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What's In The Stimulus Package For Agents And Insurers

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The $787 billion stimulus package recently enacted by Congress and signed into law by President Barack Obama contains provisions of substantial significance to the life-health insurance industry, both for carriers and agents, according to industry officials.

Especially significant in terms of cash outlays were provisions in the package improving the short-term health insurance safety net for people laid off from their jobs.

The final bill provides $24.7 billion to provide subsidies for 9 months to laid off employees under the Consolidated Omnibus Budget Reconciliation Act or COBRA. It will be available March 1.

Robelynn Abadie, president of the Association of Health Insurance Advisers, notes that the COBRA provision “is the most immediate concern to AHIA members.”

Abadie says, “What I realize now is how bogged down agents/advisors are in getting the correct information out to employer groups on how to implement the program.”

There are “numerous challenges” for human resource/risk managers/COBRA administrators, as well as small employers and agents to implement the subsidy, she says. This is particularly so, she explains, for those small employers who utilize the State Continuation programs and usually have little experience or assistance other than what their agent provides.

“The role of the agent is critical as employers are scrambling to comply but AHIA members are prepared to meet the challenge,” Abadie says.

It points up the important role agents play in the health insurance area, she says. “A critical point is that agents do so much more than just sell policies. We assist our clients and guide them through plan changes, mandates, economic and personal challenges, as well as provide a level of assistance that no one else offers,” she explains.

Group health carriers will also benefit from a provision that establishes a temporary increase in the federal medical assistance percentage (FMAP) with respect to Medicaid payments for FY2009-FY2011 for eligible states. The estimated cost of this is $86.6 billion.

The bill also provides $19.4 billion for first-time incentives for hospitals, doctors and other healthcare providers to keep health records electronically while also providing $1.1 billion to fund wellness programs and $1 billion to study the comparative effectiveness of medical treatments.

The legislation’s tax provisions include both business and individual tax relief that will benefit small insurance agencies, say officials at the National Association of Insurance and Financial Advisors.

On the business side, the bill includes an additional year of authority for small businesses to expense (rather than capitalize) up to $250,000 in capital acquisitions, and a 50% bonus depreciation provision.

In another provision targeted for small businesses, the bill provides a 5-year net operating loss (NOL) carry-back provision. This provision, scaled back in the final bill, is now available only for losses that were incurred in 2008 by businesses with gross receipts of up to $15 million, NAIFA officials say.

At the same time, the industry is now waiting for the other shoe to drop.

For example, insurance agents who work in the executive compensation market need to be watchful of the limitations placed on the executives of companies participating in the Trouble Asset Relief Program (TARP), NAIFA is cautioning its members.

“There is concern that Congress may look to expand executive compensation limits to any company receiving federal assistance, which could include companies that are receiving special tax breaks,” NAIFA says in a bulletin to its members.

The industry is also anticipating that the budget deficit reduction program President Obama was scheduled to release after press time last week may propose cutbacks in executive compensation programs sold by the industry.

Specifically, NAIFA tells its members, “more tax legislation is certain later this year.”

While the bill addressed the “pressing problem” of patching the alternative minimum tax for this year, “it did not address the equally compelling problem presented by the scheduled repeal of the estate tax next year or the sun-setting of many other Bush-era tax provisions originally enacted in 2001 and 2003,” NAIFA says.

“It is certain that Congress will not allow complete repeal of the estate tax to take effect in 2010, and thus more tax legislation to deal with this” and other tax issues “is a virtual certainty later this year,” NAIFA officials say.

Aetna spokesman Mohit Ghose says the company “is very supportive” of the healthcare provisions in the stimulus package, including Medicaid money for those who lose their jobs and don’t qualify for COBRA, as well as the COBRA subsidy.

“The funds to support wellness program and the $1 billion to study the comparative effectiveness of medical treatments are also very important as we try to build a better healthcare system,” he says.

But “details matter,” Ghose cautions. These include the regulations implementing the privacy provisions in the medical records funding program. “We must get them right so we don’t impede the progress in developing better systems of healthcare.”

John Greene, vice president of congressional affairs for the National Association of Health Underwriters, is voicing deep concern about a provision in the health records provision that gives all 50 states’ attorneys general the authority to enforce the privacy provisions.

“This is going to be problematic because it could potentially create 50 different enforcement guidelines health agents will have to follow,” Greene says. “It runs contrary to what we were trying to achieve,” he adds, noting that NAHU would have preferred a federal preemption scheme.

“The idea is that you want the flow of information from anywhere you are in the country,” he says. “This could staunch the flow of information from one place to another.”

At the same time, “we are glad they have put real money into this effort and we will see if the privacy concerns we have concerns about actually becomes a 50-state mess,” he says.

Greene also notes provisions in the bill that expand the number of people eligible for healthcare assistance under the Trade Adjustment Act.

The problem with the provision is that it did not expand the options as to how they could use the credit. “The only options that are automatic are high risk pools, which are very expensive,” Greene says.

“Why should you encumber the federal government with the highest-cost options?” he asks. “As a result, you could have a credit that you couldn’t use.”

Greene notes that during the negotiations over the bill NAHU officials suggested language changes to the provision that would have opened up the range of options and reduced the cost and availability of least-expensive options both to the government and individuals. “That is a shortcoming.”

AHIA’s Abadie says health agents are very supportive of the wellness, or disease prevention component of the stimulus package. “By addressing the root cause of the cost of care, we can make health care and health insurance more affordable, thus more accessible,” she says.

Abadie is also supportive of the comparative effectiveness provision although this has stirred controversy. “We have long advocated for comparative effectiveness research in order to ensure that patients and doctors have the information they need to evaluate the safety, effectiveness, and value of various treatment options.”

She notes the concerns of critics, saying that “of course, as comparative effectiveness is done, there may be issues arising about what to do with the results of the research.” And she adds, “I know AHIA would oppose ‘rationing’ with all our might!”

But, she says, “I seriously doubt that this or any Congress would enact legislation that would ration health care (particularly based on age)…but rest assured that we’ll fight that fight with every ounce of energy we have in the unlikely event that it develops.”


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