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What would eliminating individual health care mandates mean for real estateagents?Health care reform will almost certainly include a revamp of this controversial requirement
BY AMBER TAUFEN
PUBLISHED 4 HOURS AGO
Key Takeaways
As independent contractors, many agents would drop insurance and find catastrophic-only coverage, or do without insurance
entirely and pocket the difference, rather than face spiraling costs and participating in the exchange.
Getting rid of the individual mandate through American Health Care Act would involve significant price increases for anyone
dropping and re-enrolling in a plan on the exchange. Though the chances of the law passing appear to be unlikely, the
individual mandate will continue to be a focal point.
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Mark Bergman Not you?
Perhaps the most hated piece of the Patient Protection and Affordable Care Act (PPACA or ACA) — also known as “Obamacare” —
is the individual mandate.
This is the piece of the law that requires every citizen to secure private health insurance for himself or herself, or to pay an annual
penalty for failing to do so.
It’s no surprise, then, that legislation intended to replace ACA — known as the American Health Care Act (AHCA) and currently
working its way through Congress — kills the individual mandate, no longer requiring everybody to sign up for health insurance.
It’s not looking likely that the AHCA legislation will pass, but because the individual mandate is so controversial, future attempts to
tweak or replace ACA will no doubt tackle the mandate as the United States attempts to figure out how to get spiraling health care
costs under control.
What does this mean for real estate agents?
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Why an individual mandate to begin with?
To understand the potential repercussions, it helps to parse the arguments given for including the individual mandate in the original
legislation.
Risk pools
All insurance companies use “risk pools” to manage and protect against risk. If a risk pool contains a large proportion of individuals
who are considered “riskier” to insure than the general population, then it will cost more money to insure that risk pool.
Consider auto insurance — unlike health insurance, for the most part, insurance premium rates are stable from year to year, unless
you’re involved in an accident. Insurance companies attribute this stability to the very large risk pool of auto insurance; you can’t
legally drive without it, so the vast majority of people who drive also purchase insurance and are in the car insurance risk pool.
Good drivers and bad drivers, risky drivers and safe drivers, young drivers and middle-aged drivers and elderly drivers — all are
included in the risk pool.
Who wasn’t insured?
Prior to the ACA, health insurance was delivered primarily through full-time employers. Most large companies offered health
insurance for employees who worked 40 hours or more a week as a benefit (and often their spouses and families, too), but they
were not required to offer any health coverage.
As a result, employees at many small businesses, part-time employees, the self-employed and independent contractors were on
their own when it came to health insurance. According to insurance companies, this meant that there was a significant number of
healthy Americans who could help offset the risk pool but were not currently enrolled in health insurance coverage.
That included real estate agents. As independent contractors, agents who weren’t enrolled under a spouse’s health care plan
typically didn’t have a lot of coverage options.
Pre-existing conditions, lifetime limits and age limits
One thing the ACA accomplished that most Americans generally support was removing the ability for insurance companies to
restrict or deny insurance to certain groups of people, or to place lifetime limits on the amount of money an individual could receive
for health care purposes.
This means that insurance companies can’t tell somebody with a pre-existing condition, “Sorry, we won’t insure you because you’ve
been diagnosed with something chronic.” They also can’t create limits on the amount of insurance money an individual can claim
and refuse to pay out beyond that limit, which they were allowed to do prior to the ACA, and children are allowed to stay on their
parents’ insurance until they are 26 years old.
However, insurance companies argued that they couldn’t keep costs reasonable for people who want health insurance if they
didn’t have larger risk pools. Getting rid of conditions around who could purchase insurance and how long they could keep it would
increase the number of high-risk patients in the risk pools, and to balance that out and keep prices somewhat reasonable,
insurance companies needed more low-risk patients in the risk pools.
Hence, the individual mandate. If every American were required to purchase health insurance — healthy and unhealthy Americans
alike — then the risk pools would be big and balanced enough to offset the cost of including riskier patients.
Employers of a certain size were also mandated to offer health care coverage to full-time employees (who work 29 hours or more
each week), but part-time employees, the self-employed and independent contractors would now be required to purchase health
care insurance on either the state or national exchange or face an annual financial penalty.
Again: That meant real estate agents.
Why didn’t it work?
There’s a problem with this picture, critics might note, and it’s this: Health insurance hasn’t gotten cheaper during the past three
years, despite the individual mandate.
Why?
“The big problem, which neither party wants to confront, is that the penalties for not insuring are too low,” said Alain Enthoven,
professor emeritus of economics at Stanford Graduate School of Business, in a Q&A in January. “As a result, not enough young
healthy people signed up, and the insurance companies are losing money. That’s why premiums are going up.
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“Number one, we have to stop the adverse selection spiral. That means giving the individual mandate some teeth,” he added.
“You have to have a balanced risk pool,” confirmed Susan L. Combs, founder of New York insurance brokerage Combs & Company
and a PPACA Certified Expert.
And the process for enrolling and disenrolling from health insurance purchased on the exchange needs to be better structured in
order to manage that risk pool.
“The many exchanges are not being held to the same esteem as group plans are,” she said.
To sign up for a group plan, the enrollee (usually an employee) needs to have experienced a “qualifying event” — getting hired at a
new company, losing a spouse’s health insurance, having a baby and so on. Enrollees must typically provide proof that the
qualifying event happened.
Federal exchanges don’t have the same standards — enrollees are asked if they experienced a qualifying event, but oftentimes no
proof is required. “With the federal exchanges, they’re typically taking people’s word for it,” Combs explained. “People are coming
in when they find out they need to have surgery and after a month they drop the insurance because paying the penalty is cheaper
than paying the premium.”
What would happen if the individual mandate went away?
The proposed American Health Care Act legislation aims to offset the loss of the individual mandate by tacking a 30-percent
penalty onto anybody who dropped a health care plan and then later re-enrolled.
So any real estate agents who are currently doing the enroll-and-drop dance to manage their health care would find themselves
paying significantly more the next time they tried to enroll in a plan. Agents who are maintaining coverage from month to month
wouldn’t see that increase, though (in theory) — and given the increasing costs of insurance, many independent contractors would
happily drop health insurance and find catastrophic-only coverage, or do without insurance entirely and pocket the difference.
“I couldn’t care less” about the individual mandate, said Teresa Boardman, a broker-owner based in Minnesota’s Twin Cities. She
said she would make sure that she’s insured with or without a mandate.
“The only reason I have health insurance — and I argue back and forth with myself over this — is I’m afraid my appendix will
suddenly rupture and I’ll lose my house, or I’ll break my leg and I’ll lose my house,” she explained.
“Basically the health insurance does not give me any access to health care,” she added. “I pretty much stopped going to the doctor
and going to the clinic. I know what I need; I get my cholesterol and blood sugars checked through Target.”
Boardman said she does take advantage of her health savings account (HSA), however — an account into which independent
contractors can deposit money earned, tax-free, and withdraw it without penalties throughout the year to pay for their health care
costs.
“It doesn’t offset my exorbitant insurance cost,” she notes, but she puts the maximum allowable amount in the HSA every year and
uses it, “and especially last year, that ended up being a nice little tax break for me,” she said.
And she works hard to maintain her health so she doesn’t need to use the insurance she’s secured, Boardman adds.
“I have a better diet than I’ve ever had in my life. I’m doing yoga, I walk four miles a day, I ride my bike — I do everything I can
because my goal is to age out of the system and hope that Medicare’s still there,” Boardman concluded.
What are some positives about the proposed changes?
Agents like Boardman who are using HSAs might have noticed that the American Health Care Act proposes to increase those from
$3,400 to $6,550. “Real estate agents in my area typically have more high-deductible plans, so the health savings plan increase is
good for them,” noted Combs.
Another proposal involves providing tax credits for health insurance that can be used outside of state or national exchanges —
giving independent contractors more plan choices and offering more competition for their plan dollars.
“I think that would actually be one benefit to independent contractors because they could have more flexibility in choosing
insurance that’s going to be suitable to their needs,” said Combs. “Also, you get the full credit if you make $75,000 and under; that’s
a benefit to independent contractors who are making above the 400-percent of the FPL [federal poverty line] cap now.”
Although it wasn’t outlined explicitly in the American Health Care Act, there is another proposed change (submitted in the Small
Business Health Fairness Act in February) floating through the legislature that would give small businesses — like brokerages —
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“an option to access affordable health insurance coverage through Association Health Plans (AHPs),” according to a letter
supporting the bill that was signed by the National Association of Realtors.
According to NAR and others, this would be “a step towards building a more competitive market.”
Realtor (and other) associations can currently offer a health care marketplace for individual members — NAR and California
Association of Realtors are two that do — but giving businesses across state lines the ability to negotiate for health care as a group
could make a big difference to some brokers. “AHPs will allow small business owners to band together across state lines through
their membership in a bona fide trade or professional association to purchase health coverage,” reads the letter.
Although many advocates are in favor of allowing both businesses and individuals to shop for health insurance across state lines,
health care networks are assembled locally. So a Kansas real estate agent who thinks insurance prices look better on the Texas
exchange should think twice before deciding that’s the best option — she’d find herself traveling to Texas every time she wants to
see a doctor.
What next?
“What we’ve been saying to our clients is, ‘Look, we’ve got to go with the law of the land today — we didn’t start prepping you for
the ACA ’til the ACA came into law. Take a step back and calm down,'” said Combs.
The Congressional Budget Office (CBO) released a cost estimate for the American Health Care Act last week, and the numbers
aren’t looking promising for the proposed revamp.
The CBO estimates that under the proposed legislation, 21 million Americans would be uninsured by 2020, and 24 million by 2024.
“In 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under
current law,” said the CBO.
Future attempts to repeal ACA are virtually guaranteed to tackle the individual mandate — either strengthening it or exterminating
it.
But costs won’t go down for individuals or employers until more plan diversity is allowed, say experts; the “10 essential benefits”
currently required by the ACA don’t give insurance companies the option to offer more stripped-down plans or to remove benefits
from plans for people who don’t need them (for example, women who have had hysterectomies probably don’t need maternity and
newborn care in their plans, nor do most women over 50 years old).
Those 10 essential benefits include:
Outpatient care
Page 1 of 2
February 28, 2017
The Honorable Sam Johnson The Honorable Tim WalbergU.S. House of Representatives U.S. House of Representatives2304 Rayburn House Office Building 2436 Rayburn House Office BuildingWashington, DC 20515 Washington, DC 20515
Dear Representatives Johnson and Walberg:
The undersigned groups thank you for your leadership in introducing H.R. 1101, the SmallBusiness Health Fairness Act. This legislation allows small businesses an option to accessaffordable health insurance coverage through Association Health Plans (AHPs) and is a steptowards building a more competitive market.
The rising cost of health insurance remains a major problem for small business owners. In 2015,25 percent fewer small businesses offered health insurance than when the Affordable Care Act(ACA) passed in 2010, a significant drop in small business coverage. As health insurance costscontinue to increase, fewer employers and working families can afford coverage.
We believe AHPs will help lower the cost of health insurance by allowing small business ownersthe same opportunities that larger businesses now experience. AHPs will allow small businessowners to band together across state lines through their membership in a bona fide trade orprofessional association to purchase health coverage. Establishing health insurance benefitsthrough associations will make coverage more affordable by spreading risk among a much largergroup, strengthening negotiating power with plans and providers, and reducing administrativecosts.
Thank you again for your leadership on this issue. As congressional action takes place to replacethe ACA with marketbased solutions, we look forward to working with you to improve the healthinsurance markets where small businesses and employees purchase coverage. Small businessneeds legislative solutions that lower health insurance costs and increase flexibility to maintain acompetitive workforce.
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Emergency services
Hospitalization
Maternity and newborn care
Mental health services and addiction treatment
Prescription drugs
Rehabilitative services/devices
Laboratory services
Preventive services/wellness visits
Pediatric services
“You get what you pay for; insurance is always a scale,” Combs said.
Email Amber Taufen
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Article image credited to Alexander Raths / Shutterstock.com
Comments
7 Comments Sort by
Jason Jacques · Founder & Chief Visionary Officer at Exit Mountain Realtyits called OBAMACARE! It always was until everyone (even the Obama sheeple) realized what a disaster it is and now we want to takehis name off and call it ACA which make no sense because if you work for a living instead of looking for handouts, it anything butaffordable. Come on....it called Obamacare! Dont try to wash out his legacy with a play on words.
Like · Reply · 2 · 2 hrs
Susan Brodniak · Realtor/Agent Development Specialist at Coldwell Banker Gundaker Corporate Centre SalesSorry, the official title of the legislation was the Patient Protection and Affordable Care Act. You can call it whatever you want,but Obamacare is the play on words. And this article succinctly details WHY it doesn't work so well. What is currently on thetable for replacement won't work any better or keep costs down either.
Like · Reply · 3 · 1 hr
Cheryl Sutton GunningLooks like Trump care isn't working so well either!
Like · Reply · 1 · 1 hr
Susan Brodniak · Realtor/Agent Development Specialist at Coldwell Banker Gundaker Corporate Centre SalesGood article!
Like · Reply · 2 · 1 hr
Pete Thorpe · REALTOR®; Licensed at Cummings & Co. RealtorsThe only people that benefited from the ACA were those with pre-existing conditions....everyone else was hosed with their bill. Millionsnow have insurance, but still can't afford a co-pay.....so in theory when they go into the ER and have a $150,000 event that waspreventable, they are only on the hook for $10-$12k....and we get to pay the rest. So pretty much it's just like it was before only withhigher deductibbles and premiums.
Like · Reply · 1 · 1 hr
James Rice · Realtor at WEICHERT REALTORS® - Hallmark PropertiesWow I don't see why we just don't make Healthcare a right instead that way everybody is covered.
Like · Reply · 2 · 1 hr
Sarah Pickard ColeExactly! Problem is people see healthcare as a luxury in this country. I have family in Europe and friends in Canada who don'tunderstand the issue. I think the issue is "it hasn't happened to me and therefore I needn't worry about it." In other words, no
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understand the issue. I think the issue is "it hasn't happened to me and therefore I needn't worry about it." In other words, nocatastrophic illness has caused one to go bankrupt yet or they haven't seen a close family member diagonsed well beyond thepoint of being able to cure them because they couldn't afford the doctor's visit in the first place. Wonder if this will ever change.Like · Reply · 1 hr
Pete Thorpe · REALTOR®; Licensed at Cummings & Co. RealtorsIf you're cool with jumping taxes to 50%, then we'll all have insurance...and the good Dr's will go private and the truly rich willcontinue to get top notch care and the rest of us will be left to suffer with the scraps.
Like · Reply · 1 · 51 mins
Daniel Bates · Real Estate Broker and Owner at MCVL RealtyIf it's so great in those countries, move there! The problem isn't that healthcare is seen as a luxury, the problem is that themoochers in this country out number the hard workers. We have a country where politicians are elected into office by a majorityshare of entitled individuals who want the government to do everything for them.
Like · Reply · 1 · 32 mins
Lindsay Hamrick · Charleston, South CarolinaIf the NAR actually wanted to offer us decent plans, that would be great, considering it should be easy to pool together the tens ofthousands of realtors there are across the country. But when I looked at what the NAR offered me, it was cheaper for me to pick aprivate plan.Like · Reply · 1 hr
Daniel Bates · Real Estate Broker and Owner at MCVL RealtyNAR claims that they were working on a solution for independant contractors prior to Obamacare but that solved the issue...now they again claim to be working on that solution yet I see no signs of it. They like to talk big but rarely accomplish anymeaningful change with all of their wasteful lobbying.Like · Reply · 29 mins
Helen Luna Fess · Cal Poly San Luis ObispoI agree. It was a pivotal act , Obama hangs his hat on the controvercial healthcare plan. In theory, the concept seems terrific. In delivery it is unrealistic.
It seems the individual citizen is no longer geld accountable to care for themselves. If a person works hard, they reap the benefits. If aperson collects public assistance, they reap benefits. In fact often the more needy they become, tge more assustance they gain. Extrakids, extra assistance. Got drug addiction, look for more public assistance.
There's no need for advanced math or extra coursework. Everyone understands the situa... See More
Like · Reply · 1 · 55 mins
Daniel Bates · Real Estate Broker and Owner at MCVL Realty"Prior to the ACA, health insurance was delivered primarily through full-time employers.... As independent contractors, agents whoweren’t enrolled under a spouse’s health care plan typically didn’t have a lot of coverage options." FALSE, there were plenty of optionsand for healthy individuals they were all more affordable than under Obamacare. In my state of SC, Blue Cross Blue Shield is now theONLY company offered through Obamacare. It would have cost over $1300/mo. for a HIGH-deductable plan for us, so I droppedcoverage on everyone but my wife who is expecting. Which does go to the show the part of the article is true about not enough healthypeople in the risk pool, but who in their right mind would pay that much for insurance? We used to pay $350/mo. for a low deductibleplan and never worried about going to the doctor.Like · Reply · 37 mins
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