We haven’t delved much into how health reform will affect insurance brokers, partly because it's not yet crystal clear. I looked into that question a bit while reporting for a magazine piece this spring. I had a conversation with John Prible, who does government affairs at the Independent Insurance Agents and Brokers of America. That trade group is one of several representing brokers, and according to Prible, most members of this particular organization don’t sell only health insurance, they sell several kinds of insurance policies ranging from health insurance to crop insurance.
The future role of the broker or agent will in part be determined as states set up their health insurance exchanges. Right now the fees and commissions are generally part of the insurers’ administrative costs, but those costs will be limited under new rules about Medical Loss Ratio -- a requirement that 80 (for small group and individual policies) to 85 percent (for large group) percent of each insurance dollar is spent on health care, not administration or profits.
The industry is not by and large a fan of health reform, although their two biggest fears -- a national exchange, instead of state-based ones, and the public plan, both of which could have marginalized brokers -- did not end up in the final law. The law does recognize that agents and brokers can have a role in helping individuals and employers enroll in health plans and apply for tax credits. (The National Association of Health Underwriters has outlined its recommendations here).
“We do think there will be some squeezing of the belt by companies because of MLR restrictions,” Prible told me. And that could affect the business model of brokers and agents. The hope is that rather than going extinct, they emerge with a new role as more of a “navigator” or adviser to individuals and small businesses trying to figure out the best insurance option. They could also serve as sort of a human resources department to a small business, helping them with an assortment of benefits and insurance needs, including sorting out problems with denied claims etc. (Most of my life I’ve had large-group employer-sponsored insurance, but for a few years I was on my husband’s plan at a small nonprofit, and I was surprised to learn that his broker served that kind of role, running interference and helping us when we had a problem with denied claims etc).
A state can’t completely abolish agents -- and the rules might be different for health plans sold in the exchange and those that are sold in a parallel market outside the exchange. (No federal subsidies would be available in those outside plans, but they may be less regulated than the exchange plans -- we won't really know for sure what this looks like until we get closer to 2014).
“We anticipate that a lot of the individual and small group market will move toward these exchanges once they are implemented,” Prible said. “The new health law mandates that every state has an exchange by 2014 but it’s up to individual states how to create them, what [is] their vision of how they might look like, how they are regulated.”
Not all the states will design their exchanges the same way. In a state where the exchange looks more like an online telephone book with lots of choices and minimal explanation, a broker might indeed give a lot of value added. In a state that more actively selects which plans can be in the exchange, and how easily consumers can compare them, brokers might be more superfluous.
But I wonder, too, whether agents would be less in demand in the coming years, with or without health reform. We buy more goods and services online without middlemen. I suspect that more insurance products, whether health or casualty or life, would also migrate to the web. After all, when was the last time you used a travel agent?