduce costs used to be very simple, but now isn’t?

The answer lies in the Affordable Care Act in general, and on the MLR provision of the ACA in particular.
As you have read before here the MLR was a tiny provision in the entire law, but it has an enormous impact on health insurance in the country.

To understand why requires an understanding of basic economics and business principles.
An insurance company is running a business. Just like a doctors office or a hospital or a pharmaceutical company or a baseball team or football team or a restaurant. The purpose of any business is to stay in business while fulfilling an important customer need. To stay in business, you need to cover all of your variable costs, contribute to fixed costs, and make an acceptable profit.
When your ability to make a profit is constrained, you must look at ways to constrain costs. And you must do so long and hard.

The primary reason why you are seeing smaller and smaller provider networks has to do with the MLR provision. When you are the insurance company, you need to constrain costs. It’s literally critical. So, you go to the providers and negotiate even steeper discounts on services. Now, the doctors are not going to agree to a contract that pays them less money unless they get something in return. What they ask for in return is exclusivity…or a smaller network. This way, the doctors figure, they are making less money per unit, but they have more units because of that exclusivity, so they will end up making the same or more money in the end.

The same is true for prescription lists. Drugs are very expensive. For example, for each customer that takes the popular drug named Enbrel, the insurance company pays $40,000. As the drug is advertised more and more by an extremely popular golfer, more and more people take the drug. (They advertise like that because it works very well. The subject for another blog is should pharma even be allowed to advertise directly to consumers?)

So, by necessity, the doctors lists and prescription lists will get smaller and smaller, and the plans will be more limited and more confusing.
All of this increases a consumers need for a professional to help them make sense of it all and sort it out.

As an insurance broker, we are on the front lines of this endless circle of cost cutting by insurance companies. We’re working harder than ever but making less and less each year. Every single year we are confronted with yet another reduction in income.

Except now, we have been notified that for Special Enrollment Period customers (people enrolling in coverage in the 9-10 months outside of open enrollment — we will be paid $0.00 to enroll the person, act as intermediary and advocate between them and the federal government, and handle day to day issues they experience with the insurance company. That’s right. $0.00 compensation.

It doesn’t take a rocket scientist to figure out that a business cannot stay in business when there is no revenue generated by that business.

So, insurance brokers (if they want to remain insurance brokers) must develop an entirely new business model, whereby they charge the consumer directly for their services.
The new realities will have some extremely negative consequences for many who may need our services the most.

What can you do? Well, here’s my letter to CEO Kevin Counihan.
I would suggest that you forward this letter and include your own comments about why brokers matter to CEO Kevin Counihan and President Obama. If they receive 10 letters, absolutely nothing will happen. If they receive 100 letters, same thing. But if they each receive 10,000 or even 100,000 letters, then yes, they may feel compelled to take action to rectify one of the very worst provisions in the Affordable Care Act. and
Sharing of this blog post and writing to these two government officials is both strongly encouraged and highly appreciated.