777 HHS Waivers to Obamacare – Logical & Ludicrous

The current total number of waivers to Obamacare has reached 777.  No, this has nothing to do with a new Boeing jetliner.  These are the waivers of compliance to the initial phases of  the Patient Protection & Affordable Care Act  (Obamacare) that Health & Human Services is handing out  to insurance companies, unions, &  other various organizations.  While qualification for the waivers range from political to religious,  the following discussion highlights two such waivers; one logical, and one ludicrous.  Intended or otherwise, they tell the tale of an unread Trillion dollar piece of legislation.

The recent spike in these waivers is mainly due to the Medical Loss Ratio (MLR) mandate that took effect January 1, 2011.  This mandate requires insurance carriers to pay out 80% to 85% of what they receive in premiums as claims.  Further, carriers were no longer allowed to cap lifetime benefits, are have internal benefit caps for services within the policy.   The spirit of this portion of the law was to rid the marketplace of so called “mini-meds”; plans that impose caps on services for hospital, surgery, RX, etc.  Current MLR ratios are around 60% for those carriers that offer these mini-med plans to businesses.   As these carriers have substantially higher administrative costs due to the high turnover rate amongst the enrol-lees, coupled with relatively low reimbursements, they simply cannot comply with the MLR mandates.   Many companies who employ low wage hourly workers, such as McDonald’s, utilize these limited benefit plans as a way to offer health coverage at a relatively low cost for both employer & employee. While these plans do impose caps on major services, and place internal maximum benefits for surgery, hospital, etc.,  they are very good at covering the preventive services, such as physicals, mammograms, ob/gyn, etc.  Most offer co pays for doctor visits, specialists, & prescription drugs.  Headlines made it appear that McDonald’s was canceling coverage for it’s enrol-lees, when in fact it was the insurance carrier informing them that without a waiver from HHS, they could no longer offer the plan design to McDonald’s.  Home Depot, CVS & Staples all offer similar plan designs.  In these instances, a waiver from HHS is a realistic & logical approach to this problem, as the alternative would be to have no coverage at all for these low wage workers.

Independent producers such as myself loath to discuss how they receive compensation for the work that they do.  Suffice to say that our agency does not charge for our services as we get commissions from the carriers when we place a client.  The above MLR mandate has significantly lowered commission schedules to producers of health insurance by 50% to 80%, albeit with a rather disturbing exception.  Our office writes for any and all carriers that offer health insurance plans, both group and individual, in Connecticut.  One such carrier is Celtic, which contracts with PHCS as their nationwide PPO.  We were pleasantly surprised to receive notification from Celtic that our commission structure would be reduced only slightly.    We contacted the carrier to inquire how this was possible, and they informed us that HHS issued them a waiver so that the Federal Government could assist them in gaining market share over their competitors. Welcome to ludicrous.  This goes hand in hand with HHS threatening carriers with exclusion to the exchange plans coming in 2014 due to perceived unjustified rate increases.  Now, I am not about to look a gift horse in the mouth, but our agency has prided itself on placing people in the right plan for them regardless of commission levels.  Responsible agents are now in the unenviable position of still trying to assist those in need of procuring health insurance while providing for their families at the same time.  Those of us who remain in this industry will have to close twice as many contracts as the year prior in order to retain current income levels.  One wonders if those elected officials who both helped to craft and pass this legislation, are now overjoyed with HHS dictating winners and losers.  Worrisome still is if HHS can begin to manipulate the market with only these initial phases of Obamacare in place, what happens to their regulatory control as the rest of Obamacare is implemented over the course of the next few years?