Are exchanges weakening the role of the broker?

Five years down the road, the insurance broker’s role in health insurance may be diminished, largely due to exchanges, consultants say. The role of the broker will change greatly in the process, they say, but in the near term it is a mixed story.

As exchanges are still relatively in their infancy, consumers and employers still need help in making plan selection choices, says Ashish Kaura, a Chicago-based partner of Strategy&, formerly known as Booz & Company. But, as consumer confidence grows and newer tools come into play, “there may be less of a role for a broker moving forward,” he says, adding that trends show private exchanges plateauing in year three and four. 

No matter what takes place, there is no question the role of the broker is changing, says Mike Thompson, principal and New York-metro health care practice leader at PricewaterhouseCoopers. “All advisers are being held to a higher standard moving forward. The traditional role of providing one-off consulting is increasingly shifting to being more of a steward of a broader strategy, and that is what the private exchange movement is,” he says.

For those brokers who don’t deliver value, “the tolerance of non-performance is going to be less,” Thompson says.

Also see: Why one carrier thinks brokers are diluting the private exchange message

There is a large threat to the smaller brokerage firms that have small-group clients in particular from both public and private exchanges, as these clients are more likely to move to exchanges, adds Dan Graovac, principal, health exchange solutions, Buck Consultants at Xerox in Boston. “I don’t agree [brokers] will be gone or dead, but I certainly see their role being different,” he says. “… Brokers have to add more value for the work they do.”

The “innovations and experiments,” such as increased use of consumer-driven tools, that are taking place in the individual market will creep up to the group market, Kaura believes. That’s in reverse to what traditionally takes place with benefits, he says, “Innovation will start at the bottom of the pyramid and trickle up, once employers get more comfortable with that.”

Additionally, brokers are not exempt from market forces affecting the entire health care industry, Kaura says. “People are busier, but poorer,” he says. “More volume, but fewer dollars per unit” will lead to market consolidation.

Also see:  Were brokers an ‘afterthought’ on the state exchanges?

It’s not unlike a primary care physician, he believes. Over time, as the cost of doing business has gone up and regulatory oversight has increased, many primary care physicians are moving into large physician groups or becoming part of a hospital. “That is the ecosystem that may develop on the broker side,” Kaura says.