The health insurance market will change forever this fall. That's when state and federal health exchanges, as mandated under President Barack Obama's signature Patient Protection and Affordable Care Act, are slated to open for small group and individual enrollment.
Although unclear just a few months ago, the role a broker will play within these health exchanges is becoming more defined. Brokers, advisers and others in the industry are working with state exchange boards to define a clear path to remain relevant, properly compensated and perhaps, more needed than ever before.
Types of exchanges
To understand the role of a broker, it is important to note there will be three different types of public exchange models, explains Jessica Tolbert, director, state health reform, at the non-partisan Kaiser Family Foundation in Washington. [See the map on p. 31 for the model each state has chosen.]
In 19 states, state officials will have complete control over decisions related to a broker and agent. "What we are learning from these states is most recognize agents and brokers play an important role in connecting people, and particularly small employers, to coverage," Tolbert says. "In most of these states they are addressing the role of agents and brokers and how these folks will participate in the exchange."
The other models include a partnership with the federal government where states can take on plan management and consumer assistance, but the federal government would run the navigator program. Guidance as to the broker and agent's role in this type of exchange, as well as those that will default to a completely federally run exchange, was still in development at press time.
Meanwhile, states are making sure the industry is heard by setting up advisory groups filled with brokers, consultants and others in the business. These boards meet frequently by teleconference or in person.
For example, Nevada has solicited stakeholder feedback from more than 50 public meetings since October 2011. These statewide meetings include those who are "heavily engaged" in the process, says Silver State Health Insurance Exchange Communications Officer CJ Bawden.
Broker MD Sam Smith serves on the advisory group for the Covered California Small Business Health Options Program [SHOP] exchange and says his past prepared him for making sure everybody is heard. "I've always had a strong commitment to health care reform," Smith, president of Genesis Financial Services in the Los Angeles area, says. "I always tried to operate on the premise that all Californians should have access to quality, affordable health care. That's been a statement of mine since the early '80s."
As president-elect of the California Association of Health Underwriters and chair of the health care committee for the Hollywood (Calif.) Chamber of Commerce, Smith has always taken an active role in his community.
It is a way to make sure he stays active in legislation that will change his business. "It gives me the ability ... not to be reactive to what the legislation does," Smith says, "but to act in a positive way and help that reform."
He uses his leadership roles within the state to help brokers get ready for upcoming changes. For example, the California Association of Health Underwriters is running an extensive PPACA certification program. This is one of the few times in the history of the industry, Smith says, where everybody has the opportunity to become an expert.
"There is a lot to learn in a very short period. We have six months to hit the ground running and give people the tools they need to start," he says. It's "an unparalleled opportunity to learn the business because it's going to be a new business," he says, "but [it presents] an unequaled challenge at the same time. You have to take the time to get this education."
A broker's role
For the most part, states setting up state-run exchanges all say that brokers will play an important role. "The broker's role is as critical to the success of the exchanges as they are in any distribution," says Kevin J. Counihan, CEO of the Connecticut Health Insurance Exchange in Hartford. "I came from the health plan world and always appreciate the value the broker brings."
It's a thought that state officials in Maryland echo. "Producers are going to be essential participants in the Maryland [exchange] and we really are designing a state-based exchange so they can play a prominent role as we launch the Maryland Health Connection," says Tequila Terry, director of plan and partner management for the exchange in Baltimore. "We really are working to ensure we are very inclusive to be able to leverage [a producer's] existing role in today's marketplace."
Broker's compensation - a concern since PPACA passed and was upheld by the Supreme Court -the states say for the most part will continue as normal.
In Maryland, it will go through the carriers, just as it does today, Terry says. "We believe this is the most fair way to operate and ensure that producers are paid in a manner consistent with how they operated in their past."
The same will happen in California for agents, says Michael Lujan, RHU, director of the SHOP Exchange. "Agents will be paid the same commission that they were paid in the non-exchange market," he says. "Not only receive commission from insurance companies but paid according to their existing contracts."
Yet, Smith says an agent's compensation in California is a work in progress. "The SHOP exchange is fully committed to offering market-competitive compensation to qualified agents who are certified to offer their products," he says. "The exchange is currently in the process of working with California carriers to make sure that the contracts and compensation are comparable to similar contracts and compensation in the open market.
"This includes such important provisions such as vesting, broker of record changes, survivorship clauses and code of conduct and steering language," he adds.
Smith continues that the agent's role in the SHOP exchange will be critical to its success in the market and says that Lujan fully understands that. "Mr. Lujan's breadth and depth of experience in the California insurance market makes him the best choice to assure the overall success of this effort.
"For all intents and purposes the agent's role will mirror their existing role in the California market," Smith adds. "They will just have a smaller window in which to prove themselves as critical partners in the exchange."
For states that will be on the federal exchange or partnership model, Joel Ario, who was director of the Office of Health Insurance Exchanges at the Department of Health and Human Services, believes that those exchanges will defer to the states on the role of agents and brokers. "That's traditionally been a state role and been pretty consistent with exchanges from the beginning," Ario, now managing director at Manatt Health Solutions, says.
Most important, brokers say, is making sure their voice is heard as states prepare for the exchanges - and that state representatives pledge they understand that desire and are listening.
As a former agent and member of several agent associations, Lujan says the first call he made when appointed director in June 2012 and again when the Supreme Court upheld health reform was to CAHU. "All of that to say, 'We want to make sure you are plugged in and I want to make a standing monthly conference call,'" he recalls telling them. "We are engaging the associations. ... We meet regularly, I speak at their events, we have webinars, and we invite them to board meetings."
Even so, after attending a few meetings, Smith remains cautious on the impact stakeholders will have.
"The first SHOP Advisory Group meeting proved to be an active example of the Exchange Board's commitment to being guided by the stakeholders it is striving to serve," he says. "The composition of the SHOP Advisory Group covers a broad spectrum of both experience and responsibility in the health care world. ... It remains to be seen whether that effort will have a real impact on the SHOP exchange or will it be just window dressing for the desire to appear transparent and accountable?"
That concern, Smith says, comes from the fact that the Exchange Board is on the surface making a good case for agents. "They really seem to be sincere in making this a market rate contract," Smith says. But the issue that comes up is "political" in nature, he adds, and deals with general agents, who play a critical role in delivering products to the small business market.
Smith refers to a rumor that California wants to limit the general agent population to three total - even though there are there 10 active ones in the state.
"At the Advisory Group meeting and follow-up since them, everybody agrees that there is no benefit to the exchange to limit the number of general agents," Smith says. "Why would you go into the market and create seven known enemies? It's such a small window to get information out there; we need all hands on deck. So why would you limit that?"
Smith said this topic was brought up numerous times at the Advisory Group meeting and if the exchange does select which GAs can participate, he may be forced to select a new general agent and put someone out of business.
However, if they do not limit the pool, Smith says, "I think our voice is being heard and effective. ... If they don't, I would have serious concerns."
Listening to the broker's concerns is a sentiment shared on the East Coast, too. Connecticut's Counihan says that he and his staff speak frequently with NAHU. It's about making an agent comfortable with the change. "We want them to feel comfortable, we are not saying we are the only source for health insurance in the market," he says.
In Maryland, Jonathan Anders, CEO of Timonium, Md.-based Allegeant and a member of the Maryland Health Benefit Exchange's Advisory Committee, says the state is very receptive to hearing from stakeholders. "It's unique because the state has acknowledged our experience, our expertise, our knowledge, and I think they have included the broker community in most decisions," he says. "[We] have a phenomenal working relationship with [state officials.] Several times they called meetings to say, 'What do you think about this?'"
Terry, the Maryland Exchange director, echoes that. "As we move forward with implementation, producers will be relied upon to provide expertise as to how we, as state officials, can build the state exchange to leverage the existing strength of marketing," she says.
"They are looking at us to get the word out," Anders adds. "It's that spirit of public/private partnership that has gone very well and they included us every step of the way."
On the federal level, Ario - who set most of the proposed exchange rules before leaving HHS in September 2011, and was previously insurance commissioner in Pennsylvania and Oregon - says that HHS would receive written comment and the "final regulations does take those comments very seriously.
"In the final regulations, there is reference to most of the comments that come in," he adds. "There are exceptions because sometimes you get contradicting statements. ... You can't accommodate every comment. But every comment is read and, typically, with the final reg comes a preamble that explains how the comment was taken into account."
In the near-term, admittedly there will be much uncertainty as states finalize their exchanges and rules become set in stone. But, Anders says that uncertainty is a function of the unknown.
"Part of that is education," he says. "Brokers themselves need to be educated. Health reform is real, it's happening. And unless you know everything, you will not be a good use to clients."
Lujan says, moving forward, it is all about outreach and education. "We have to reach a broad population across 58 counties that speak multiple languages," he says.
But in the end, a broker will continue to be valuable, Smith says. "The role we play will look different ... [but] our clients will be more reliant on us than ever before," and those who change have nothing to be worried about.
He notes his firm moved into a new, larger office space in Encino, Calif., in February and hired two new associates.
"Do I feel challenged? Absolutely," Smith, who was named California Chamber of Commerce Small Business Advocate of the Year in 2011, says. "But you have to become a greater force to your clients. You have to become more consultative with your clients - from one to a thousand.
"We need to take a larger view of the needs of our clients," he adds. "As we do that, people will be willing to continue to compensate us for the value of our services. The value proposition has to be more distinct. If we don't do that, yeah, you better be worried about the future."
He equates being active to the dawn of civilization. "If you look at the title wave of changes in health care, it reminds me of the great floods of Mesopotamia at the dawn of civilization," Smith says. "Those that were able to change within and find higher ground are going to survive. Those that can't do it or won't do it, they won't survive."
Share Your Knowledge
California is one of the more advanced states in building its exchange, Covered California, and others are learning from the process. "We are months ahead of the other states. Those that are interested in seeing what we do .... be it certifying courses or how we roll out education outreach, [they] are welcome to take a look at it. ... We need to share it," says MD Sam Smith, president of Genesis Financial Services and a member of the advisory group for Covered California's SHOP exchange, says. "I don't know how a lot of the states that claim to be prepared [for Jan. 1, 2014], are going to do it. Even when Christ converted water to wine, it took some action. It will take that kind of miracle to launch on January 1."
But asked if he worries about tipping off the competition, Smith says you can't think about business that way. "If we look at our business and service with that narrow vision, none of us will succeed," he says. "We have to look at the larger vision. We have to help each other. In the end, we all do better and our communities will be served.
"If we are worried about own pocketbook all the time this won't work," he adds. "There is a lot riding on brokers to make this successful. It's in our best interest to make this successful. If we fail, then we have a problem."
Michael Lujan, RHU, who heads the SHOP exchange, says that several states meet on a monthly basis in addition to calls with the federal government. Since California has had a state exchange since 1992, called the Insurance Plan of California, the state is "ahead of the curve and more experienced with the exchange concept," he says. "That experience gives us a leg-up to learn from past lessons and gives us an advantage that others may be able to learn from.
"We try our very best to share that proactively and be here so other states can benefit from our experience," he adds. - Brian M. Kalish
Answer the Call to Service
Ignorance will not be bliss this fall when state and federal exchanges begin enrollment for individuals and small group employees. While brokers are experiencing anxiety about their role in such exchanges, employees of all types may be confused about their options - thus providing brokers the chance to come to the rescue with targeted communication on the subject.
"Most employees don't think [health reform] impacts them yet," says Mike Thompson at PricewaterhouseCoopers' human resource services. But, when more information begins to come out on public exchanges, "employees are very likely to be very confused," he adds.
Jim Blaney, CEO, human capital practice, Willis North America, says employees are concerned about costs PPACA might pass on them, and how exactly PPACA's exchanges will affect them. "I get the feeling that employees might start to think that their employer will just throw them out on the exchanges for coverage," he says. "That will bring around a whole set of communications opportunities for the broker and the employer."
State organizations vary drastically in the level of education and tools provided to residents. Some of the most active states so far are California and Maryland. Both have informational websites dedicated to their respective exchanges. Blaney says confusion for employees will likely increase when more states begin their awareness campaigns.- Gillian Roberts
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