It’s Better Than Crack

In mid-June, I attended back-to-back political fundraising events for two moderate-to-liberal Democratic members of the House, both fairly reliable allies of former House Speaker Nancy Pelosi, D-Calif. 

This is not my usual crowd. I cringe when I’m sitting next to the trial-lawyers’ association lobbyist. But these are two friends who are smart and “getable” on a number of our parochial issues, and I have great respect for both.

Each was seething about President Obama, fresh off of the failure of the House to pass fast-track authority for the negotiation of a massive Pacific Rim trade deal. Both invoked the words “lame duck.” Recriminations were flying for the president’s absence of rapport with rank-and-file legislators and poor salesmanship of the trade pact. Each of them said a variant of: “We carried his water for six years; now we’re going to look after ourselves.” 

All of this portends a Congress in the fourth quarter of the Obama administration that barely gets anything done. So much for a repeat of the final two years of the Clinton administration (the triangulation of congressional Democrats, the balancing of budgets, the enactment of welfare reform, etc.).

On the Senate side, Minority Leader-in-Waiting Sen. Charles Schumer, D-N.Y., has made it clear his caucus will disrupt any appropriations matter unless and until Republicans give in on big domestic spending increases. No Republican is going to go for that. It’s all about positioning for 2016 elections. No wonder the American people rank Congress just one tick above crack dealers.

But I’m going to use the two Democrats’ exasperation to inspire my own rant. The prospects for legislative opportunities wane, and the clock ticks, and I’m getting too old for all the niceties of lobbying. This administration has been hostile toward intermediaries in the financial world in general and our world in particular—past, present and, sad to say, future. And the animus comes from the top.

Let us never forget the past. During consideration of the Affordable Care Act, there were numerous political efforts aimed at preventing agents and brokers from even being a partner in selling exchange plans. Independent agents and brokers, after all, are conflicted: they are compensated by insurance carriers (gasp!). We beat the administration and congressional Democrats on this.

One of the most insidious episodes of my career happened after the Senate Finance Committee and the Senate Health, Education, Labor and Pensions Committee passed the ACA but before it was considered on the Senate floor. White House officials, working with Majority Leader Harry Reid, D-Nev., inserted a provision aimed at creating a broker compensation regulatory authority at the Department of Health and Human Services (HHS). It was to govern all aspects of broker compensation in the benefits arena. It had never been debated or vetted in a hearing, much less passed in a committee of jurisdiction. Their aim was to jam us. They failed.

Then there is the present—as in the present implementation of the ACA. Even among those brokers who have attempted to partner with HHS to sell exchange plans, there has been little success. On issue after issue, the Obama administration regulators have pushed for rules that create more headaches for employers who are trying to do right by their employees in the purveyance of benefits. As one exec put it to me in an email in June (referring to the Equal Employment Opportunity Commission’s proposed wellness regulations): “Employers are weary of the baggage that comes with providing health insurance. At some point, employers may say ‘enough is enough’ and send their employees to the exchanges. As you know, the cost estimates for ACA did not assume a mass exodus of employers from providing coverage. EEOC’s ill-conceived proposed regulations are one more straw on the camel’s back.”

The most recent Obama administration effort to stick it to brokers comes in the form of the Department of Labor’s proposed regulation for a new fiduciary standard for financial advisors—aimed at protection against conflicted advice. Even the president of the United States devoted an entire weekly television address to the nation to promote this regulation.

We, of course, side with all those in our sector who argue there are already strong consumer protection laws. As my friend Peter Lefkin of Allianz wrote recently: “With all of its complexity, the proposed fiduciary rule would add huge costs and result in many low- and middle-income people not being able to afford financial advice. To be sure, the history of regulation is replete with examples of unintended consequences—more bad than good.”

While these rules are aimed at the retirement and financial advice communities, they were written in a way that could encapsulate nearly the entire benefits community, particularly in group life, disability, and perhaps even standard-issue health plans. After all, such plans involve employee-shared premium payments. Will brokers who sold plans to employers large and small have a fiduciary duty to every plan participant? Imagine the nightmare.

The Department of Labor says that’s not its intent. Do we trust the agency?

As for the future, consider the Cadillac tax to be enacted in 2018. Purported to rein in high-cost plans only, it will capture (by some estimates) 76% of all plans by 2026. It will disproportionately affect nonprofits and any plans populated by older populations. It is the ultimate incentive for employers to dump plans.

But isn’t that this administration’s goal, after all? In 2009, the White House healthcare czar told the U.S. Chamber of Commerce that one of the ACA’s goals was to get rid of intermediaries who don’t provide healthcare. On that day in June when the president’s own party bucked him on trade, he implored the House Democratic Caucus to support him, invoking the ACA as an excellent “starting point” toward national health insurance.

I look forward to Friday, January 20, 2017—inauguration day. I am keeping hope alive for a presidential administration that’s not so hostile to the commercial insurance brokerage industry.