Insurance brokers work with businesses and their employees to navigate a slew of health care acronyms, explain what it means to be in or out of network and generally help companies find the best health insurance coverage.
But health care reform, particularly the health insurance exchanges that are supposed to make it easy for companies and individuals to buy insurance, could greatly reduce the role brokers play in the process.
According to a 2011 study by PwC, insurers that plan to participate in the exchanges expect broker-generated business to decline by 20 percent in the individual and small group markets after the exchanges begin operating in January 2014.
A requirement that insurers spend at least 80 percent of premiums on health care when the Affordable Care Act takes full effect in 2014 might reduce the commissions paid to brokers for bringing in business.
That’s because broker premiums aren’t considered a cost of health care, said a recent article by Ragan’s Health Care Communication News, an online health care information site.
What role brokers will play in the health insurance exchange world remains a topic of speculation in New Mexico and elsewhere, because states have yet to write their regulations on how exchanges will work. But brokers are already thinking about how the coming changes will impact their work and how they are paid for their services.
“We are concerned whether there is going to be a place for brokers in the distribution network. Health care reform is such a moving target that we don’t know what the target looks like,” said Terry Linton, owner of Linton & Associates LLC, a four-person brokerage firm in Albuquerque with nearly 700 small group and individual clients.
The ACA requires the exchanges to have “navigators” who will help individuals and small businesses buy insurance on the online exchanges.
“We don’t know whether a navigator will be a broker or whether a broker can be a navigator,” Linton added.
The exchanges could force many small brokerage businesses to close, said Sybil Bogardus, chief compliance officer, Western regional employee benefits for Hub International Insurance Services Inc.
“There will be a number of brokers who won’t be able to provide the services or meet the requirements” of the exchanges, Bogardus said. “They might want to consider joining a larger broker or refocusing their attention on different types of business.”
Mark Zapatka, a partner in the Axcess Financial Group in Albuquerque, a firm that offers employee benefits consulting services, said brokers offer such valuable service to businesses that they probably won’t go away entirely.
“The exchanges say they are going to have these navigators. Navigator means, ‘Here is your website, good luck,’” Zapatka said. “We [brokers] give employers resources. We explain to them what it all means and help them get the best plans for the best prices.”
Dr. Martin Hickey, CEO of New Mexico Health Connections, the state’s startup nonprofit health plan, said brokers have told him of their concerns about the exchanges.
“I think that the complexities of what we are trying to iron out are so great that if I were a small business, I might really want to go through a broker who is going to have to understand all these things,” Hickey said.
Lovelace Health Plan, which insures about 230,000 New Mexicans, says 95 percent of its business is broker-driven. Lovelace works with more than 500 brokers and expects to continue doing so, said Doug Gullino, Lovelace vice president of commercial sales and service. He added that generally brokers’ commissions currently range from 3 to 6 percent. When ACA takes effect that could drop, he said.
Janice Torrez, vice president of external affairs and chief of staff for Blue Cross and Blue Shield of New Mexico, which insures 320,000 New Mexicans, said 95 to 98 percent of the company’s business comes from brokers. Blue Cross works with 548 brokers, Torrez said.
Neal Spero, vice president of sales and marketing for Presbyterian Health Plan, said he believes brokers will still play a major role in helping companies find insurance plans.
And no one knows whether ancillary health benefits such as dental and vision insurance will be sold through the exchanges, Spero added.
The New Mexico Human Services Department is responsible for setting up New Mexico’s insurance exchange. The effort is in the beginning stages, and the role that brokers will play in New Mexico’s future health insurance market hasn’t yet been determined, said HSD spokesman Matt Kennicott.