Mr. Chairman, and members of the Committee, my name is Don Brain. I am the President of the Lockton Benefit Group, the 11^th largest benefits consulting firm in the nation. The 3,000-employee Lockton Benefit Group sells and administrates a full range of employee benefit plans. I appear today on behalf of the insurance agents and brokers of America, and their employees – nearly 1,000,000 men and women who work in every part of the United States. These professionals are represented by the Independent Insurance Agents of America, Inc. (IIAA), the National Association of Insurance and Financial Advisors (NAIFA, formerly known as NALU) and the National Association of Professional Insurance Agents (PIA), on whose behalf I testify today.

I currently serve as a member of IIAA’s Government Affairs Committee and I am the Health Care Liason to that committee. In addition, many of the Lockton Benefit Group’s agent and broker-employees are members of NAIFA and the Association of Health Insurance Advisors, NAIFA’s conference devoted exclusively to health insurance and benefits-related issues. IIAA, NAIFA and PIA members include health insurance specialists located across the country, and IIAA, NAIFA and PIA represents their members’ interests on a wide-range of insurance matters, including health and employee benefits issues.

IIAA, NAIFA and PIA are appearing before you today to comment on the bill that you just recently introduced – H.R. 4585, the "Medical Financial Privacy Act." First, Mr. Chairman, let me thank you for holding this hearing today and providing us with a chance to submit our views on this very important piece of legislation. There is perhaps no more important topic in politics today than ensuring that the private information of individuals remains just that – private. And there is no more important type of information that should remain private than each and every person’s medical information.

At the outset, I must therefore commend you, Mr. Chairman, for following up your work on the Gramm-Leach-Bliley Act with legislation designed to strengthen that Act’s consumer privacy protections in the health information context. I also must commend you, Mr. Chairman, for being sensitive to our views and for agreeing to work with us to ensure that the protections that you are crafting protect consumers’ privacy while at the same time protecting their access to employer-sponsored group health care plans.

The primary message that I have been asked to relate to you today, Mr. Chairman, is that the insurance agents want you to know that they intend to do everything within their power to help you mold a bill that can take flight and become the law of the land.

The insurance agents fully support the overarching objective of protecting individuals’ sensitive health information and your approach to achieving that objective. At the same time, insurance agents need to share information that they receive in the normal course of business with insurers and health care providers in order to provide both the high level of service and the health care benefits that all of us want and need. Insurance agents use the information for one purpose and one purpose alone: to help provide the highest level of health care benefits and service within the budgetary constraints of each of their clients. Indeed, because the vast majority of small businesses in the United States cannot afford a separate health benefits administrator or human resources department, the agent often fills those roles for such small businesses.

From our perspective, the only clarification that is necessary to ensure that the on-going administration of employer-sponsored health benefit plans and workers compensation programs is not disrupted in any way is to specifically provide that information obtained in conjunction with the administration of a plan can be used for any purpose related to the administration or replacement of that plan.

This testimony is divided into two parts. The role of the insurance agent and the manner in which employer-sponsored group health insurance plans and workers compensation programs are administrated is outlined in the first part. The second part then highlights the need for our suggested clarification.

Historically, the agent system has been the principal method of distribution for private life and health insurance. Agents are the essential link between the consumer and the insurance company, providing and servicing the products of the insurer while educating the consumer on how to manage risks and how to make informed choices regarding their insurance purchases.

Dramatic increases in health care costs in the last decade have made the agent an increasingly important part of the health care equation. More than ever, both employers and individuals rely on the advice of their agents regarding cost savings measures and coverage options. Indeed, in the health insurance context, the agent almost always represents the interests of the insured or of the employer-sponsor of the health care plan. In this sense, the agents are acting as "brokers" and they are not considered to be agents of the underwriters.

Health insurance agents/brokers play a number of invaluable roles:

• They work with clients to evaluate their need for health insurance protection. This may involve substantial research and fact finding about the client's needs. It also may involve sharing health information about an employer’s employees with a number of different insurers to fully evaluate the potential health benefit plan options and the costs of each of those options.

• They make specific recommendations that suit the client's objectives and budget. Often a health insurance plan is designed by the agent to fit a client's special needs.

• They encourage the client to act in a timely fashion to assure that the proper coverages are in place when they are needed. They also see to it that accurate and complete information is provided to the insurer to make sure that the client gets the very lowest premium available.

• They keep in touch with the client and review or update coverage on a periodic basis. They suggest changes when appropriate and counsel clients on ways to reduce cost. Often they must assist their client in reviewing the need for legal and tax compliance, recommending other professional assistance when necessary.

• They assist with claims, answer questions and serve as ombudsmen in helping their clients and their clients’ employee-insureds deal with insurance companies. Agents often spend a great deal of time helping to assemble the proper documentation needed to file or follow up on a claim.

• They assist business owners in communicating their benefit packages to their employees, often assisting the employee in seeing how the benefits coordinate with their personal financial programs as well as those provided by government entities.

As noted at the outset, IIAA, NAIFA and PIA share the overarching objective of ensuring that the confidentiality of individually identifiable health information is protected. Indeed, IIAA, NAIFA and PIA have fully supported efforts in the States to enact privacy provisions that apply to both insurers and agents. Although H.R. 4585 would help to ensure that these confidentiality objectives are met, it must be clarified to make clear that its restrictions are not intended to interfere with the provision of employer-sponsored group health plans or workers compensation programs in any way.

A failure to make such a clarification could have serious negative ramifications for our current health benefits system. This is because tens of millions Americans currently are insured through employer-sponsored health benefits plans and are protected by state-mandated employer-purchased workers compensation programs. In order to evaluate alternative and replacement benefits plans, agents must be able to use and share personally identifiable health. Indeed, insurers cannot and will not price a group plan without specific information on the claims history of members of that plan. If a single employee directs that their information not be shared for that purpose, the entire group plan would be frozen in place.

Without the clarification we have requested, the legislation would thus undoubtedly serve both to increase the costs of providing health care benefits and to reduce the number of benefit options that many employers will be able to consider. This would greatly undermine the level of care that many Americans will be able to receive and it would likely lead to a tremendous expansion in the number of un- or under-insured Americans.

In closing, I would just like to thank you once again for offering us this opportunity to testify. IIAA, NAIFA and PIA look forward to working closely with you to in your efforts to pass H.R. 4585 into law this term. I would be happy to answer any questions.