By Cathy Miller, Business Writer
Depending on what insurance venues you frequent, the health reform law means the extinction of insurance brokers or new opportunities. Without a crystal ball, predicting future changes for the insurance broker is anyone’s guess. One thing is certain – we have not heard the last of health reform changes.
Let’s look at some of the areas of health reform with potential impact on the role of the insurance broker.
State Health Exchanges
Targeted for implementation in 2014, the government-run health insurance exchanges appear the most threatening to many brokers. The creation of the exchanges happens at the same time as a significant expansion of Medicaid eligibility. Reality is, we have more questions than answers about the exchanges. Here are some things we do know:
- By 2014, all states are required to have health insurance exchanges for individuals and small employers (up to 100 employees)
- All health plans must be offered on a guaranteed issue basis – prohibits exclusions for pre-existing medical conditions
- Exchanges and all health plans are prohibited from incorporating annual and lifetime maximums
- Plans must abide by community rating standards – no experience rating – with specified variations for age, tobacco use, family demographics and regions
Some fear that the state exchanges will eliminate the need for insurance brokers. As noted in Part 3 of our 3-part series on health reform, the law does contain language specific to agents/brokers. The text is in Part II, Sec. 1311 of H.R. 3590.
In a nutshell, it states that procedures will be developed by the Secretary of Health and Human Services (HHS) that allow agents and brokers to enroll and assist individuals with premium tax credit applications and cost-sharing reductions sold through the exchange. It goes on to state that the procedures “may include the establishment of rate schedules for broker commissions paid by health benefits plans offered through an exchange.”
What Happens to the Individual and Small Group Market?
By 2014, all individuals (with some exceptions) are required to have health insurance or incur a penalty for no insurance. Critics of the provision argue that the penalty is far less expensive than the cost of health insurance; therefore, it encourages individuals to forgo the mandated health insurance.
There is also speculation that small employers will decide to get out of offering health insurance and steer employees to the exchanges. Some of those employees may qualify for premium assistance. On the other hand, starting this year, small employers (no more than 25 full-time equivalents) are eligible for tax credits for offering health coverage.
So, what does this mean to the individual and small group market? Will the individual market completely go away for insurance brokers? Or does it mean that more individuals shift into group coverage as more small employers offer coverage? The answer – your guess is as good as mine (or probably better).
Jack Be Nimble
What this does say is that the insurance broker cannot afford to ignore the changes going on. Smart brokerage firms saw the handwriting on the wall. They started looking at the way they did business even before the signing of the health reform law. With the shrinking carrier market and skyrocketing health care costs, “better” service and annual plan design changes could take them only so far.
The role of the insurance broker has already evolved into more of an advisor than one who simply secures health insurance. Health insurance is complicated and nothing in the health reform law indicates that is going to change – at least not anytime soon. Undoubtedly, broker compensation will change and it will not look like the commissions’ standards of today. It may mean compensation based on a per member basis or some other method. Only time will tell.
The successful insurance broker and agency knows the key to survival is staying educated and flexible for the long road of health reform that lies ahead.
Notice of Disclaimer –Cathy Miller and InternetCE are not attorneys and cannot provide legal advice. The information provided is for your general background only, and is not intended to constitute legal advice as to your specific circumstances. We recommend you review legislation with legal counsel.
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Cathy Miller, Business Writer/Consultant has over 30 years of professional writing with a specialty in health care, employee benefits and wellness. Cathy also has an active Life/Accident/Health insurance license. Visit Cathy at her business writing blog, Simply stated business to Keep it simple, clear & uniquely yours