Health Underwriters Opposes N.J. Bill That Seeks Discount From Carriers
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The New Jersey Assembly on June 21 approved amendments to a bill opposed by the New Jersey Association of Health Underwriters.
If it becomes law, A-1315, sponsored by Connie Myers, R-23, will allow small businesses (with between two and 50 employees) to pool their resources in order to buy health insurance plans in volume for their employees at a discount rate.
The legislation would enable such an alliance to negotiate directly with a carrier, effectively eliminating the role of the broker.
Myers sponsored the bill for small-business owners who say they need to be able to offer health benefits to compete with large corporations for talented employees, but are discouraged by prohibitive costs.
The response of Charles Gartlan, president-elect of NJAHU, is that such associations are well-intentioned but shortsighted. They have failed in the past and are therefore likely to fail in the future, he says. He argues that a carrier wanting to increase its number of participants might initially find such an alliance alluring, but eventually realize the same losses that it experienced insuring the small employers on its own.
How can a carrier provide a discount when it must pay the same number and type of claims whether the small businesses buying its plans have pooled their resources or purchased directly, Gartlan says.
"Who is making so much money today that they can find a cheaper way to market, administer and process claims?" Gartlan says. "Are you going to eliminate brokers? Plenty (of carriers) have done that and have gone back to using brokers. Theres no magic; weve got to collect premiums and pay claims. The brokers are being paid less, the carriers have laid off lots of people, services have gone downhill, where is the magic here?
"A larger group will only get a better rate in the long run if (the plan members) are healthier people, the reason being that the cost of health insurance is claims plus a rather small administrative overhead," Gartlan says. "If it were claims plus a large overhead, more companies would be entering New Jersey instead of leaving New Jersey."
Trying to protect carriers from making a potentially expensive mistake is a moot point, suggests health care lobbyist Brian Markowitz, because the bill does not mandate that a carrier sell to an alliance. He adds that if a carrier does sell to an alliance, then decides it is not profitable, it can always opt out.
