The Life of a Health Insurance Broker – Post Health Reform

published in Insurance Journal 4/5/10.

The last couple of years have been challenging for the national economy – the housing market decline, bank bailouts, tightening credit markets, and a volatile stock market have strained many businesses across varying industries. For the last year, in the midst of this turmoil, our President and Legislators have taken up the cause for Health Care Reform – a reform which in some way will impact $2.5 trillion of our nation’s $14.2 trillion gross domestic product (about 17% of the national economy). On Sunday, March 21st, the US House of Representatives passed the Senate’s Patient Protection and Affordable Care Act as well as an amendment “fixing” certain provisions of that Bill. On March 23rd, the President signed this Bill into law while the amendment goes back to the Senate for reconciliation.

Health insurance agents and brokers have a specific role in the health insurance delivery system – they assist individuals and businesses with the purchase of health insurance plans and provide insurance companies with additional sales and service channels for their insurance products. This role provides agents and brokers with a unique perspective. They have seen their individual and employer clients struggle with new economic realities while trying to keep up with the steady and significant insurance premium increases. They have also seen insurance companies struggle to stay profitable by managing their risk, streamlining administration and negotiating more intensely with providers.

As prices and the complexity of product solutions have dramatically increased, the health insurance brokerage industry itself has undergone some significant changes as well. Smaller independent agents are under pressure to grow while providing new value for their individual and employer clients. A wave of acquisitions and consolidations has been followed by a wave of new competitors – from payroll providers and online portals to business process outsourcers (like PEOs, ASOs, HROs, etc.). And now, here comes major Health Care Reform. In my opinion, it is in these times that high quality agents and brokers are more needed than ever before.

How Do Agents and Brokers Stay Relevant in a Post Health Reform World?

Be Informed – Hundreds of pages of legislation means there will be no shortage of homework (this is before amendments and clarifications to come). Grey areas will be found and will need to be clarified. Agents must not rely on insurance companies for their education (as many have in the past). Insurance companies will develop new products to accommodate the newly defined plan parameters as well as explore all cost effective methods of distribution. They will do what they need to do to stay relevant themselves. Effective agents must have a deep knowledge of plan design as well as funding alternatives – including appropriate federal subsidies for individuals and small businesses. In order to provide real value to clients, agents will not be able to simply sell products.
Listen to Clients – What are your clients’ primary goals and objectives in obtaining insurance products today? What are the new challenges they will face to manage their mandatory requirements in the future? How can you help them with their goals and their challenges? There will be significant changes in years to come – with the majority taking effect in 2014. Agents will need to adapt to survive as the individual and small group markets merge and standardize and guaranteed insurability lessens the value of insurance provided through employer groups. Nothing is more important to an Agent than his client base. Agents should not expect that doing things the way they always have will produce the same results.
Embrace the Opportunity in Change – Ushering in major changes to a system that literally touches every man, woman and child in the country is a monumental task unto itself. In the short term, individual and small group focused agents will need to develop efficient systems and be prepared to increase sales volume to maintain current revenue levels. It is unclear what role traditional agents would play in any of the proposed exchanges (if there is a role at all) once those appear in the marketplace. Pooled small group and individual rates will set the bar for large group pricing and the penalties will drive decisions to maintain these benefits. Those employers that maintain better than average pooled pricing will probably continue to do so. Those that pay more than these averages will be very tempted to get out of the business of providing insurance for employees at all.

Most agents that are in tune with their clients realize that the health insurance industry cannot continue for too much longer on its current pricing trajectory. Time will tell what overall effect reform efforts to increase administrative efficiencies and wellness incentives will have on total health care costs – that is ultimately where the real money is and where real change needs to take place. But, individuals and employers will need to evaluate their new options and make informed decisions with guidance from trusted and informed advisors.

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