When President Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010, big changes for insurance agencies got underway. Though the industry has monitored the legislation closely, it is complicated and difficult to understand. As a result, an education process began to take shape for agents to understand the impact of the law as we move forward.
Part of the challenge is that the rules for implementing the new law are still being written. Nevertheless, now is the time for small agencies to start looking toward the future and making changes to remain viable.
For small agencies that work primarily with businesses that employ 25 individuals or less, this is especially important. Many of the changes under the new law could affect how small businesses choose to provide benefits and what benefits they provide.
In particular, the creation of state insurance exchanges in 2013 could have a tremendous impact on where employers purchase health insurance. According to the government plan, the exchanges will make insurance more affordable by pooling individuals and small businesses together to bring costs down. Initially, the exchanges will only be open to employers with 100 employees or less.
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If the exchanges are indeed a more cost-effective option for smaller employers, they could cut many agents out of the health system.
Small agencies have three choices going forward: invest in the technology and infrastructure to support large groups, merge with a larger agency that has those capabilities, or move toward a more worksite-focused strategy.
Option 1: Investing in technology
Investing in the technology that is needed to service large groups and keep up with new regulations established by the PPACA, many of which still remain unknown, has its risks. But, as with all risks, it may also have its rewards.
Before you dive in, you should know a few things about your market. First of all, know your local area well. Are there many large groups in your area? Do they have established relationships with their current agent? Those are the kinds of questions you need to answer to determine if your investment would have adequate potential for return.