One of the greatest professional challenges that brokers and general agents will need to confront by mid-2013 will be how to survive in the emerging world of health insurance exchanges. Both you and your clients will be faced with new options to consider, new decisions to make, and new rules to follow.
But just as an abundance of information has emerged regarding health insurance exchanges, there is sadly also a great deal of misinformation regarding how such exchanges will affect the marketplace. Here are five truths worth knowing.
Myth #1: If we build it, they will come.
Truth: While health insurance exchanges hold many great benefits, the law as it's currently written contains very weak penalties for those employers that choose not to participate. As a result, some employers, at first glance, will likely opt to accept the penalties rather than provide coverage for their employees. To combat this, agents and brokers will need to aggressively reach out to inform employers of this new option and explain its many benefits. This is why brokers need to get up to speed as quickly as possible on this issue -- and the time to start doing this is now.
Myth #2: New state exchanges are going to be strictly for the uninsured.
Truth: To be sustainable, state exchanges will need to be as welcoming to those currently insured as they are to the uninsured. They will also need to appeal every bit as much to individuals and small groups that do not qualify for subsidies or tax credits as they do to those who qualify for these incentives. Recognizing this, some states have made it part of their goal to tap into currently insured individuals and groups. To do this, they would be well advised to not only harness private sector distribution channels (such as brokers) but to offer products and services that align with commercial purchaser interests and needs. Only by being inclusive to all individuals can an exchange attract the type of balanced enrollment that will allow it to be a meaningful force in the market.
Myth #3: It will be complicated for employers to cover employees through a health insurance exchange.
Truth: Not true. The beauty of an exchange is that employees get access to a number of great health plans and benefit choices while employers get ease of administration and a single point of contact. The big change for employers will be to convert the funding of their employee health benefits program from defined-benefit to a defined-contribution model. Here employers provide employees with a voucher-like premium contribution; employees then use that premium contribution toward the health plan option they like best within the exchange. Employees who wish to "buy up" to coverage not covered by their employer's contribution can do so by increasing their premium contribution, generally through payroll deduction.
Myth #4: Health insurance exchanges are expressly designed to save individuals and employers money.
Truth: Some policymakers falsely believe that by attracting a larger volume of purchasers, an exchange will turn around the rising cost curve. It doesn't work that way. Health plans will still need to price to the risk and underwriting losses that can't be made up strictly by volume. That's because medical trend increases are driven by utilization, provider costs, hospital costs, and an aging and often unhealthy population. So while there should be a small administrative savings, health insurance exchanges are really more about value-based purchasing. Exchanges create an online shopping mall where consumers, employers, and brokers can view health insurance plans side by side and compare benefits, costs, and other features. Each of the plans offered in an exchange includes an essential set of benefits at different levels of cost sharing. By giving individuals the freedom to choose what's right for their needs and budget, purchasers will be able to determine what is most valuable to them and, as a result, get the greatest value for their dollar.
Myth #5: The creation of health insurance exchanges will eliminate the need for brokers.
Truth: While exchanges will be selling direct to consumers and using a still undefined network of "navigators," the health reform legislation says that state exchanges can use brokers. But brokers who wish to stay competitive will need to ask themselves "Why would a client use me to purchase exchange coverage when they could go straight to the exchange themselves?" The answer is the same as to why employers use brokers today when they can go directly to a carrier. It's because brokers, more than anyone else, can provide the information and unbiased recommendations purchasers need to make well-informed decisions, as well as service for both routine issues and more serious policy interpretation concerns. Equally as important is the fact that, despite some other myths, exchanges will not turn health insurance purchasing into an annual transaction. During the course of a year, an individual can encounter many lifestyle changes - including a change in marital status, the birth of a child, a change in income, etc. This means that the need for the broker as "ombudsman" will not diminish, nor will the need for competent and responsive service.
The time to start speaking with your clients about exchanges is now. By separating fact from fiction, you can inspire their confidence and position yourself as a go-to person as exchanges continue to emerge.
Ron Goldstein is president of CHOICE Administrators(R) Exchanges.
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