The Individual Health Insurance Drum Beat

1. The Individual Health Insurance Drum Beat Course Number: 190003 Inland Empire Association of Health Underwriters February 1, 2007 Alan Katz, RHU President

2. What We’re Up To Today • The Political Drum Beat • The Individual Health Insurance Market • The Reform Debate • Preparing for Change • Conclusion / Q&A Drum Beat - IEAHU

3. The Political Drum Beat • Once there were Two columns ... • … with One message • Two very different publications • The Wall Street Journal • The Sacramento Bee • Which is which? Drum Beat - IEAHU

4. Excerpts from Column 1 • The inefficiencies of the current system are a drag on wage growth that's being felt now …. And health care costs may partly explain why many Americans don't feel as good as they might about the current economic expansion. • Even the half of our national health-care spending that remains a "private" responsibility bears little resemblance to an efficient market …. A tax exemption for employer health spending … has created a system of overgenerous employer-provided plans that give individuals little incentive to pay attention to costs. • [What’s] important is creating a national market for individual insurance. Drum Beat - IEAHU

5. Excerpts from Column 2 • Imagine … your employer was required by law to buy a plan to manage your nutrition needs - rather than simply paying you a wage, out of which you buy the food you want to eat. • Or suppose the government required your employer to pay for a housing plan, rather than paying you and letting you decide where and how to live…. • [Y]ou'd probably get paid a lot less … because your employer would be diverting much of your current wages to pay for these plans ...the costs of each of these goods would tend to rise over time - especially if you and your fellow employees were able to eat as much as you liked, or live in any size house …. Finally, as the costs did start to rise, you would feel less secure about where your next meal was coming from, or whether you'd have a place to live tomorrow • Sound like a good deal? Well, that's exactly the kind of health care system we have today…. Maybe, instead of trapping us into having our health care managed by others, we should emulate the ways we have more successfully provided food, shelter … to almost everyone who needs it. Drum Beat - IEAHU

6. The Correct Answer Is … • Column 1: • The Wall Street Journal-February 1, 2006 • Column 2: • The Sacramento Bee-February 21, 2006 Drum Beat - IEAHU

7. Why This Matters • In the world of politics, a convergence of opinions on both the left and right often presages a turning point in the political debate Drum Beat - IEAHU

8. Political Realities: The Uninsured • The Media Reports Increase in Uninsured • Politicians Repeat the Story Deploring the Increase in the Number of Uninsured • The Media Reports the Politicians Repeating the Media Story and Deploring the Increase in the Number of Uninsured Drum Beat - IEAHU

9. Real Realities: The Uninsured • The current public and private system has the capacity to cover most of the uninsured Eligible for public programs but not enrolled ~14 million1 Low-income, not eligible for public programs ~9 million1,2,3 Moderate to high income ~18 million2,3,4 <100% FPL 100%-199% FPL 200-299% FPL 6.4 million2,3 300%+ FPL 11.4 million2 • Awareness • Stigma • Enrollment barriers • Affordability • Not offered at work • Transitions • Undocumented • Perceptions of Affordability • Transitions (Employment, age) • Value (Cultural, age) • Small employer/Individual market • Source: NIHCM Foundation, 2002, RWJF-sponsored project. Based on 2001 data. • 1. NIHCM Foundation estimates based on data from the Urban Institute. • U.S. Census Bureau, Current Population Survey, 2002 Annual Demographic Supplement. • Within these categories, the uninsured are not eligible for public programs. • Nearly one million uninsured who are above 200% FPL are eligible for public programs and are therefore included in the 14 million who are eligible for public programs but not enrolled. Estimates based on Urban Institute data and CPS 2002. Drum Beat - IEAHU

10. Political Realities Part II: Perception Wins • Political Reality trumps Real Reality for all parties at all times • Politicians are paid to address perceptions and that’s what they do • The media is paid to report on what politicians do and that’s what they do Drum Beat - IEAHU

11. The Political Drum Beat • The left and the right are suggesting the Group market isn’t working • If this perception takes hold, they may turn to the Individual market for a solution • That’s a very big IF Drum Beat - IEAHU

12. The Individual Market • 17 million Americans under the age of 65 purchase their own coverage1 • 8 million uninsured Americans live in households with an annual income of greater the $75,0002 • 25million: total market size and growing 1. Update on Individual Health Insurance, Kaiser Family Foundation, August 2004 available at http://www.kff.org/uninsured/19991112o-index.cfm and Private Health Insurance in the United States, 2. Industry Profile, Datamonitor, November 2004 Community Tracking Study (CTS) household survey 2000-01 as reported on Health Affairs Web Exclusives, October 23,2002. Drum Beat - IEAHU

13. 1. Employer Health Benefits, 2005 Survey, a study by the Kaiser Family Foundation and the Health Research and Educational Trust, released September 26, 2006.2.Commuting in America, a study by the Transportation Research Board of the National Academies, Commuting in America, published October 16, 2006. Individual Market Expansion • The number of groups providing coverage is declining • 65% in 2001 • 59% in 20061 • The percentage of Americans working from home increased by 23% between 2000 and 20052 • More carriers are entering the market Drum Beat - IEAHU

14. The Uninsured Want Insurance • The Uninsured have assets to protect • 40% are homeowners • 56% own computers • They are healthy • 88% self-report good, very good or excellent health • They are worried • 67% worry about not having coverage • 29% worry a lot Drum Beat - IEAHU

15. 50% 50% Assumed Price Willing To Pay 19-29 40-49 30-39 50-59 The Need for Agents INDIVIDUALS (non-Poor) Range of existing Plans Source: California Healthcare Foundation - 1999 Drum Beat - IEAHU

16. Even “Group Agents” Can Prospect • Group agents have a ready-to-go source of Individual prospects in employees leaving their insured groups. • One proven technique: “You Have Alternatives to COBRA” postcards Drum Beat - IEAHU

17. Ingredients for Positive Change Political Perception of a Need for Change + A Market in Need of Agents = Opportunity Drum Beat - IEAHU

18. Ingredients for Negative Change Political Perception of a Need for Change + An Overwhelming Desire to Be Perceived as Doing Something = Disaster Drum Beat - IEAHU

19. Reform Proposals: Federal • President Bush has put a national solution to health care challenges • Congress has it’s own proposals spanning the entire political spectrum • Candidates for President will have proposals • Likely Outcome: • Political context will result in lots of talk and positioning • Lack of working majorities will generate few results Drum Beat - IEAHU

20. Reform Proposals: California • Governor Schwarzenegger has made his Health Care Plan a top priority • Part of a trend for state solutions It’s a comprehensive and complicated approach focusing on: • Prevention, health promotion, and wellness • Coverage for all Californians • Affordability and cost containment Drum Beat - IEAHU

21. Governor’s Key Messages • Current System is Broken • Been a problem for a long time • Sacramento hasn’t addressed it • The “Hidden Tax” of the Uninsured • Need to eliminate the tax if we’re gong to keep the state’s economy strong • Everyone is responsible for the solution and everyone has something to gain • The gain outweighs the pain for everyone Drum Beat - IEAHU

22. Agents: A Need for Focus Lots of Hot Button issues Lots of interest groups focused on each element of the plan For Agents, two key questions: • If the provision becomes law will it harm our profession or our clients? • Is changing the provision an absolute necessity for other stakeholders? Applying this means agents should focus on ……. Drum Beat - IEAHU

23. Agents Focus: Issue #1 Carrier Administrative Expense Cap • Governor would require carriers to spend 85% of premium dollars on medical claims • Result: Little or no funds left for distribution Concern: • Limits funds available for distribution • Likely to deter new entrants into the market • Doesn’t guarantee lower costs, just eliminates agents and reduces customer service levels Drum Beat - IEAHU

24. Agents Focus: Issue #2 • Purchasing Pool • Uninsured legal resident adults with incomes between 100-250% of the Federal Poverty Level would be eligible for coverage through a state purchasing pool and employers may place low income workers into the pool • Limited anti-crowd out provisions • E.g., 4% employer “in-lieu fee” paid to the pool and Employer contribution levels slightly higher than employee-only premium contribution levels Concern: • Unlevel playing field • Ineffective anti-crowd out provisions Drum Beat - IEAHU

25. What’s Required: Stay Informed • Helpful publications: • CAHU Statement • Inland Empire AHU Newsletter • California Broker • Helpful web sites: • Health Underwriters: • www.CAHU.org • The Governor’s Site: • www.StayHealthyCalifornia.com • My Blog (a shameless plug): • www.AlanKatz.WordPress.com Drum Beat - IEAHU

26. What’s Required: Get Involved • Join Health Underwriters – Today! • Contribute to CAHU PAC – Today! • Be a communicator • Inform clients of what’s at stake • Respond to articles in your local paper and other media • Volunteer to speak at community organizations • Attend town hall meetings • Get involved in local campaigns • Meet with legislators in their districts Drum Beat - IEAHU

27. What’s Required: Be Ready for Change • Expand your current marketing • If focus on Individual – add group • If focus is on Group – add Individual • Plenty of Resources • Carriers • General Agents • Technology companies • Health Underwriters Drum Beat - IEAHU

28. Good News We’ve faced challenges like this before: • 1990-1993: AB 1674 • 1993-1994: ClintonCare • 1996: Single Payor Initiative Agents have unsurpassed grassroots strength CAHU helps us speak with one voice We are not alone Drum Beat - IEAHU

29. The Drum Beat • That sound you hear, from the left and the right, is a drum beat for change • If we work together … • If we stay focused … • We can make it a change for the better for our clients and our profession Drum Beat - IEAHU

30. The Individual Health Insurance Drum Beat Alan Katz, RHU President