Editor’s note: This op-ed is by Steve Kimbell, the commissioner of the Vermont Department of Banking, Insurance, Securities and Health Care Administration.
In a recent letter to the Vermont business community and in newspaper advertisements, some of Vermont’s health insurance brokers and agents have come out against the health care reform legislation that is moving through the Vermont General Assembly.
Unlike others in the business community, brokers and agents profit from rapidly escalating health care costs. Their commissions are based on a percentage of premiums. So when premiums increase at two or three times the rate of inflation, health insurance agents and brokers make out pretty well compared to the businesses and employees that have to pay those premiums.
Data from filings by health insurance companies with Vermont regulators indicate that broker commissions on the sale of health insurance amount to about $18 million per year. At the current rate of growth in health care spending in Vermont, that number will increase by more than $1 million each year going forward.
We can’t sustain that rate of growth for a function that is essentially administrative in nature. That is why Gov. Peter Shumlin has proposed that we move to a simpler system that will reduce the rate of growth in health care expenditures in Vermont and reduce the costs of insurance administration.
This is not to imply that health insurance brokers and agents don’t earn their money. Health insurance today is a very complex product. Our health reform bill aims to eliminate much of that complexity. This will, of course, modify the role that agents and brokers play, perhaps making their current services less necessary and requiring them to adapt. This is no different than the adaptation required of businesses affected by changes in technology or popular tastes or in the general economy. Travel agents are a good example. Their traditional role has changed drastically due to the emergence of online booking services, but they have adapted and continue in business.
Let’s keep our eye on the ball: We must reduce the rate of growth in health care costs in Vermont by simplifying and integrating the health care system. That will, inevitably, cause some economic dislocation for those who make their living from the complexity of the current system, particularly on the insurance side of things. Our bill would create retraining opportunities for these Vermonters. Fixing our health care system will be difficult for some, like agents and brokers, whose income growth depends on increasing prices for health insurance. But the system is broken and we must push hard to fix it.
It is broken because it costs too much: $5 billion in total costs in 2010 are projected to increase to nearly $6 billion by 2013.
It is broken because costs are not distributed equally. Premium increases vary wildly depending on the group being insured.
It is broken because we are not getting the highest possible value for all of this money. We pay most health care providers for volume, not value. Communication across care settings is not what it should be. And the administrative complexity of the current system drives providers and consumers alike crazy.
Finally, our health care system is broken because a lot of people are left out. According to a recent survey, more than 47,000 Vermonters had no health insurance at the time they were surveyed, and another 150,000 were “underinsured,” paying an unacceptably large amount of their income for out-of-pocket health care costs even though they has insurance.
Those are the reasons Shumlin is pushing for reform of Vermont’s health care system. That reform will bring change for everyone, because all of us interact with the health care system in one way or another. We need to help each other get through this period of change, because sticking with the existing system will do increasing damage.
