The effect of health reform on brokers will be monumental. No other social policy change in recent memory has driven as much transformative change in the brokerage business model as the Patient Protection and Affordable Care Act (PPACA) is predicted to.
Producer participation has been intensely debated, and the value of the services they provide and their role in a post-reform individual and small-group insurance market hotly contested.
While questions remain about that role, and changes to the existing definition are already beginning, brokers will certainly continue to be an invaluable resource to policymakers, carriers, and most importantly, the clients who rely on them as an extension of their staff.
Numerous industry cost pressures are causing this re-evaluation of the broker’s role and their value in the distribution relationship. Many health plans have already shifted their broker compensation strategy. With newly implemented minimum medical loss ratio requirements, many carriers are reducing commissions on groups representing undesirable risk.
Commission structures previously based on a percent of premium basis have been converted to flat per employee per month fees. And with unemployment at nearly 9% there is a shrinking client base within companies that are able to find a way to keep their health insurance in place, further threatening the broker’s livelihood.
Additionally, PPACA charges states with establishing new health insurance exchanges. These marketplaces are intended to simplify the health insurance shopping experience while providing a broad menu of certified benefit options to eligible individuals. Some observers initially argued that Exchanges, with their web-based portals where consumers can comparison shop for and purchase health insurance online, would eliminate the need for brokers.
However, the encouraging news is that over the past six to nine months, many of those same observers, along with increasing numbers of other experts, are coming to a consensus that brokers will continue to play a vital role in commercial health insurance markets around the country in light of health reform implementation.
Exchanges will certainly redefine the private health insurance marketplace. With their ability to allow consumers to compare standardized plan options, the mandate to certify health plans, and by providing robust back-end administrative services and capacity to drive other state-based health policy reforms, exchanges will indeed have a transformative effect.
Although these new marketplaces will serve both individuals and employers, brokers will remain especially relevant and important partners to employers purchasing insurance in the small group market. The undeniable fact is that in this complex and often times confusing landscape, employers will continue to seek the services of their trusted advisor.
Experts project that Exchanges will attract over 24 million individuals and small employers, some previous insured and others obtaining coverage for the first time ever. As a pillar of this coverage expansion effort, Exchanges must succeed. And they must succeed early.
State policymakers and other influential decision makers are realizing that competing against producers will have the effect of working against their coverage expansion objectives. By partnering with brokers and incentivizing them to enroll individuals and employers in Exchanges, state and federal policymakers will move closer to achieving their goals of access to health care for all.
The value of the broker has been documented in numerous reports and surveys published by both governmental and non-governmental entities. A 2007 IBM survey found that American consumers overwhelmingly prefer personalized services and human interaction from their insurance providers.
The nonpartisan Center for Studying Health System Change, a non-profit health policy research organization, concluded that brokers provide important benefits to not only small employers, but health plans and policymakers too.
And the nonpartisan Congressional Budget Office (CBO) confirmed in a 2008 report to Congress that brokers function as a de facto human resources department to small employers – an assuredly significant role in a tough economy.
The advent of health reform may cause some to rethink the nuances of these conclusions, but there is no doubt that the value of brokers will continue to be an enduring element of the industry. What is also apparent is that employers using a health insurance exchange typically highly value their broker and the services they provide.
Once Exchanges are established, brokers may actually be presented with new opportunities in the form of incentives to enroll qualified individuals in public health insurance programs such as Medicaid or the Children’s Health Insurance Program (CHIP). In addition, brokers could contribute to the success of states’ “No Wrong Door” policy of assuring coverage enrollment to anyone who touches an exchange.
Although clarifying regulations have yet to be released by the federal government, brokers might be provided the opportunity to serve as a navigator, a new entity created by health reform to help enroll traditionally hard-to-reach populations.
As a stakeholder group significantly affected by Exchanges, local or statewide broker communities should also be seeking opportunities to have a spot at the decision making table. In some states, such as Massachusetts, brokers will be granted a chair on the Exchange’s governing board. Other states’ Exchanges, though, may call on brokers to serve on an advisory board.
The active involvement of brokers will be central to achieving the complex and multifaceted policy and business goals that Exchanges must achieve. If producers are shut out, Exchanges will be hard pressed to succeed. Brokers must be valued partners to the states and their Exchange strategy.
By leveraging partnerships with their local and regional broker communities, states will increase the likelihood that Exchanges thrive, provide a boost to the struggling economy, help expand coverage and revitalize, what is in some states, a struggling individual and/or small group market.
Vince Ashton is executive director of HealthPass New York, a commercial health insurance exchange that serves small businesses in the New York metropolitan region. More information can be found at www.healthpass.com.