Unless you are an insurance commissioner or an insurance industry lobbyist you probably don’t think much about the National Association of Insurance Commissioners (NAIC). The NAIC is a national professional organization of state insurance commissioners. While the NAIC has always enjoyed some power and prestige its importance was elevated by the passage of national health reform.
One would imagine that this group would be sympathetic to consumers. It is, after all, an organization of insurance regulators. But a key NAIC vote last week revealed otherwise.
For more background on the vote see this News & Observer editorial by Consumer Reports President Jim Guest. In short, the Affordable Care Act created a new rule that insurance companies must start spending a minimum amount of each premium dollar on health care. This rule means that in the future insurers will spend more on your medical treatments and less on executive pay, trips to Cabo, fancy new buildings, and agent commissions. It turns out (surprise!) that agents don’t like the idea of insurance companies spending less on commissions.
So insurance agents are trying to effectively reclassify commissions as medical care or quality improvement. Last week the NAIC took up the issue and voted on a resolution urging Congress and Health & Human Services to weaken health reform and suspend or delay implementation of the new rules.
Sadly, North Carolina Insurance Commissioner Wayne Goodwin made the motion for the resolution and voted in favor of this ill conceived recommendation.
Commissioner Goodwin tried to construct an argument from twigs and twine to support his vote but his logic falls apart with a little poking. For example, Goodwin says he is concerned that if commissions are cut then some agents could go out of business. This would hurt consumer access to agents, he claims. How did he reach that conclusion? He asked insurance agents whether or not consumer access would suffer if their commissions were cut. Interesting methodology.
A different approach would be to ask consumers whether or not they are having trouble finding an agent or broker. Goodwin could carefully monitor responses over time to see if NAIC action is warranted.
His second major contention is that agents run businesses and he doesn’t want them to lose those businesses. I can appreciate that argument but I have trouble seeing why consumers should have to subsidize this business through higher premiums. For many years the NC General Assembly made a similar argument to explain why we shouldn’t work too hard to cut drug prices. Drug companies, after all, provide jobs in the state. True enough, but that doesn’t mean that people should suffer and get squeezed out of the market to ensure drug industry profits. As one broker who supports health reform told me, agents and brokers need to innovate.
The NAIC could have monitored commissions and surveyed families and small businesses to gauge their level of access to brokers. NAIC could have made any number of recommendations to accommodate agents without chipping away at health reform. Instead, under intense political pressure from brokers and agents, they voted to pass a one-sided resolution. Thankfully, it does not have the force of law. But if the symbolic vote weren’t important then agents would not have poured so much effort into getting it passed.
In North Carolina, I hope this is not the start of a troubling trend for the Department of Insurance. Commissioner Goodwin generally stands on the side of consumers. Not this time. Let’s work to make sure this was an aberration for the insurance commissioner and not a change in direction.