The Role of Brokers in the evolving Health Insurance Marketplace
Brokers in the rapidly changing healthcare market
With the Affordable Care Act having marked another milestone on January, 2014, brokers are facing numerable challenges to survive in a new “self-service” marketplace. Brokers have traditionally played a big role in helping small businesses buy health insurance. According to a study by Boston’s Wakely Consulting Group, 88 percent of small group coverage in New York is purchased through brokers, who reap $693 million a year in commissions. In the constantly evolving marketplace, could that change? There are plenty of reasons to believe that brokers are growing concerned about their future role and some are already adapting their business models to the new market reality.
Although the initial launch of the Health Exchanges had a rocky start, their ability to make it easier and cheaper for employees to shop on their own will put pressure on brokers who may find themselves increasingly irrelevant in purchasing healthcare. The fate of Insurance brokers is now being compared to the travel agents in the 90’s. But purchasing health insurance is more complicated than buying a plane ticket: significant variations exist in provider networks, covered benefits and cost sharing. Sorting out these nuances and meeting with sales representatives from various plans has a high opportunity cost for employers. Many firms prefer to rely on brokers to work with insurers, explain the options, and help make a decision. Observers say changes are bound to happen in this perception. Small firms may simply offer employees cash to buy insurance on a Public or Private Exchange. The brokers are hence confronted by three fallouts: dwindling commissions, the fierce competition to retain their business, competition with health plans, and unpredictable market climate.
MLR and Brokers
The Medical Loss Ratio (MLR) requirements for health insurance issuers play a central role in how brokers’ compensation will change once all ACA provisions have been implemented. Beginning January 1, 2011, the medical loss ratio required that a certain percentage of premium dollars collected by insurers are spent on medical costs (80% for the individual and small group markets and 85% for the large group market). In the process of meeting these requirements, the insurers are forced to decide between supporting current broker margins or finding ways to reduce their administrative costs, so broker commissions end up being a potential target.
Navigators v/s Brokers
It is clear, however, that some thought has gone into accommodating agents/brokers in the Affordable Care Act framework. If allowed by their state, licensed agents and brokers who agree to register with the Marketplaces, complete training, and adhere to privacy, security and other state and federal requirements would be able to help qualified individuals enroll in coverage through the Marketplaces. Most states are expected to allow agents and brokers to facilitate enrollment in individual market coverage, and help individuals apply for the premium tax credit and cost-sharing reductions. The other option is to assume the role of Navigators. However, the compensation for the Navigator is usually a fixed amount or a fraction of their previous compensation. Brokers, on the other hand, can also continue to receive compensation and payments from health insurance issuers, at rates set by the issuers and will vary by state. In some cases the broker may be paid by the employers or their fees will be explicitly displayed as an additional charge separate from premium costs.
For the Small Business Health Options Program (SHOP), agents and brokers will work with consumers using the Federally Facilitated Marketplaces (FFM) website to complete the employer and employee applications.
Brokers can also assume the role of Navigators in the healthcare Exchange platform to perform the following major tasks:
- To conduct public education about the availability of qualified health plans.
- To distribute fair, impartial information about enrollment in qualified plans and about the availability of premium tax credits and cost-sharing assistance in the Exchange.
- To facilitate enrollment in qualified plans.
- To refer people who need help resolving a problem with their health plan or with their premium assistance to a consumer assistance or ombudsman program or to another appropriate agency that can help with a grievance or appeal.
- To provide information in a culturally and linguistically appropriate manner to the population being served by an Exchange.
There is still significant confusion resulting from differences in interpretation of the Affordable Care Act (ACA) definition between the roles that navigators and brokers will play in facilitating Exchange enrollment. What is clear is that states will have to specifically outline the roles of brokers and navigators in the Exchange to prevent duplication and confusion in the marketplace. Compensation for navigators will be paid through a navigator grant, or if working under a navigator organization, hourly compensation may be available (rates and details will vary by state). Under the law, a licensed health insurance agent or broker can be a navigator; however this disqualifies them from acting as a traditional producer (selling policies on or off the Exchanges and receiving commissions).
In general, brokers will receive compensation as Navigators for QHP policies sold on the Exchanges. Commissions will be managed either by Exchange or paid directly from insurance carrier to broker. Brokers must register with the Exchange and will receive a unique ID number to track sales and commissions.
For the Federally Facilitated Marketplaces (FFM), agents and brokers can work with consumers in either of the two ways:
- Directly accessing the FFM website through the issuer’s connection
- Assisting consumers who are accessing the FFM website
The road ahead
Many brokers are adapting to the changing market by adopting a three-pronged strategy:
- Product diversification
- Superior Service
- Low cost operations
Selling ancillary and voluntary products like Life, Disability or even Auto and Property insurance, and offering high quality, low cost services may help keep brokers relevant in the changing markets, but other threats still remain.
One threat to brokers may be the time and cost savings small businesses might reap with the debut of State Health Exchanges. Another threat may come by way of new model of purchasing healthcare – Private Exchanges and Defined Contribution. In this model, employers could simply give workers a fixed amount of funds to buy insurance on from a small set of the plans, and free themselves from the administrative costs and hassles of contracting and managing the coverage. To compete, industry watchers say brokers need to figure out what other value-added services companies need, such administering employee benefits for small groups. Service is going to be the way forward; as healthcare products become more commoditized, service and the customer experience become important differentiators. Excellent service will be rewarded with increased satisfaction and higher member retention. Some brokers are taking even bolder steps. In September, 2012, Manhattan-based insurance broker Hub International launched its own private Exchange as an alternative to the state Exchange.
The benefitalign® Advantage
benefitalign® is a powerful technology that provides an unparalleled view of the member through the whole sales process. The benefitalign® solution gives brokers multiple advantages in this evolving healthcare market. With a seamless technology oriented approach that supports an integrated shopping experience with:
- Online End-End sales process
- Enrollment and eServices Solutions
- Integrated view across benefits and health plans
- Personalized Group Administrator engagement
- Better Technology = More Scalable Business
- Better Service
- Supports product line expansion
- Supports greater number transactions
To compete and grow in a consumer-centric market, brokers need to innovate to manage growing workloads and win new individual and commercial business. New sales channels create both competition and opportunities from Health Exchanges to Private Exchanges. Brokers need to understand the member deeply, and engage in an ongoing relationship for all lines of business.
benefitalign® offers a comprehensive, multi-carrier, cloud-based SAAS platform and solutions originally designed for our Health Plan customers. Each of these solutions can be deployed either as a complete module, or the entire suite can be leveraged as a comprehensive solution. The solution is pre-built and configured with Broker’s preferences and business rules once for different line of businesses. Then it is ‘open for business’ on the web or mobile device for your direct consumer experience, Private Exchanges, small and large employer groups.
- Individual and Group Solution – Empowers to offer a branded web and mobile shopping, quoting, enrollment, billing and retention experiences across multiple Health Plans.
- Private Exchanges – Empowers to offer a branded regional, national or employer group based Exchange for shopping, enrollment, billing and retention experiences.
Partners in Change
While reviewing all the challenges, let’s not forget that opportunities also abound. Healthcare Reform is here to stay, make sure your business will too with solutions from benefitalign®.