The Role of the Broker in a Post-Health Reform World

The effect of health reform on brokers will be monumental. No other social policy change in recent memory has driven as much transformative change in the brokerage business model as the Patient Protection and Affordable Care Act (PPACA) is predicted to.

Producer participation has been intensely debated, and the value of the services they provide and their role in a post-reform individual and small-group insurance market hotly contested.

While questions remain about that role, and changes to the existing definition are already beginning, brokers will certainly continue to be an invaluable resource to policymakers, carriers, and most importantly, the clients who rely on them as an extension of their staff.

Numerous industry cost pressures are causing this re-evaluation of the broker’s role and their value in the distribution relationship. Many health plans have already shifted their broker compensation strategy. With newly implemented minimum medical loss ratio requirements, many carriers are reducing commissions on groups representing undesirable risk.

Commission structures previously based on a percent of premium basis have been converted to flat per employee per month fees. And with unemployment at nearly 9% there is a shrinking client base within companies that are able to find a way to keep their health insurance in place, further threatening the broker’s livelihood.

Additionally, PPACA charges states with establishing new health insurance exchanges. These marketplaces are intended to simplify the health insurance shopping experience while providing a broad menu of certified benefit options to eligible individuals. Some observers initially argued that Exchanges, with their web-based portals where consumers can comparison shop for and purchase health insurance online, would eliminate the need for brokers.

However, the encouraging news is that over the past six to nine months, many of those same observers, along with increasing numbers of other experts, are coming to a consensus that brokers will continue to play a vital role in commercial health insurance markets around the country in light of health reform implementation.

Exchanges will certainly redefine the private health insurance marketplace. With their ability to allow consumers to compare standardized plan options, the mandate to certify health plans, and by providing robust back-end administrative services and capacity to drive other state-based health policy reforms, exchanges will indeed have a transformative effect.

Although these new marketplaces will serve both individuals and employers, brokers will remain especially relevant and important partners to employers purchasing insurance in the small group market. The undeniable fact is that in this complex and often times confusing landscape, employers will continue to seek the services of their trusted advisor.

Experts project that Exchanges will attract over 24 million individuals and small employers, some previous insured and others obtaining coverage for the first time ever. As a pillar of this coverage expansion effort, Exchanges must succeed. And they must succeed early.

State policymakers and other influential decision makers are realizing that competing against producers will have the effect of working against their coverage expansion objectives. By partnering with brokers and incentivizing them to enroll individuals and employers in Exchanges, state and federal policymakers will move closer to achieving their goals of access to health care for all.