It’s time to put a feather in your cap, brokers and agents. An independent study out of the University of Minnesota finds that areas of the U.S. where broker competition is highest are associated with lower health premiums and higher levels of health coverage.
"We hear that small businesses use brokers not just to find health insurance but also as an HR extension," says author Pinar Karaca-Mandic of University of Minnesota's Division of Health Policy and Management. "We think at least in the short run, for brokers’ services, the exchanges won’t eliminate these transaction costs for brokers."
This comes just weeks after an Aflac poll of brokers themselves found that many are unconfident about their role in the industry with the unknown changes the Affordable Care Act will bring — with even 45% saying they’re thinking about dropping out of the business altogether.
The new research by economists Karaca-Mandic, and co-authors Roger Feldman and Peter Graven, uses confidential employer data from Medical Expenditure Panel Survey- Insurance Component and the National Association of Health Underwriters database to analyze employer-sponsored health insurance against the presence of brokers in counties across the U.S. The results show that small businesses are 20% more likely to offer health insurance in areas where broker competition levels are highest. Also, small business health premiums are about 13% lower in the areas where broker competition is greatest.
The authors conclude: “Greater availability of brokers and more competitive broker market structure play an important role in reducing search costs and improving offer rates in small firms.”
Karaca-Mandic and Feldman explain that their research shows that most counties in the U.S. fit into one of four profiles — counties either have, on average, zero brokers, one broker, two brokers or seven brokers. Once they found these averages, they were able to compare health coverage and premiums. The full report by the team is published online as a working paper by the National Bureau of Economic research.
The authors also determine that there are two policy implications stemming from their research. The first is that since smaller businesses offer health insurance at lower rates than larger ones, “Reducing this disparity by increasing the offering rate among smaller firms has been a long-standing goal of health care reform.”
The second pertains to the ACA and they write, “The insurance exchanges will presumably reduce the search costs substantially.” Given their research that an increase in broker competition already does this, they nod to the “undetermined” impact of brokers on the exchanges as another variable to look for in the future.
A recent analysis by insurance broker-focused think tank Health Partners America determines that brokers have three ways to help consumers with the new exchanges: through the carriers portals, through the exchange portals themselves or as Web-brokers.
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