House Education & Workforce Subcommittee Issues Testimony From National Association of Realtors
"Chairman Walberg, Ranking Member Sablan, and Members of the Subcommittee, thank you for giving me the opportunity to talk with you about the challenges that face the nation's small business and independent contractor community as they search for accessible and affordable health insurance coverage. My name is
"I am here on behalf of members of the
"As a practicing real estate professional since 1982, I know very well how hard it is to find and keep health insurance when you are a sole proprietor with no employer-provided coverage. I also know how hard it is to find affordable health coverage for your employees when you're the boss.
"My experience is shared not only by my real estate colleagues but by the growing number of small businesses and self-employed Americans who are part of every sector of our economy. The real estate sales professionals' search for health coverage is a microcosm of the challenges that the self-employed and small business face today.
"Real estate agents are not employees of the realty office with which they are affiliated. They are independent contractors, a separate legal business entity - the smallest of small firms. More REALTORS(R) work with an independent company than any other type of firm. Real estate firms, the offices with which these independent agents are affiliated, typically have one office and a small number of salaried employees - a receptionist, office assistant, or, perhaps, a transaction coordinator - and two independent contractor sales agents. Only a very small percentage of realty firms offer coverage to their salaried staffs and none offer coverage to their independent contractor agents.
"According to NAR research, the percent of NAR's members that are uninsured have ranged as high as 33 percent in 2005. When asked why they do not have health insurance coverage, an overwhelming majority of our members cite cost as the primary reason. A majority of members are paying for their entire premiums without any financial help and cite affordability and access to preferred doctors as top priorities when selecting a plan. Consequently, reducing the cost of health insurance while maintaining quality is a top priority for the nation's REALTORS(R).
"It is this experience that has driven NAR to continually seek health insurance solutions for its membership. To this end, the Association was an early supporter of House bills to allow bona fide trade associations to create association health plans (AHPs); these included
"Along with its long history of support for AHPs or Small Business Health Plans, NAR supports the
"While REALTORS(R) satisfy the DOL's "commonality of interest" requirements when it comes to related industry, NAR has never been able to overcome the geographical limitations that prohibit the association from being able to offer an affordable AHP health plan to all members nationwide. The prospect of complying with 50 different state insurance laws is a major barrier. Also, since the majority of members are self-employed individuals with no employees, NAR has not been traditionally considered a "bona fide group or association of employers" for purposes of sponsoring an AHP.
"However, NAR is concerned that the proposed rule purports to limit AHP eligibility for many real estate professionals and may not adequately protect against state regulation, threatening AHP development and sustainability. As explained in NAR's comment letter, the Department must consider the following when finalizing the proposed rule:
* Ensuring that self-employed individuals with no employees (referred to as a "working owner") can participate in group health plan coverage under an AHP, which are still subject to important consumer protections;
* Removing arbitrary and unnecessary eligibility criteria for being considered a working owner; and,
* Clarifying that while states may continue to regulate AHPs, states may not use existing authorities to undermine the intent of this rule which is expand access to AHPs (e.g., by simply re-characterizing large group AHPs as "small group" health plans).
"While the final terms of the proposed rule and the specifics of NAR's member demographics will govern the feasibility of any efforts by NAR to offer an AHP for its members, there are some of the considerations that NAR has raised which are explained in further detail below, and in the attached addendum.
I. Working Owners Should Benefit From More Affordable Options In An AHP, Which Are Also Subject To Important Consumer Protections
"NAR is encouraged by the Department's inclusion of self-employed individuals with no employees (i.e. "working owners") as eligible to participate in "group health plan" coverage through an AHP. NAR has long-advocated for policy changes that would provide additional health coverage options for working owners like the independent contractor real estate sales professionals. Currently, working owners have limited options when it comes to accessing health insurance. If a working owner happens to have a spouse who is offered group health plan coverage through the spouse's employer, the working owner may be eligible for coverage. However, not all employer plan subsidizes coverage for workers' family members, and in some cases, this "family" coverage may be unaffordable for the working owner, their spouse and dependents.
"If a working owner is not married3 - or their spouse's employer does not offer group health plan coverage - the only health care option available to them is coverage in the fully-insured individual market. This can dramatically limit a working owner's ability to access affordable health coverage.4 In today's individual market, finding a health plan that provides an adequate level of coverage at an affordable price is difficult.5 NAR research indicates that median monthly premium cost in the individual market for members is
"AHPs would fall in this large group market that typically enjoys lower costs than the individual and small group market. Some critics have asserted that this lower price point is often times the product of less comprehensive - or "skinny" - coverage. In fact, large group plans tend to offer more comprehensive coverage than small group or individual health insurance plans. Contrary to the assertions, the lower costs in the fully-insured large group market - relative to the individual and small group markets - are driven by administrative efficiencies. In other words, the same administrative costs that drive up the cost of individual and small group coverage are not present in the fully-insured large group market, such as enrollment volatility.
"Explained further, individuals and small employers often times drop in and out of the insurance markets and routinely change insurance carriers, sometimes every year. This volatility adds significantly to insurers' already very high administrative costs for small-group coverage, especially as greater resources are devoted to underwriting, and dis-enrolling and re-enrolling small groups. In the case of existing fully-insured large group AHPs, the health coverage is traditionally superior to coverage a small employer independently might find in the commercial insurance market, and as a result, there is limited turn-over among small employer members.
"In addition, prices in the individual and small group markets are typically higher on account of the Affordable Care Act's (ACA's) risk adjustment program.6 In other words, insurance carriers typically price any potential risk adjustment "charges" into their premiums, which arbitrarily increases costs. Because the ACA's risk adjustment program does not apply to the fully-insured large group market, these added costs are not present, thus resulting in a lower costing health plan relative to individual and small group plans.
"The requirement to cover the ACA's Essential Health Benefits (EHBs) and the ACA's adjusted community rating rules also have cost implications for individual and small group plans, which are also not present in the fully-insured large group market. For example, fully-insured large group premiums may be developed based on the "health claims experience" of all of the employees employed by a large employer, while this type of under-writing practice is prohibited in the individual and small group markets (i.e., premiums in the individual and small group market cannot be based on health status). In addition, age rating in the individual and small group markets is more limited, while age rating in the fully-insured large group market may produce a more "actuarially fair" premium rate.
"NAR recognizes that other stakeholders will sound the alarm over the fact that fully-insured large group and self-insured AHPs are not subject to these ACA requirements, however these concerns are misplaced due to existing applicable consumer protections and State regulations.
* There are existing consumer protections under the ACA that require a fully-insured large group and self-insured AHP - as a group health plan - to provide a comprehensive level of coverage. For example, according to the ACA, a fully-insured large group or self-insured AHP (1) cannot deny an eligible plan participant health coverage if they have a pre-existing condition,7 (2) cannot refuse to cover certain government-approved preventive services (rather, the AHP must provide free coverage for these preventive services),8 and (3) cannot impose annual and lifetime limits on the "essential health benefits" covered under the plan.9 Other ACA requirements including - (1) covering adult children up to age 26, (2) free access to emergency care, and (2) the prohibition against rescinding coverage absent fraud - apply.10
* Under the Employee Retirement Income Security Act (ERISA), there are specific notice and disclosure requirements,11 and also fiduciary responsibilities that apply,12 requiring the AHP and its employer members to act in the best interest of the plan participants. Participants also have a private right of action to sue the AHP if there is wrongdoing,13 and there are detailed procedures for filing health claims,14 and rigorous internal and external appeals processes.15 In addition, continuation of coverage requirements under COBRA apply,16 and according to the Health Insurance Portability and Accountability Act (HIPAA), premiums for an AHP plan participant cannot be developed based on the participant's health condition.17
* In the case of a fully-insured large group AHP, State benefit mandates also apply, meaning specified benefits and services that a particular State requires insurance contracts to cover must be included in the AHP plan.18 Many industry experts suggest that most State's benefit mandates are as good as the ACA's EHB requirement, even in cases where a State does not cover all of the 10 medical services that make up the Federal EHB standard. The drafters of the ACA recognized that fully-insured large group plans traditionally offer a comprehensive set of benefits similar to the ACA's EHBs, which led
"Finally, NAR exists solely to serve its members. As a member organization led and governed by a leadership compose of members since its inception in 1908, it would not be in NAR's best interest to offer a member benefit product that is not a quality product. As mentioned previously, REALTORS(R) top health coverage priorities are affordability and access to preferred doctors, so any AHP must strive to achieve those goals and cultivate a deep participant pool.
II. DOL Should Remove the Provision That Would Disallow Participation In an AHP If a Working Owner Is Eligible for Subsidized Health Coverage Through Their Spouse's Employer
"NAR believes that the eligibility criteria for qualifying as a working owner under the Department's proposed rule is overly constraining and will limit the number of self-employed individuals who may be eligible to participate in an AHP. Such a provision appears directly contrary to the Department's policy goal of expanding health coverage to these individuals.
"According to the NPRM, a self-employed individual with no employees who is eligible for subsidized health coverage through their spouse's employer would not be considered a "working owner" for purposes of participating in an AHP. Based on a survey of membership, 32 percent of NAR's members are covered under their spouse's employer plan.19 It should be noted, however, this statistic does not account for those members who may be "eligible" for subsidized health coverage through their spouse's employer, but who have not enrolled.
"If close to half of NAR's membership fall in this category and are therefore preemptively excluded from AHPs, it may be difficult for NAR to attract enough members to offer an affordable, better quality plan than the individual market. As currently structured, the proposed rule could inadvertently prevent NAR from even establishing an AHP, contrary to the intent of the rule.
"It appears that this eligibility factor is intended to protect the small group market "risk pool" by limiting the number of working owners who may seek health coverage under an AHP (and therefore, exit the small group market and enroll in AHP coverage). However, if a working owner has access to subsidized health coverage through their spouse's employer, enrolling in such health coverage will - in many cases - be in the working owner's best economic interest. In these instances, working owners should have the choice and decide whether or not to exit the small group market.
"There may also be instances where even though the "family" coverage is subsidized with employer contributions (and tax-free employee contributions), the coverage may still be "unaffordable" to the working owner and his or her spouse (because, for example, the employer subsidy is minimal or the employer imposes a costly "spousal surcharge"). In this case, a working owner should not be arbitrarily forced to choose between (1) no health coverage and (2) "unaffordable" health coverage. Instead, this working owner should be given another "choice," and the freedom to seek coverage under an AHP.
"There might be instances also where coverage under an AHP would be superior to subsidized health coverage through the working owner's spouse's employer. One such example would be when a family's preferred health providers are participants in the AHP plan but not the spouse's employer plan. NAR strongly believes that working owners should not be precluded from enrolling in the superior AHP coverage that may better meet their families' needs.
II. State Regulation of AHPs Concerns
"While nothing in the proposal alters a State's ability to regulate insurance, there is concern in the association community that States may attempt to enact legislation or promulgate rules to re-characterize a fully-insured large group AHP as a "small group" health plan, thereby subjecting the fully-insured AHP to the insurance rules applicable in the small group market. Such state action could frustrate the intent of the rule, which is to expand access to AHPs in order to offer more affordable, better quality health plans.
"NAR is sensitive to this type of State regulation because of the interest in offering fully-insured large group or self-insured AHP coverage on a nationwide basis to all members and the ability of state associations to offer coverage on a regional basis. If, however, States set up barriers to the formation of AHPs, NAR - along with other national trade associations - and its members would surely be disadvantaged, potentially to the point that it would not be able to offer its 1.3 million members with an alternative health insurance option that might better meet their needs. This would be an unfortunate outcome, especially in those states where the existing individual market has suffered from a declining number of insurers participating in the market and premiums have and are anticipated to continue to surge higher.
Conclusion
"On behalf of NAR's 1.3 million members, I thank the Subcommittee for holding this hearing and looking into this important
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Footnotes:
1 NAR's Board of Directors has the authority to approve expenditures of the Association; establish governing policies of the Association; develop public policy positions as they pertain to the real estate industry; approve member programs products, and services; and approve amendments to the bylaws.
2 Definition of "Employer" under Section 3(5) of ERISA - Association Health Plans, 83 Fed. Reg. 314 (
3 According to the NAR 2017 Member Roughly 30 percent of NAR's members are unmarried. NAR 2017 Member Profile. https://www.nar.realtor/research-and-statistics/research-reports/member-profile
4 For example, the
5 According to
6 See ACA section 1343.
7 Public Health Service Act ("PHSA") section 2704.
8 PHSA section 2713.
9 PHSA section 2711.
10 PHSA sections 2714, 2719A, and 2712.
11 ERISA, Title I, Subtitle B Part 1.
12 ERISA, Title I, Subtitle B Part 4.
13 ERISA section 502.
14 ERISA section 503.
15 PHSA section 2719.
16 ERISA, Title I, Subtitle B Part 7.
17 ERISA section 702.
18 According to the
19 About 32 percent receive health insurance through a spouse, partner, or family member. NAR 2017 Member Profile.
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