Across the country, many in the healthcare marketplace — from doctors and hospitals to employers and benefits consultants — are trying to figure out where they fit into President Obama’s brave new healthcare world.
Adjusting to the law has been particularly difficult for insurance brokers.
They’re feeling the sting of smaller commissions thanks to new federal rules limiting how much insurers can spend on administration. Aetna, for instance, announced in December 2010 that it would cut agents’ commissions by 50 percent, which would apply to agents’ business nationwide.
With their incomes plummeting, will insurance agents go the way of the travel agent? Not necessarily. In fact, brokers can use health reform to their advantage if they marshal recent developments in technology to reinvent themselves as trusted — and money-saving — advisers for their clients.
As the primary source of coverage for most Americans, employers are desperate to rein in runaway healthcare costs, which have risen at triple the rate of wages. In just ten years, employers will spend an average of $28,530 on health insurance costs per employee — 166 percent more than they do today.
Many employers are just eating the yearly increase in the cost of benefits.
Others are being forced to shift costs to their employees or do away with certain benefits. Neither strategy is sustainable in the long term.
Pre-health reform, rising health costs weren’t always bad for brokers. After all, a more expensive policy translated into a higher commission.
But those days are over. Brokers will have to replace their lost commission income somehow. By providing expert counsel to their clients on how they can trim their health expenses — and then implementing that advice — brokers could shore up their bottom lines.
Advances in health information technology offer a tremendous opportunity to do just that.
At present, our fragmented and uncoordinated healthcare system delivers quality care but at extremely high cost. Better information systems could change that.
Today, there’s more data than ever on how patients consume health care.
Prescription records, hospitalization records, and even biometric analyses can yield actionable information that can help firms cut health expenses.
For example, analysis of healthcare data might inform a firm that a large segment of its workforce suffers from serious but treatable conditions like high blood pressure. The data might also show whether employees are taking their medicines as prescribed. In both cases, taking action ahead of time could head off the need for more invasive — and more costly — procedures.
Federal privacy laws prevent employers from examining this data themselves.
These rules are designed to prevent a company from discriminating against employees with health problems, who may cost the firm more to insure.
That’s where brokers can fit in. As third parties, they’re not bound by the privacy regulations governing employers. Armed with insights gained from their clients’ employee claims data, brokers could implement targeted wellness or outreach programs that help workers better manage their health–and that lead to lower health expenses for employers.
The savings from such programs are significant. Harvard researchers have found that every dollar spent on wellness generates three dollars in savings. If brokers could grab just a fraction of those additional savings, they’d see their revenues shoot up even as their clients spent less on health benefits.
Moreover, since company savings wouldn’t come at the expense of workers — either through reduced benefits or more cost-sharing — morale among client firms’ employees wouldn’t suffer.
Some brokers have already deployed these technological tactics with their employer clients as part of a broader strategy to save them money without sacrificing the quality of their benefits.
Consider the case of the Men’s Wearhouse, a nationwide clothier. Its broker implemented a technology-focused strategy and was able to deliver $3.3 million in savings between 2009 and 2010. Without making any plan design changes, the retailer’s health costs declined by almost $500 per employee, year over year.
The federal reform effort has forever changed the healthcare landscape — and everyone from providers to insurers to consumers will have to adapt.
That process may be hardest for brokers. But new technologies will make that transition much easier — and could give brokers tools that make them more valuable than ever before. They should seize the opportunity.
Keith Lemer is President of WellNet Healthcare Group, Bethesda, Md.