Making it Simpler: Reinventing Individual Health Insurance

KISS, as a business imperative, is cited so often it’s passed beyond cliché to become background noise. Keep It Simple Stupid, however, is more of an illusive ideal than a comfortable accomplishment for most businesses. The individual health insurance industry is no exception – yet it needs to be.

 

Consumers buying medical coverage for themselves and their families lack the support network larger enterprises have. They (hopefully) are working with an independent insurance agent who understands their needs and knows the way through the maze of getting coverage, fixing billing problems or getting claims paid. But there’s no human resources department in the living room or colleagues to call upon for help in the kitchen. Worse, for those without an agent, there’s often no one to call for help than the carrier itself.

 

This isn’t necessarily a bad thing. Many people working in carriers’ membership service departments are quite good – once you get past the dreaded phone system. (I just dealt with a customer service rep at the health plan for my small business who solved the problem in one phone call – and was nice about it to boot).

 

The thing is, however, if you need to call for help, then something isn’t working right. Getting health insurance shouldn’t be complicated. Neither should understanding bills or explanations of benefits (EOBs). And doctors and hospitals shouldn’t have to devote so much resources and time into their interactions with health plans.

 

If Google can make searching the web clean and simple, if Apple can make a cell phone/music player/ PDA elegant and straightforward, if Visa and Mastercard can present payment histories in a relatively easy to understand manner, if Southwest can make booking a flight a breeze, then certainly health plans could simplify their processes.

 

A place to start would be with the products themselves. Each carrier describes their benefits in their own terms. Surely there’s a best practice for this kind of thing, but every carrier has its own unique and often idiosyncratic method. The result: agents (and their clients) devote hours to creating their own apples-to-apples comparisons.

 

There are the conspiracy theorists out there who believe this is done to make it more difficult for consumers to understand what they’re buying. I believe their wrong: why assume bad intent when indifference or incompetence explains the situation? When it comes to presenting benefits I think it’s more a case of an inward orientation with a dash of pride of authorship thrown in.

 

Or take provider directories. Many have moved online, but again, there’s a best practice out there that would make finding your doctor even easier. Or claim forms. Every doctor I see (and at my age it’s more than one, now) complains about the paper work. There have been efforts to move claim submittals online, but the problems with the process are more than technical. There’s also a need to simply make the process simpler. There’s a place for uniqueness. Commodity material is rarely that place.

 

Instead, the focus needs to be on something somewhat foreign to most health plans: design. Design has become a hot business concept. Magazines like Fast Company, Inc., Fortune fawn over the concept and those who excel at it. Products like iPods and half the house wares at Target are held up as icons of a new business paradigm.

 

Yet design shouldn’t be the sole purview of gadget manufacturers or fashion designers. Processes can be well designed, too; so can forms. But good design will only come to the work flows and materials of health plans if it’s a priority of their leadership. And that takes some courage. It’s not easy to make being easy a corporate priority, especially when your industry is under fire.

 

Yet those attacks can be seen as a motivator for simplification, too. For example, individual health plans are going to have change the way they underwrite applications. Their ability to discover fraudulent applications is going to be extremely limited once lawmakers get done reforming the rescission process. With no back-up, the importance of underwriting at the front-end becomes even more critical than it already is.

 

This is a great opportunity to make enrollment applications simpler. Again, there are those who claim the applications are complicated to enable carriers to play “gotcha” with their members who later incur claims. They have no facts to back this up, but that hardly matters, especially when these critics get a lot of attention just for making the claim. Which means carriers are going to have to deal with this charge for quite awhile – or until something changes.

 

(What’s more likely to blame for complex applications is the same dynamic that haunts anything created by committee. When lawyers, underwriters, actuaries, and business managers sit down to create a form – especially one that needs to meet regulatory standards – that form is going to be bloated, complicated and annoying. No ulterior motive is required.)

 

Instead of spending time repeatedly repudiating the charge, however, health plans would be better served to move beyond it. The fact is, applications are more cumbersome and complicated than they should be. Carriers should work with their Departments of Insurance and an outside design consultant to come up with standardized and, even more importantly, simplified underwriting forms. The forms should focus on making it as easy as possible for consumers to provide enough information for the carriers to make their underwriting decisions.

 

And that should be the explicit goal: easy sufficiency. This, in turn, means using simple language in a clear, concise manner. It means laying out the questions in a manner that flows and avoids asking for the same information repeatedly. It’s a lot easier to describe than do (I know, I tried once), but if made a priority, it’s doable.

 

When lawmakers, prosecutors and others are lobbing grenades your way it might be counter-intuitive to use the situation to focus on design. In reality, simplifying the touch points where consumers, agents and medical providers interact with the carrier is an extremely visible way of demonstrating a commitment to change. As important, it’s a vehicle for getting in front of the change that is inevitable.

Executing the Basics: Reinventing Individual Health Insurance

The best strategy in the game, the most inspiring vision in the industry means nothing without execution. And if an organization isn’t executing the basic components of the business, implementing something fancy — culture change, a new business model — isn’t going to get very far.

Executing the basics is the least exciting critical component of any successful business. By definition, a successful business has proven itself. It’s an ongoing concern. Leaders like to lead and that usually involves moving in new, more exciting directions. Over time, attention to the nuts and bolts can wane. The basics become a source for savings. The attention moves from serving the customer to an internal focus on efficiency. After all, resources need to be freed up to fund those new initiatives.

In the context of individual health insurance, the basics include processing applications, issuing bills, paying claims, contracting with doctors, appointing agents, and answering the phone. Most carriers do an adequate job on these items most of the time. All carriers do a lousy job on some of these at some time. Those osciallations in performance are normal and to be expected. What’s unacceptable is that “adequate” is, well, acceptable. Carriers will talk about delivering first class customer service, being partners with their providers and producers, but few, if any, consistently succeed.

The problem, I believe, is two-fold: an inability to measure the return on investment of better service; and an unwillingness for competitors to cooperate.

Providing services, whether it’s underwriting applications, answering questions from insureds and their physicians, or paying commissions, costs money. These dollars can be measured, tallied and monitored. Given the need to keep coverage affordable, the appropriate goal for carriers is to provide these services as efficiently (meaning at the lowest cost) as possible.

These services also have benefits in the form of customer satisfaction, increased efficiencies at the partner level (less time spent in doctors offices tracking down an answer freeing up more time to work with patients), and a negative public image. The problem is that dollars are a lot easier to track than satisfaction or efficiency in someone else’s office. So when carriers do a cost benefit analysis on a new IVR system (IVRs are those automated “press 1″ or “say ‘billing’” phone routing systems) they can measure the savings in personnel costs, but they lack the tools to measure the increased frustration members feel when unable to make the artificial (un)intelligence get them to the right place.

Health plans aren’t the only industry with frustrating phone systems. Sprint, AT&T, Time Warner, DirecTV and Verizon are a few others with IVRs deserving of a shout-out — or shut down, depending on your point of view. But cable and phone utilities are not the standard to which carriers should hold themselves. Nor should the standard be Nordstrom or Starbucks. It should be what consumers define as good customer service, doctors define as good physician service, and producers define as good agent service.

Carriers need to examine their basic operations from the consumer point of view. They need to define customer expectations and then think about ways to deliver those services in a cost-effective way that meets those expectations.

This means shifting the focus from an internal point-of-view to one that looks at operations through the eyes of the consumer (or physician or agent). This isn’t hard: every officer in every health plan should be required to call their customer service departments on a monthly basis. They should get a monthly bill and call in with a question. They should receive an Explanation of Benefits (EOBs) and be asked how much and to whom they would cut a check if it was for real. They should call in to the pre-authorization phone line and follow-up on an application. In other words, they should walk in their customer shoes at least monthly. Then, on a quarterly basis, their staff meetings should focus on what they experienced.

There’s other techniques that work. For example, executives and managers should be required to plug in and listen to phone calls between their service reps and customers. Not occasionally, but in a regular, disciplined way.

Carriers also need to find ways to quantify something more than dollars. Perhaps bonuses should be impacted by customer satisfaction survey results or even public surveys. Or, perhaps they should ask someone. Fortunately for carriers, there’s too many economists in the world with too little to do. Certainly some of them have come up with mathematical formulas for measuring intangibles. Give them a call — they’re hungry for someone to talk to. Make your CFOs sit down with them and come up with a formula that works.

And then share the results. Which is the other part of the challenge. Most businesses tend to think that everything they do must be confidential and proprietary. The market is a jungle and every advantage needs to be exploited to survive. In this mindset, advantages are to be hoarded, not diluted by sharing.

The problem is that most customers don’t really care about a lot of these proprietary advantages. An example from a book I read, but now forget the title, describes the foolishness of the auto industry when lawmakers required them to incorporate catalytic converters into their cars. Each auto maker spent many millions of dollars to invent and implement their own design. Yet who has ever purchased a car because of its catalytic converter? The industry could have redirected most of those dollars to features that matter if they had come together and designed a standard converter they all could have used.

This concept of standardizing and sharing resources is much more acceptable in the software world where open source systems like Linux and MySQL are widely used. It’s foreign to most companies, including carriers. 

Yet the opportunity to standardize and share resources is huge in the industry. Applications for coverage, claim forms, EOBs, bills, commission statements aren’t competitive advantages — their Babel-like diversity is merely a source of frustration for users. Better yet, by standardizing them, entrepreneurs could develop tools to increase efficiency for the carriers and convenience for consumers.

Consider: most carriers currently accept online applications from large producers like eHealthinsurance. Yet, as large as eHealthinsurance’s production is, it represents a small percentage of carriers’ overall sales. Why create mechanisms that benefit just a few agencies? Instead, carriers should agree on standards for quoting and case submission systems that works for all health plans in all states. These standards should be freely distributed as open-source software. eHealthinsurance may compete in the market based on its quoting system, but carriers don’t. By creating a publishing low- or no-cost software carriers can more easily implement customer friendly services like automated underwriting, immediate issuance of membership cards and the like.

Standardization doesn’t mean customization isn’t allowed. There are several flavors of Linux commercially available. Similarly, entrepreneurs could take the open-source quoting/submittal software and package them, adding new interfaces and functionality. So long as carriers standardize around the basics, however, they should all save money, increase efficiency and improve customer satisfaction with the industry as a whole. They could then use the freed-up funds to better compete on what does matter to consumers: benefit design, cost of coverage, and the like.

Would this kind of cooperation be legal? It depends on how it’s approached. The standards negotiations can be outsourced to an independent third party. Or they can be convened under the auspices of regulators. In California, Insurance Commissioner Steve Poizner has done something similar and has expressed an interest in helping carriers appropriately address common challenges. So yes, it can be done legally.

Attending to the basics is not exciting, but it can be impactful. Perhaps more importantly, invigorating innovations will fail unless they’re built on a strong foundation. So if the individual health insurance industry is going to reinvent itself, the nuts-and-bolts of the business is where it has to begin.

 

Reinventing Individual Coverage: Defining the Approach

In my previous post I suggested the current political environment provides more than sufficient inspiration for individual health insurance industry to reinvent itself. One of the challenges to actually implementing change is figuring out how to approach the problem. It’s often too easy to get caught up in the details without remembering the goal.

And the goal here is to deliver value to consumers who purchase their own health insurance coverage. This may seem obvious, but in too many cases, industry insiders and reformers at the barricades alike get so caught up in rules and regulations, processes and work flows, structure and platforms that they lose site of this simple truth: at the end of the day we either provide value to consumers … or else.

And it’s a truth that is agnostic as to whether the “we” is a private enterprise or a government agency. We either deliver or we go away.

So instead of structuring the gratuitous advice I intend to offer over the next several posts on specific items (dealing with rescissions, simplifying the application, etc.) I’m going to focus on a few general themes. Specifics may crop up as examples or to help amplify the themes, but it’s the overarching themes that provide a framework for change.

As of now, I’m inclined toward four major themes:

1. Executing the Basics
2. Making it Simpler
3. Sharing Technology
4. Earning Trust

Executing the Basics is all about the nuts-and-bolts of being a health insurer. Processing applications, issuing bills, paying claims, contracting with doctors, appointing agents, and answering the phone.

Making it Simpler recognizes that individuals are not businesses, even when they have the assistance and counsel of a qualified agent. Health insurance coverage is complicated enough. The process of getting and using it, however, shouldn’t be as complicated as it is. Nor should finding the plan that best fits a family’s need. Nor filing a claim. Nor … well, you get the idea.

Sharing Technology stresses that a carriers’ sales and member service technology shouldn’t drive consumers’ buying decision. A health plan’s benefit design, pricing, access to providers and the carriers’ customer service offerings should.  The industry could save millions of dollars by adopting standards that any and all technology providers can use for everything from accepting online applications, issuing online membership cards, processing claims, creating provider directories, etc.

Earning Trust may be the most important theme. After more than a year of every major office holder in the country calling the system broken, after endless legislative hearings, headlines and press conferences attacking the industry, consumer confidence in the industry is lower than its ever been. Worse, this only seems to inspire supposed industry insiders to pile on. The fact is there are problems in any enterprise, public or private. What’s needed is facing them honestly, not to score points.  Most of all, earning trust means raising the standards of behavior and meeting them.

These themes overlap with one another. What works in one area might well impact another. But they provide a general framework for discussing ways to reinvent individual health insurance. At least they are the themes I’ll be addressing over the next several days. Do you have others you think need to be considered? Are these off-target? Please let me know your thoughts by posting a comment. 

Reinventing the Individual Health Insurance Market

The health insurance industry has been under attack for years. There are those who would like to do away with it completely. While those voices have grown louder in recent years their political success has been limited at best. For evidence, just look at the campaign for the Democratic presidential nomination: no major candidate called for a government-run, single-payer system. The two remaining contenders have both explicitly taken such an approach off the table.

Yet there is one aspect of the industry that is under intense attack: the individual market. Again, this isn’t new. In the past, however, most of the attacks have been unfocused or ill-informed. Critics tended to ignore unique aspects of the coverage targeted at individuals and families buying insurance outside of work: it’s a voluntary decision. To maintain affordable premiums carriers must weed out potential buyers who are certain to incur substantial claims.

For example, carriers will often reject an applicant who is a regular user of a particular prescription drug. This strikes many as wrong, if not immoral. Just because someone needs a certain medication is no reason to deny them insurance.

Yet, when the monthly prescription costs exceeds the monthly premium, what else can the carrier do? Insurance is about spreading risk. In a voluntary market where people can choose when to purchase coverage, it means they need to buy insurance before their known risks exceeds the premium. Otherwise, they are simply asking other consumers to subsidize them. This dynamic, known as adverse selection, is at the root of much of the problems facing the individual market.

It’s not the only cause, however. Carriers exacerbated the problem by mishandling their approach to managing adverse selection. The most obvious mistakes involved how rescissions were handled. Even the industry’s most ardent foes admit carriers need to protect themselves from fraud. If an applicant knowingly and intentionally lies about material information on an application for coverage, the carrier should have the right to revoke the coverage.

It’s identifying when the misstatements are knowingly and intentionally that creates a gray area. Carriers chose to be aggressive in applying their right to rescind coverage. Now they’re paying a huge cost for this posture in the form of large fines, law suits and horrendous publicity.

The rescission issue is the hammer being used by lawmakers, regulators and pundits interested in reshaping the individual health insurance market. That their proposals would be more likely to do more harm (in the form of higher prices and less consumer choice) than good seems almost beside the point. They want change. They want it now.

While their changes are often off target their goal may not be. Perhaps the attack on the this market segment is what’s needed to prod the industry to reform itself. Perhaps it’s the motivation needed to reinvent the individual health insurance market, to make it stronger, more valuable and more respected than in the past.

I’ll be writing about the opportunities for reinvigorating the individual market over the next several days. I hope you’ll share your ideas, too. Please post your thoughts on ways to reinvent individual health insurance products, the way they’re sold, administered and used. By the end of this dialogue we’ll at the very least have built a list of alternatives to some of the misguided proposals currently being considered in Sacramento, Washington D.C. and elsewhere. At best, someone who can actually implement the changes may be inspired by your thoughts and meaningful change will follow.

Stay tuned.  

Senator Invites Carriers to Help with Health Care Reform

A coalition of Senators is waiting to help the next president forge a bi-partisan coalition on health care reform. A leader of the group, Senator Ron Wyden of Oregon, spoke before the America’s Health Insurance Plans 2008 National Policy Forum on March 5th and urged health plans to join the effort, not to fight it.

The 12 Senators, six Democrats and six Republicans, have their own health care reform proposal before Congress, the Healthy Americans Act. None of the Senators support every element of the package. But the mere existence of a bi-partisan coalition surrounding health care reform will give the next president a boost in developing a compromise plan.

In Senator Wyden’s address to AHIP, he said the “success of health care reform hinges to a great extent on how your profession responds to the efforts of a new president and a new Congress.” He warned, however, that if medical carriers spend ”millions of dollars fighting to preserve the status quo, you may delay reform for awhile but you will increase the likelihood of a government run health system with no role for the private sector.”

In urging the insurance industry to become a part of fashioning a solution, Senator Wyden noted that in a market in which 20 percent of Americans are uninsured, carriers need to be good avoiding risk. As Senator Wyden put it, “If you don’t excel at shedding risk, you are going to enroll too many people who need too much care.  Enrolling too many people who need too much care means that your costs are going to go through the roof.  When your costs soar this way, the healthy people that you do business with are going to start looking for another insurer whose costs aren’t going through the stratosphere.  In other words they’re going to look for another insurer who does a better job of shedding risk.”

This, according to Senator Wyden, is part of the reason the current health care system is broken. Another reason is that health care in the United States is tied to the employer/employee relationship, which the Senator noted hasn’t changed much since 1948. “But economic challenges for business and workers today are very different then they were in 1948,” he noted.  “Sixty years ago employers weren’t operating in a global marketplace and employees who went to work at twenty stuck around long enough to get a gold watch and a steak dinner for retirement.  Employers need cost-containment and workers need quality health care within a system that is portable – where they can truly take their insurance from job to job.”

As an alternative, Senator Wyden suggested carriers consider a new approach in which “everyone who’s not in the military or on Medicare, has a basic private health insurance policy. Private insurance companies are on the same footing – each must take all comers. Competition would be based on price, benefit and quality.”

This is the underlying approach established by the Healthy Americans Act. In asking his audience to consider supporting the legislation, he cited six reasons why health plans would benefit from this alternative system:

1. Bringing the 47 million uninsured into the system would greatly expand the private insurance market.
2. There would be “no competitive disadvantage for carriers doing the right thing” and, with a risk sharing mechanism as part of the package, there would be no need to specialize in risk avoidance.
3. The legislation supports increased information and transparency in the health marketplace.
4. By focusing on wellness and preventive programs, carriers would be selling a product people want more of.
5. Carriers “wouldn’t be the political football any longer.”
6. More attention could be given to cost containment issues such as reducing needless medical errors.

He concluded his speech with a plea to carriers to be a part of the solution. “I want to ask you to become a part of the Senate’s bipartisan effort to fix American health care. Both Democrats and Republicans in the Senate want to work with you to get health care right in 2009.”

My take on all this is that the stars may be aligning for a health care reform effort that is more consultative than adversarial. Senator Barack Obama has certainly spoken of the need to have everyone, including carriers at the table. Senator Hillary Clinton has also spoken of leading a more open process than she did during her husband’s Administration. Significantly, Senator John Edwards, who promised to exclude the health insurance industry from participating in the health care reform debate, is out of the race.

I also think a move away from employer-provided coverage is likely to be a strong current in future health care reform discussions. Senator John McCain favors this approach as does the bi-partisan coalition of Senators backing the Healthy Americans Act. The business community would love to be relieved of the burden of shouldering the nation’s health care system. In speeches I began giving in 2006 I predicted that health care coverage might follow the path of pensions. Instead of companies running pension plans they moved to simply administering — and contributing to — their employee’s individual retirement plans. Similarly, employers could administer — and contribute to — employee’s individual health plans. Even though the Democratic presidential candidates still embrace an employer-centric system, the support fora more individual-centric model is gaining momentum..

For health plans this could be good news. They would remain a core part of the nation’s health care system. While the nature of their competition would change, it would still likely be a vibrant, primarily private, market.

The role of health insurance agents could change far more dramatically. If consumers are pushed into exchanges, connectors or purchasing pools, the system administrators might assume they can play the role of agents. It will be important for agents to make sure Americans continue to have access to independent advocates and consultants — in other words, to professional insurance agents. That won’t be easy. Many lawmakers — and even more of their staffs — have never worked with an agent and don’t understand the value we bring to the system.

Senator Wyden and others, however, have expressed a willingness to listen to others. That’s an opportunity agents need to seize. Fortunately agents have a compelling story to tell. 

Agents Call for Changes to ABX1-1

Two of California’s largest insurance agent organizations have combined forces to seek urge the State Senate to amend Assembly Bill X1-1, the health care reform package produced by Governor Arnold Schwarzenegger and Assembly Speaker Fabian Nunez. Passed by the Assembly on December 17, 2007, the legislation is scheduled for a hearing before the Senate Health Committee on January 16th.  Governor Schwarzenegger and Speaker Nunez have already started the process of qualifying the ballot measure needed to finance the bill’s provisions. ABX1-1 takes effect only if the funding initiative gains voter approval. It is expected to be on the November 2008 ballot.

The California Association of Health Underwriters (CAHU) and the National Association of Insurance and Financial Advisors-California (NAIFA-California) asked Senators to “take the time to get the legislation right.” Noting the compleixity of revamping the state’s health care system, the agents issued a statement claiming “Comprehensive health care reform is too important, and the stakes for Californians are too high, to push this legislation through without needed changes.”

Agents are asking for changes to how a state-run purchasing pool would operate. Of specific concern is the bill’s driving of residents receiving a tax credit to subsidize their premiums into the pool. Agents want there to be a level playing field. “The state doesn’t require food stamp recipients to shop only at government-run grocery stores. Similarly, Californians receiving tax credits to help pay premiums should not be forced to shop only at a government-run health insurance store.”

The agents are also urging Senators to define the minimum benefits package all residents would need to obtain. Additionally, agnts are asking the Senate to confirm the financing mechanism will actually meet the funding needs of the reform package. Specifically, they express the concern that a substantial portion of funding relies are tied to payroll taxes. Agents noted that wages don’t increase at the same rate as medical costs, meaning, over time, the financing will be inadequate to cover state health care obligations.

2007 Prediction Results

On January 2, 2007 I was foolish enough to post some predictions for the year. At the time I promised to review my results in a year. And here we are, a year later. Just keep in mind these were predictions. I wasn’t saying these things should occur. I was predicting they would occur. 

2007 Prediction #1. More Major Carriers Will Enter the California Individual Health Insurance Marketplace
The theory was sound. The individual health insurance market in California is huge. And with employers dropping coverage it has been getting bigger. Major carriers (I mentioned Humana and Cigna) couldn’t ignore the potential here. And they still can’t, but they certainly didn’t act on it in 2007. My guess is the health care reform debate created enough uncertainty that, combined with opportunities in other state, made California less attractive. In fact, a carrier, Nationwide, left the California individual medical market. So while other carriers might get here eventually, this prediction was a big miss.

2007 Prediction #2. Carriers Will Experiment With New Distribution Strategies
The premise of this conjecture rested on carriers recognizing that online sales weren’t enough in the indivdiual insurance market segment. While that channel would grow in 2007 (see prediction # I sensed a countervailing trend to get more people in the streets talking about individual medical coverage. So I predicted a carrier (didn’t know which one) would supplement its independent agent channel and launch a captive field force. Agents wouldn’t like it, but some carrier’s need to increase market share would drive them to at least experiment with this approach. Turns out 2007 was not a year for carriers to be upsetting agents. In fact, all of the carriers have reached out to agents and their association, the California Association of Health Underwriters, for input and help on health care reform issues. Chalk this up as another miss.

2007 Prediction #3. A Carrier Will Try to Introduce Per Member Compensation
Tying agent compensation to the cost of health care doesn’t make much sense, yet the historical practice of paying agents a percentage of the health insurance premium pay has deep roots. Like many traditional practices they’re hard to change. I thought 2007 would be the year one of the major health insurance carriers would take a stab at it. I was wrong. The desire not to upset their relationships during the health care reform process may have influenced this, or it might be that none of the carriers thought this was an important enough issue to address. In any event, this is clearly miss #3.

2007 Prediction #4. Kaiser Will Seek to Work Closer With Agents in the Individual Market
Kaiser has been thinking about ways to work with independent agents since their small group team successfully added this distribution channel. With Tom Carter and Mitch Ross, among others, in leadership roles there, I felt 2007 would be the year they’d actually move forward with an agent channel. I’m sure they’re still considering it, but their deliberations — which can seem endless even to those inside Kaiser — are ongoing. Sensing a trend here? Strike 4.

2007 Prediction #5. No Major State Health Care Reform in 2007
I launched this blog thinking it would deal with health insurance related topics, but in a general way. That it came to focus on health care reform (to the extent that I renamed the site) was a gradual process. In hindsight it’s kind of interesting (at least to me) that it wasn’t until the fifth prediction that the topic of health care reform came up. Here’s the full text of that forecast: “This is a cheap prediction. While health care reform is at the top of everyone’s agenda in Sacramento, the issue is too big and complicated, there are too many stakeholders involved with too many diverse perspectives, and there are too many other pressing issues demanding attention for the Governor and Legislature to work things out in one year. But watch out for 2008.” Less of a “cheap prediction” than I imagined, but it turned out to be right nonetheless.

2007 Prediction #6. Mandates Become Viable
The idea here was that acceptable health care reform would require reducing the number of uninsured. This would mean requiring all residents to obtain coverage and that, in turn, would mean requiring all carriers to sell coverage to all applicants. These twin mandates were are key components to the health care reform package currently awaiting Senate consideration. And they’ve been a big part of the debate for most of the year. Clearly, mandates are viable. Hit #2.

2007 Prediction #7. More Musical Chairs in Carrier Organizations
There was a lot of changes occurring in the leadership of health plans around this time last year. In this prediction I noted, for example, that Lisa Rubino, had recently left as CEO of Blue Shield’s individual, small group and government program division and would no doubt be recruited quickly. Shortly after this post, Ms. Rubino was named president of Molina Health Plans in California. And while fewer moves among the carriers took place than I was thinking when I originally wrote this one, there were a number of changes. Since I’m the one giving out the scores here, I’m going to count it as a hit — but only barely.

2007 Prediction #8. Online Sales Will Continue to Grow
This was the gimme of the lot. The trend of independent agents to move a portion of their sales online is growing. The top producers for virtually every carrier sell exclusively or mostly online. Internet-assisted sales is a permanent part of the individual health insurance landscape. Its influence on small group sales is growing as well. I still believe that local agent who get to know their clients do a better job of finding the right health insurance plans for a particular consumer’s unique needs than any web-based sales site. But I also believe local agents should integrate the Internet into their sales process. Anyway, this was an easy prediction to get right, and I did. So that makes hit #4.

The tally reads four hits and four misses. My prediction skills are either half full or half empty, depending on your personality type. Significantly, I missed on all the predictions dealing with carrier competition, but got both of those involving health care reform right. Narrowing the focus of this blog to health care reform-related issues was a good move.

Getting Closer to a Health Care Reform Bill … Maybe

Hopefully you’ve forgotten my prediction that we’d see Governor Arnold Schwarzenegger’s health care reform plan in legislative form on September 21st or so.  Well, the “or so” part was technically accurate. It’s still not here. However,  recently a draft bill has been circulating in Sacramento which seems to reflect some elements of the compromise reached by the Governor and Legislative Leaders. There’s also a great deal in the draft which is clearly just placeholder language — something to be filled in later. So when I say “draft” I mean “draft.”

Whether what’s in this version is close to what eventually gets introduced is unknown. Talk is there’s still some serious differences between the Democratic Legislative Leadership and the Republican Governor. In the end these may turn out to be insurmountable and no health care reform comes out of Sacramento.

Yet the odds seem to favor some sort of comprehensive package will get worked out. The circulating of a draft is a sign that movement toward a compromise is ongoing. Both sides have constituencies they need to bring along and an unofficial draft can help with that process. Showing around a “for comment” draft is a good way to flush out concerns from both allies and foes. It also psychologically moves the starting point of the discussion to the new proposals.

In a later post I’ll address some of the substantive issues in the draft. A quick glance indicates that nearly all of the concerns agents had with Assembly Bill 8 (Nunez) remain on the table. It’s important to keep things in perspective. We’ve all been concerned for some time and, while unpleasant, that’s healthy. 

When crunch time comes agents and their organizations will have specific language to promote. But our most important activities will be to educate lawmakers about the real value we deliver to our clients in specific and to the system in general. (Thanks to all of you who posted comments on the previous post describing examples of this). Agents also need to emphasize that responsible health care reform and a continued role for agents are not mutually exclusive concepts.  Hopefully this reality is already understood by the Governor and the Legislature. As the compromise language takes hold we’ll know for sure.

The Value of Agents

So far I’ve received only one comment on an earlier post, “Agents Need to Deliver Value — And Let People Know About It.” The author of the comment, Dr. Zagreus Ammon doesn’t have much nice to say about agents and brokers. “Based on my experience, most agents add very little value and are generally a waste of time, effort and oxygen”, he writes. “Being so behind the scenes, they suck a significant amount of money out of the health care system returning little.”  Dr. Ammon, who has practiced in Canada, now works in Maryland and maintains his own blog (The Physician Executive), has given health care a great deal of thought. He’s come to the conclusion a private health care system is preferable to one run by the government. This leads him to begrudgingly conclude that agents are “a necessary evil.”

Needless to say, this isn’t the reputation agents want to be building. Nor, I believe, is it accurate. True, some agents fail to deliver anything worthwhile to their clients. The majority, however, deliver a great deal. Yet here is Dr. Ammon claiming we’re parasites. This opinion is, no doubt, based on his experience. By the nature of such things, his experience with agents is limited, but it’s the only data he has — for now.

I was going to respond to Dr. Ammon, but on reflection I think it would be more interesting to hear from agents and others who read this blog. My guess (and hope) is that it will be a lot. I’m expecting agents will provide examples of how they saved their clients money, how their intervention helped clients get paid on previously denied claims and how they guide clients to the right health plan. In short, I’m expecting agents to explain how we add value to the health care system.

The health care debate is driven in large part by anecdotes. Many of these involve insureds whose claims were denied and had to stand-up to the insurance companies on their own. Agents frequently point out to me that these consumers apparently had not insurance agent. If they had, these agents maintain, the results might have been different. So now’s your chance to provide your own anecdotes — or ask your clients to post something for you. (Just click on the blue comment link at the bottom of this post)

As an agent, you’ve walked the walk. Here’s a chance to talk about it.

Agents Need to Deliver Value — And Let People Know About It

It’s not that anyone wants to do away with agents. OK, let me rephrase that. Single payer advocates would like to do away with agents. They also want to do away with insurance companies, too, so it would be wrong to take this personally. Most of the folks working on health care reform don’t think that way. In fact, part of the problem is they don’t think think about agents — and the value we add to the system — much at all. As a result, a lot of the reform proposals out there are likely to eliminate agents and brokers from certain market segments,  or at the very least, greatly diminish what we can contribute. This isn’t intentional, but it could be the result. And, of course, from the squirrel’s rabbits point of view, whether the truck runs them over intentionally or inadvertently, it’s still roadkill.

But it’s not only the truck’s fault. As insurance professionals we need to take responsibility for selling our value. And for earning it every day in our interactions with our clients.

Ross Pendergraft, who is Media Relations Chair for the Los Angeles Association of Health Underwriters recently circulated an email which is spot on, so much so, I’ve reprinted it below. (For those who aren’t aware of the background, Oprah devoted a recent show to health care reform. Her guests included Michael Moore, director of the film Sicko,and Karen Ignagni, president and CEO of America’s Health Insurance Plans, a trade organization. NAHU is the National Association of Health Underwriters, a professional organization representing insurance agents and brokers). 

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After viewing The Oprah Winfrey Show, “Sick in America: It Can Happen to You,” I have a NAHU challenge. The America public needs to know that there are Health Insurance Agents able to assist people with their insurance claims especially when they are too sick and vulnerable.

Case in point: 1. The Oprah show highlighted three individuals with severe medical conditions, each having a battle with their insurance carrier. There was not one single mention that a Health Insurance Agent could have assisted these individuals with their ordeal. 2. Karen Ignagni, president of America’s Health Insurance Plans, in her commanding performance supporting the health insurance industry, never once mentioned anything about a Health Insurance Agent and the support the agent could have provided.

I would encourage everyone to read the transcript from the show (Summary of Oprah program, “Sick in America: It Can Happen to You) and, better yet, to watch the show.

When I watched the movie Sicko I was extremely disturbed by the many half-truths that Michael Moore broadcast leaving me very little respect for Mr. Moore. However, I have to say after watching Oprah, I found myself starting to resonate with some of the beliefs that Michael Moore has with regards to our country’s health care problem.

Rather than accept my comments, go to the Oprah Message Board and see what the American public has to say after viewing the show. I would also encourage all health insurance agents to respond to the Oprah show.

I love this from the show: Although Karen Ignagni admits that America’s current health care system has its faults, she says a government takeover is not the answer. “There’s no perfect system. What we need to do is craft something that’s uniquely American. We have to take responsibility in insurance plans of doing a better job dealing with mistakes, dealing with people who are falling in the cracks, good physicians and good hospitals,” she says.

Respectively,
Ross Pendergraft

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Agents can make a huge difference in the health care outcomes for their clients. We serve as counselors when consumers shop for coverage and advocates when they encounter problems. Both NAHU and CAHU strive hard to get this message out to decision makers and opinion shapers. The reality is, however, that every agent needs to take responsibility for delivering this message. It starts with asking the question, “Do I add value to the products I sell?” If the answer is “yes,” then make sure your clients — and their legislators — know (CAHU’s current Operation Drumbeat communication provides a sample letter your clients can use as a starting point). If the answer is “no,” then it’s time to turn your business over to an agent who can provide meaningful services to your client or to change your ways before legislators, inadvertently or not, changes your business for you.