By David L. Fear

 With the 2018 midterm elections in the rear-view mirror, there is much speculation on the future of health care reform in Washington, D.C.  Here are the obvious facts:

1)       The Democrats have re-taken the U.S. House of Representatives from the Republicans and Nancy Pelosi will be back as Speaker of the House, and;

2)       Even though the Republicans picked up seats in the U.S. Senate, they are still shy of a 60-vote supermajority and so are limited as to what they can enact into law without some compromise with the Democratic minority, and finally;

3)       The Trump administration has made overtones about working with the Democrats to “fix” some of the problems with the ACA – something the Republicans were unwilling to do when they held the majority in both chambers of Congress.

So, the echoes of “Repeal and Replace” are fading and there is hope that after eight year as law, the ACA might be modified to make things more palatable for both consumers and businesses. Perhaps some real ‘bi-partisan’ work will be done in a polarized Washington, DC.

For us in the industry there remain a long list of things that we would like to have fixed with the ACA including the agent commissions as part of the MLR calculations.  NAHU has introduced ‘bi-partisan’ legislation in this matter for several years and it appears that they will continue to do so in the next session of congress. But will such legislation die again for lack of true bi-partisan support?  The long-held opposition to this by the Democrats may be waning as they want to position themselves for a run for the White House in 2020 and appear to be open to negotiations on key parts of the ACA that should have been fixed years ago. At the same time, moderate Republicans who have suffered in the recent election might be open to some other strategy than “repeal and replace” that their leadership was promoting. 

One big issue that needs to be addressed is the enforcement of the employer mandate of the ACA.

Even though the Trump administration made a lot of noise about the executive order to no longer enforce the individual mandate penalties, they did not do so regarding the employer mandate. Most large and nearly all mid-sized employers complain loudly about the employer reporting requirements of the ACA. The Trump administration – who is supportive of business and commerce – appears to be non-responsive to complaints from employers about annual reports to IRS. You know, those wildly popular forms 1094-C/1095-C.  They are causing huge nightmares with both large and mid-sized employers who have more than 50 full time equivalent employees.

The problem is that many employers thought this was repealed and were not expecting to hear from the IRS. Yet about a year ago, the now infamous IRS Form Letter 226J began to arrive in the mailbox of large employers for the 2015 tax year. This year, another round of letters is going out to mid-sized employers for their 2016 tax year. And the letters are not very pretty – employers are being billed for hundreds of thousands of dollars in fines and penalties because they either failed to report or failed to offer coverage when they were supposed to.

Recently the Federal government has “tried to help” by sending employers letters through the Federal or State Marketplaces (i.e. Covered California) which have had the effect of confusing employers about their responsibilities under the law. The Trump administration can and should end all of this immediately until they can come up with a fair and simplified method of employer reporting (if the employer mandate remains in place).

And then there is the equally unpopular “Cadillac Tax” which continues to get pushed back yet not quite repealed. The potential to drive up the cost of both fully insured and self-funded health plans is very high. Regulations have been proposed, then withdrawn by the government. This will affect all purchasers of health insurance (employers and consumers) who have seen their rates skyrocket since 2010, when the law was enacted. Today, in the year 2018 when the tax was originally supposed to go into effect, premiums are approaching the original limit of $10,000/year for single or $27,000/year for a family. Yes, the Cadillac Tax was pushed down the road, but is still in the law and continues to loom darkly over private benefit plans of employers who struggle to keep up with the ever-increasing cost of health care and health care insurance.

My observation is that now that Congress and the Legislatures have pretty much regulated just about everything in the insurance industry, they need to turn their attention of the bigger problem: The cost of health care. After all it is the cost of health care that directly impacts the cost of our health insurance.

I would speculate that this past election may be a blessing in disguise in that congress and the administration will now be forced to compromise and work in a bi-partisan manner to deal with the issue of the cost of health care.  For some reason, our elected officials seem reticent to tackle this issue. We all know that the cost of hospitalization, medical devices and prescription drugs have skyrocketed since the passage of the ACA in 2010.  Lobbyists for these industries continue to have a field day in Washington, DC (and in Sacramento) while we all continue to pay double digit rate increases for our insurance products. There is no question that we need to hold our elected officials accountable for their lack of action to do something about the high cost of health care. 

Of course, we here in California like to do things our way and so the question remains is if the ACA is changed at the Federal level, will the Democratically controlled legislature and governor act to ignore those changes and leave things in place anyway?  California is one of a handful of states that fully embraced the ACA and we see results in market stability, pricing and carrier choice.

In spite of California’s success in implementing the ACA, many here in California continue to promote a full takeover of the health care system through implementation of a “single payer” program. Twenty years ago, we voted down Proposition 186 by a 75 to 25 percent margin. Today those percentages are growing closer and we need to consider that a new generation of workers seem to care less about government takeover of health care through single payer. Many millennials don’t seem to think that this is an issue.

Governor-Elect Gavin Newsome is a long-time proponent of single payer but was amazingly quiet about it on the campaign trail. Why? Because he probably knows what most in Sacramento know – that we don’t have the money to pay for it and will not get exemptions from the Trump administration to pursue it anyway. Democrats in Sacramento continue to be pushed by the far left to vote for single payer almost as a litmus test of their politics. What’s scary is that with term limits, many politicians in Sacramento can vote for single payer today knowing that their successor will have to figure out how to pay for it. That is a seriously dangerous situation.

For our industry, other than agent commissions being nearly eliminated in the Individual market and substantially reduced in the group market, the ACA has been a good thing here in California. We have much more stability in our market than do most states. And we have competition that helps keep costs from rising as high as they are in other states. Most agents I talk to are very busy selling group health plans because employers see value in offering group health benefits and agents can show them many competitive plans and innovative ideas. Since 2010, agents have adapted to reduced compensation, standardization of benefits and the new rules and regulations imposed in the market.

But working on a smaller margin means that an agent needs to work smarter and bring value to their clients. Employers are looking for new ideas that will save them money without trashing their benefits and angering their employees. Good agents are using innovation to enhance their position in the market and some – not all – carriers are finding that their agent partners are worth the money to make things work so that the private sector health system can and will flourish in the future!

I am optimistic about the role of agent/advisors in the delivery of health care products and services to American. I believe that 2019 will be a real comeback year for many in our industry as we strive to serve the needs of our clients and grow our blocks of business.


David L. Fear, Sr. RHU is managing partner of Shepler & Fear General Agency and a 40-year veteran of the employee benefits industry. He is a past-President of CAHU and NAHU and 2015 recipient of the NAHU Harold R. Gordon Memorial Award as ‘Health Insurance Person of the Year’. David is a member of the 2019 Cal Broker editorial advisory board.