There is no question that the Supreme Court upholding the Patient Protection and Affordable Care Act in a 5-4 ruling has solidified, for now, the change in the country's health care market that took form when President Barack Obama signed the legislation into law in March 2010.
And while many brokers are concerned over lost commissions, primarily as a result of the law's medical loss ratio provision - which requires that only 15%-20% of insurance plan costs be spent on administrative function - industry observers say in the short-term, now more than ever, brokers can prove they are a needed asset to employers for the long run.
Yet, nearly three-quarters (74%) of brokers believe they will generally be worse off under PPACA, according to a survey from the Kaiser Family Foundation. Additionally, nearly two-thirds (65%) think their business will be worse off, and more than half (59%) think their family will be worse off, according to the survey.
Brokers' time to shine
Although according to supporters PPACA was intended to simplify the health care system in this country, there is still the question of what the insurance market will look like after the reforms have had time to affect the system.
"The intention is for health insurance markets to be simpler, more reliable, less [uncertain], more consumer-friendly," says Karen Pollitz, Kaiser senior fellow. "I think today's individuals, and particularly small businesses, rely pretty heavily on brokers to help them figure out the private insurance model."
It's then up to brokers as the changes take place, Pollitz explains, to work with their clients to explain how to be in compliance by 2014, when most provisions take effect. As a result, in the near term a broker's value has increased expeditiously, says Jay M. Kirschbaum, practice leader at Willis Human Capital Practice, national legal and research group, in St. Louis.
"[Our clients] haven't been paying attention, they need advisers and they get that," he says. He adds that Willis research over the past two years shows that 65% of employers look to their broker first for detailed compliance direction.
"Employers have that sense of urgency," to comply by 2014, Kirschbaum says. "Now is the time for us to say, 'We are here to help, we have the information, we have the details, we have the expertise.' And I think employers are going to take advantage of it.
"In one sense, it's a non-event," he adds. "We've been trying to get employers to think about [PPACA] for two years. Over 1,200 employers dial in to our webinars and a lot ask very specific questions, 'How do I deal with W2 reporting? How do I do all this?'"
The end result for brokers
Pollitz, who served as deputy assistant secretary for health legislation at the Department of Health and Human Services from 1993 to 1997, explains that there is an acknowledgment among developers of health care exchanges that brokers know a lot of about health insurance and have a lot to offer consumers.
While brokers tend to more strongly disapprove of the law than the general public, it is unclear what the end effect will be on them and their business.
"I wouldn't hazard a prediction," she says. "It seems clear [that] while the market will change and will be easier to navigate, insurance will remain a complicated product for people, and all kinds of studies about health insurance show that this is just not something people feel comfortable with.
"[Consumers] are scared of it, they don't like it," she adds, saying that studies show people would rather work on their taxes than on health insurance.
The more informed brokers will be the ones who last, says Larry Harrison, owner of Las Vegas-based Harrison Insurance and media relations chair for the Nevada Association of Health Underwriters.
"The more informed you are, the more you are going to be able to offer the best value to your clients," he says. "[We] have too many dumb agents doing stupid things. I find people know more about professional ballplayers ... then they do about their own industry."
More efficient brokers?
As mandated by PPACA, there will be "tremendous" new information resources for consumers, including the already active healthcare.gov, says Kaiser's Pollitz. Similarly, information in the health care exchanges will have to be standardized and provided through an objective source.
With all this new information to help consumers, brokers may be relied upon in different ways. "I think the amount of assistance people would need from brokers compared to today will be different," she says. "It's possible that [the mandated changes] could make the work of insurance agents more efficient."
With the MLR provision potentially eating away at commissions, Elliott Kroll, a partner at Arent Fox in New York, says that brokers will likely have to consider some type of blended compensation, where part of it is perhaps fee-based. "Otherwise," he says, "I don't see how they can make due."
Kroll, who sits on the boards of several major insurance and reinsurance companies, says that he is certain that "brokers are resourceful and will find a way. The better brokers will be able to demonstrate their value-add to their customers during what will be a very challenging transition time."
Overwhelmed insurance
Similarly, Kroll says that insurance companies are expecting to be overwhelmed, as some studies show an increase of 30 million to 50 million new enrollees when PPACA fully kicks in. "Insurance companies will be under such challenging administrative times with a surge in enrollment that brokers will ... be called upon more so than ever," he says. "Better brokers are going to rise to the challenge and deliver high quality [information], and clients are going to be willing to pay for it if they get the service. ... It will require a lot more effort."
But, Pollitz says in the end, "no one thinks [agents] are going to go away. Brokers spend a lot time helping people evaluate options. It's possible ... [the changes] will be more efficient for brokers and maybe [they can] afford to help more people."
Moving forward
Brokers say that PPACA still does not address one of the main problems with health care - its rising cost.
"Our country still does not have measures in place to control a system that is on an unsustainable cost trajectory," says Adam Bruckman, president and CEO of Atlanta-based Digital Insurance.
"The solution is a system that produces knowledgeable and engaged health care consumers. This can only be achieved through innovation - not through mandates, regulations and government programs. Evolution must be led by the private sector and requires collaboration between benefits advisers, employers, insurance carriers, providers and consumers."
LouAnne Drenckhahn, a human resources and compliance consultant at the Edina, Minn.-based David Martin Agency says that the rising health care costs are not a result of PPACA.
"Our health care system as a whole has not been working as efficiently as it could. Health care reform in the form of PPACA may not be perfect - in fact it may be far from perfect - but it was time for a change," she says. "It was time for a major stop in innovation, and great strides continue to be made.
"Fortunately, [health reform] preserves a role for the employer-based system. Employees to continue to place high value on benefits," she adds.
