Health insurance brokers fear loss of business in new benefits exchange program

By Len Lazarick

Independent health insurance brokers and their clients lobbied legislators in Annapolis on Tuesday to try to prevent being put out of a business by a new health benefit exchange program proposed by Gov. Martin O’Malley.

“A new health insurance exchange is going to be a new public bureaucracy,” Gary Livengood, co-chairman of the Health Insurance Buyers & Brokers Coalition of Maryland, told about 100 coalition members.

The exchange program is a major component of federal health care reform. As proposed in the O’Malley administration bill, the insurance exchange is a new government agency to deal with health insurance. It is designed to help people with lower incomes and without health insurance obtain it on the open market, and aiding individuals and businesses in finding the best insurance plan. Exchanges can be independent state agencies, but need to be able to assess whether beneficiaries are eligible for federal subsidies under health reform.

Lt. Gov. Anthony Brown

Stephen Salamon, the broker’s co-chairman of the coalition and a principal in Landmark Insurance & Financial Group, said buying health insurance on a benefit exchange is sometimes portrayed as something “as simple as buying a plane ticket online,” but it is much more complicated. For consumers, Salamon said, it would be “more like going to the MVA or going to the Post Office” to get service for health insurance.

“There are forces that would like to see a large new government bureaucracy,” said Salamon, who chaired the Maryland Health Care Commission in the Ehrlich administration. “The last thing in the world that we need is a powerful new competitor.”

The brokers enlisted the aid of economist Anirban Basu of the Sage Policy Group to bolster their case.

Summarizing a report, Basu said the brokers represented 20,000 to 23,000 jobs in Maryland, small businesses that serve other small businesses in providing health benefits.

The brokers handle 20 million e-mails a year about health insurance issues, and answer 1.6 million phone calls. They have spent $57 million on information technology infrastructure, and millions more in beefing up their capacity to serve customers.

“The state already has the capacity needed” to service lots of clients without creating a large bureaucracy, Basu said. “Why replicate existing capacity?”

Lt. Gov. Anthony Brown, the administration’s point man on implementing the federal health care reform, disagreed.
“We’re not trying to run these guys out of business,” Brown said.

Brown and state Health Secretary Joshua Sharfstein met with the brokers’ group last week. The administration wants them to have “a seat at the table” to help plan and structure the exchange. Brown actually mentioned the brokers in a speech Tuesday to a national health policy conference in Washington, discussing the implementation of the health benefit exchange.

“The exchange will be authorized to contract for any services needed to run the exchange,” Brown said. “We’re not experienced in operating markets.”

The brokers are backing legislation by Sen. John Astle to create a nonprofit organization – not a new agency – with the primary purpose of “securing health care coverage for individuals who do not have coverage.”

But Brown said the best solution is what the administration has proposed: an independent government agency that can make determinations about eligibility for Medicaid and subsidies for those making below than 400% of the poverty line. Determining eligibility can’t be contracted out to private firms, Brown said.

Brown noted that the brokers are already being squeezed by a provision in the new law that requires health insurance carriers – which actually pay the bills – to spend at least 80% of their revenues on health care. This puts pressure on the carriers to reduce commissions to brokers for selling their products.

Basu said many legislators and state officials don’t really understand the role brokers play in the health care market.

Jim Belikove of Belikove & Graves in Bethesda, a small brokerage with a couple hundred business clients, agreed. “I don’t think they’re assessing the value we provide our clients.”

About The Author

Len Lazarick

Len Lazarick was the founding editor and publisher of and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.

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