With new medical-loss ratio regulations and an expansion of government involvement in the insurance purchasing process, insurance brokers are likely to cease to exist as an industry. “Insurance agents and brokers and small insurance companies are among those who may have to scramble to stay afloat over the next few years. This is partly by design and partly an unintended consequence of a new law that is so sweeping, it will affect nearly every corner of an industry that accounts for one-sixth of the U.S. economy.”

Insurance agents are looking at the government’s plans to create insurance exchanges and are worried that they’ll be made obsolete and driven out of business. They are assuming that the fee insurance companies pay to brokers will be considered an administrative cost by new “medical-loss ratio” regulations and that insurance companies will be forced to lower those costs to comply with ObamaCare.

“Fewer than 2 million of the nation’s 6 million companies with employees qualify
for the small-business tax credits included in the new health insurance reform
law, says the National Federation of Independent Business. The law’s supporters
had projected that twice as many small businesses would qualify for the tax
credit.”

Large employers are expecting next year’s health costs increase more than they did this year, with ObamaCare’s new regulations taking much of the blame. “While there was uncertainty about the regulations determining grandfathered plan status, the majority of employers (53%) were still planning to make changes to their plan designs. To comply with the law, employers are having to remove lifetime dollar limits on overall benefits (70%), make changes to annual limits on specific benefits (40%), remove annual dollar limits on overall benefits (26%), and remove pre-existing conditions exclusion clauses for dependent children under age 19 (13%). Employers are still evaluating retiree health offerings as a result of new provisions related to taxation of retiree drug subsidies as well as changes in Medicare Advantage plans.”

The U.S. Chamber of Commerce formally objected to the recently published regulations to implement ObamaCare’s provision to “grandfather” existing insurance plans. The regulations are very strict, and would likely grant exemption to only a small number of current plans. Complying with ObamaCare’s regulations will lead to higher insurance costs for companies, or lead those companies to drop coverage altogether.

ObamaCare’s promises to lower costs are not working, according to a new study from the National Business Group on Health. Businesses are increasing or considering increasing cost-sharing , dropping retiree drug coverage to stave off rising health insurance costs in 2011.

“Employers and consumers sorting through their health insurance options may see a bump in their rates next year to account for the potential impact of some of the early elements of the federal health overhaul law, according to some health experts. Jeff Sher, an independent health insurance agent and consultant in San Francisco, said he’s anticipating employee coverage at mid-size companies to go up 13 percent to 15 percent. ‘Then we’re supposed to tack on several percentage points for health reform,’ he said.”

“We find that the reform’s mandate will raise overall costs, and that the structure of the mandate and tax credit will raise effective marginal tax rates on small business growth and expansions. In addition, the burdensome and intrusive 1099 reporting requirements will burden firms, alter the customer relationships in the small business market, and impose potential strains on employee relations in the small business sector.”

Seeing rising health costs on the horizon, employers are scaling back their insurance plans to put more costs on the consumer. This is despite pledges from the White House that families will see their premiums decrease without any quality reduction because of ObamaCare. “That could come as a surprise to many who remember the repeated assurances from President Obama and other officials that consumers would retain a variety of health-care choices.”

“If the health care legislation passed in 2010 is implemented fully and on schedule, public attention will turn to features of the legislation that were perhaps less obvious during the debate. For example, who ultimately controls the new health exchanges-the states or the federal government? Resolution of this issue could determine the nature of health insurance in America. The so-called OPM alternative will soon be seen as an end-run for the public option and, if it remains on the statute book, could lead to a far stronger public option than anyone thought possible. Employers and employees will soon wake up to the fact that the legislation will accelerate the erosion of employer-based insurance. And rosy projections that health spending will taper down will most likely prove to be an illusion-forcing choices about price controls and budgets. However Congress responds to these decisions, it will mean big changes in access to services and control of the system.”