Healthcare 101: Insurance Challenges for Realtors® and other Independent Contractors

medical statistics and graphic charts with stethoscopeNearly nine in 10 Realtors®, members of the National Association of Realtors®, are independent contractors of their real estate firms. As an independent contractor, many typically don’t have access to traditional employer-provided benefits, such as health insurance. As debate continues around the Affordable Care Act and more insurance companies drop out of the individual and small group insurance market, it is more important to NAR than ever to ensure affordable health insurance options are available to Realtors® and other individuals who are also self-employed or independent contractors.

This was the topic of discussion at the recent Healthcare 101 session during the 2017 Realtors Conference & Expo in Chicago. Sharon Millett, former NAR president and session moderator, summarized the challenges of overhauling the complex and ever-changing healthcare industry by acknowledging, “Healthcare can’t and won’t be fixed easily or quickly.”

History of Health Insurance

Panelist Fritz Busch, a consulting actuary with Milliman in Brookfield, Wisconsin offered attendees a brief history of health insurance, which only dates back 80 years to World War II.  “Since employers couldn’t increase wages, paid health care and other benefits were introduced as a way for employers to circumvent wage and price controls,” he said. Citing Kaiser Family Foundation data, he said more than half of all Americans get their health insurance from their employers, in the large group health insurance market.

Individual Insurance Options and Affordable Care Act

ACAsmallFor those who aren’t eligible for large group employer provided insurance, individual health insurance is a type of policy individuals can purchase for themselves or their family, but plans can be expensive and coverage limited.

The Affordable Care Act, or Obamacare as it’s commonly called, aimed to provide cost effective, quality individual and small group insurance coverage (plans for small businesses or startups) for many who had previously been uninsured. “The individual market was dysfunctional prior to the ACA, so the bill’s writers tried to apply the risk pool rules of the group market to the individual market,” said speaker Chris Condeluci, principal of CC Law & Policy in Washington, D.C.

A health insurance risk pool is a group of individuals whose medical costs are combined to determine premiums. Typically, the higher costs of the sick or less healthy are offset by the lower costs of the healthy and, generally, the larger the risk pool, the lower and more stable the premiums. “It’s all about the risk pool. The more people you get in the pool, the more you can spread the risk. The unbalanced pool that we have today is why we are seeing so many of the problems in the individual market and with ACA,” said Condeluci.

Busch agreed, and said another issue is that when it comes to insurance, individuals tend to optimize at specific times, for example, when they anticipate surgery, pregnancy or the onset of a disease, like diabetes, and when coverage is most expensive to policy providers. In addition, he said, more young, healthy adults than anticipated elected to opt out of the ACA and to pay the mandate penalty. “The ACA needed those healthy people in the risk pool to offset the costs of the sicker, older people who did elect to get individual coverage,” said Busch. Lastly, he said, the ACA’s mandated health benefits, like maternity, dental, vision, mental health and substance abuse benefits, which many plans didn’t previously include, also contributed to the increase in costs of many individual insurance plans.

Recent Trump Healthcare Executive Order

On October 12, the White House issued an executive order to several agencies to consider changes to increase access to more affordable health insurance options, including through Association Health Plans, or AHPs.

The order allows small businesses to band together to form AHPs and purchase health insurance coverage across state lines in the large group health insurance market, which would be exempt from some ACA regulations and perhaps reduce insurance premiums for policyholders. While many Realtors® first thought this was good news, the order, unfortunately, does not directly apply to coverage for self-employed individuals or independent contractors.

You can read more about the executive order and watch a video on what NAR is currently doing to advance regulatory and legislative changes needed to make AHP plans a workable option for Realtors® at https://www.nar.realtor/washington-report/health-care-executive-order-signed.

Association Health Plans, a group insurance option for independent contractors

While NAR can’t currently offer group insurance to Realtor® members, many of which are self-employed or independent contractors, under the executive order, Condeluci said the way the order was written, it could be interpreted that it’s a change the administration might be considering.

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He said, however, that there is political opposition to this from groups who believe there is benefit to having more and healthier independent contractors in the individual insurance market. Condeluci recommended that Realtors® take swift and strong action if this regulatory change is proposed to ensure it does happen.

“All Realtors®, and not just NAR, will need to be proactive and respond to the comment period to ensure that changes made to make Association Health Plans are a workable option for independent contractors,” said Condeluci. He cautioned though that change may come slow. “Even if we see guidance before the end of the year with a proposed regulation and a public comment period, it could be more than a year before a final rule is published and takes effect, meaning there may not be any new changes for the 2018 insurance market.”

Like other health insurance plans, Busch said the issue for NAR going forward with  any AHP plan will be how to get healthy people to buy insurance and not just the unhealthy or sick ones, to help offset premium costs and the risk pool. “The association will need young members to join and help pay subsidies for older members to offset and make affordable the costs of their monthly plans,” he said. “But making young people pay more means less could join.”

Realtor® Insurance Marketplace

REALTORS® Insurance MarketplaceIn the meantime, NAR provides health, dental, vision and supplemental solutions, both public and private major medical health insurance exchange options, to its members through the REALTORS® Insurance Marketplace. Plans available through the Marketplace are administered through SASid, Inc., a trusted NAR partner that offers full complimentary consultative services and can talk members through their options and help them find the best solutions for themselves and their family.

For further updates on health care reform and NAR’s advocacy on this issue, visit www.nar.realtor/health-care-reform.