MN Reacts: Insurance broker fears law will reduce competition, raise costs [Pioneer Press, St. Paul, Minn.]

June 28--Ever since it was signed into law in 2010, the federal health law has prompted speculation that insurance brokers are an endangered species.

That's because the law is meant to simplify the insurance market so that individuals and small businesses might not need a broker's help when buying health coverage.

But the cloudy future of the brokerage business isn't the only reason that broker Christopher Schneeman sounded subdued when talking about the Supreme Court's decision on Thursday, June 28, to uphold the federal health law.

Schneeman said he worries that the health law's changes ultimately will reduce competition in the insurance market and thereby drive up costs.

"My feeling is that eliminating choices in the long term is not cost-effective," Schneeman said. "Not only does it stymie innovation and ideas, it also leads to complacency for the big players who survive."

Some holders of individual insurance policies think the health law will give them access to lower-cost policies with better benefits beginning in 2014. Schneeman has a different take.

"Those individual insurance policy premiums are going to explode," he said. The health law will provide subsidies for many Americans to buy coverage, Schneeman said, but it's unclear whether they will offset the premium increases.

If premiums are too high once the mandate for individuals to obtain coverage begins in 2014, many might decide to simply pay a penalty for not being insured, Schneeman speculated.

The size of penalties will increase over time, but during the first year of the mandate they will be equal to either $95 or 1 percent of a person's income -- whichever is greater.

Decisions to pay penalties rather than buy coverage would, in turn, undermine the insurance market, Schneeman said. That's because the system needs premium dollars from newly insured healthy people to offset costs that will come as the federal law gives people with health conditions better access to care.

"Is it going to be cheaper to pay the penalty or pay premiums?" Schneeman asked. "People can figure that out pretty fast. So, the question is, in that environment: Can insurance companies survive?"

Christopher Snowbeck can be reached at 651-228-5479. Follow him at twitter.com/chrissnowbeck.

___

(c)2012 the Pioneer Press (St. Paul, Minn.)

Visit the Pioneer Press (St. Paul, Minn.) at www.twincities.com

Distributed by MCT Information Services