The passage of the Affordable Care Act (ACA) spurred considerable debate on the future role of health insurance brokers. At the time the ACA was passed, many in the industry argued for brokers’ relevance, while others predicted they would become obsolete with the increasing adoption of health insurance exchanges.
Today, five years on, we can safely say that brokers are needed more than ever before — but they are needed in new and different ways. According to the 2014 Aflac WorkForces Report for Brokers, companies’ usage of brokers increased from 56 percent in 2011 to 61 percent in 2013 to 64 percent in 2014, punctuating their staying power. What is interesting, however, is that successful brokers are evolving, specializing and adding value beyond customary quoting and transactional activities.
They are seizing opportunities created by health reform to become even more valuable, taking on the role of human resource/benefits consultants, business strategy partners and trusted advisors on all things insurance-related.
Historically, brokers provided valuable services to individuals and companies, such as obtaining quotes for coverage, explaining benefits and regulations, and helping solve various other insurance-related issues. A survey by the American Institute of Certified Public Accountants showed that more than 50 percent of Americans do not understand basic health insurance terms — such as premium, deductible and copay — making it clear that brokers have played a vital function.
Today though, public and private health insurance exchanges have created somewhat of an identity crisis for brokers. In theory, exchanges diminish the importance of brokers. With sophisticated decision support tools and a plethora of information available online, the broker of yesteryear is no longer needed. But in practice, individuals and employers continue to seek guidance from health insurance experts, to ensure they are compliant with rapidly evolving health care reform and tax regulations. They also want to be informed about the many different medical and voluntary insurance products now available in the market. Meanwhile, businesses continue to face rising health care costs and are keen to reduce their financial risk, while still retaining and attracting talent.
The new role of the insurance broker varies depending on group size. In the short term, small businesses will continue to rely on their brokers in a more traditional way. According to the National Small Business Association’s 2014 Small Business Health Care Survey, 76 percent of small businesses said they planned to purchase insurance through their existing broker in the coming year. Fewer than one in 10 said they planned to purchase health insurance through the Small Employer Health Options Program (SHOP) exchange.
In the longer term, however, as medical products become more commoditized through both the exchanges and new e-broker offerings, the role of traditional brokers in the small-group market becomes less clear. Brokers will gravitate to new areas where they can add value, such as administering employee benefits and taking on human resource functions for small businesses.
Small business will need a number of services that brokers can provide. Those services include giving advice about which exchange to join, managing the exchange relationship, designing comprehensive benefits strategies that include robust voluntary insurance offerings, and educating employees on their insurance options.
Brokers who serve large-group employers will specialize and be asked to play a more strategic role, consulting on issues ranging from contracting with hospitals for Accountable Care Organizations and benchmarking benefits both nationally and internationally, to providing guidance on how to create a productive workforce. They also will create points of differentiation by extending their counsel to include predictive modeling around risk and costs, and lending their expertise on exchange infrastructure and user navigation. This may mean providing specialized services around compliance and health care or providing consulting services around the types of technologies and exchanges these businesses should be integrating with their current offerings.
Brokers in the large-group market eventually will become the essential go-to experts for all things insurance-related. Businesses will seek guidance on insurance strategies, from picking the right property and casualty insurance to deciding what mix of voluntary insurance options makes sense for their employees. Offering these types of sophisticated services means brokers will need to invest in new skill sets and expand their broker teams to include underwriters and other subject matter experts.
Whether serving groups or individual clients, there are certain actions that all brokers should consider as they make the shift away from providing transactional services and toward becoming consultative partners.
Partner with an exchange. Given that brokers are being asked to do more than ever with less commission, exchanges offer a tremendous opportunity to both reduce administrative burdens and increase voluntary insurance sales. Aligning with a strategic technology partner can help brokers leverage technology to speed up and streamline complex processes. This will allow the broker to focus energy on other areas such as compliance or other specialized services that cannot be managed by a technology solution.
Support new product lines. On the medical side, employers are interested in a wide range of coverage from carrier-
provided preferred provider organizations and high-deductible health plans to self-funded arrangements. Beyond medical coverage, there is a collection of voluntary products that are now easily available through private exchanges, and fit perfectly with defined contribution models. These voluntary offerings help create a robust benefits package at little to no cost to the employer.
Get smart on the available technology. Not only must brokers understand all the cutting-edge technology as it relates to human resource information systems, benefits administration and exchanges, they must fully understand the older internal insurance carrier systems that weren’t necessarily designed with the needs of the broker in mind. Integrating new technology with carriers’ legacy systems can be challenging. Brokers should engage with carriers to ensure that internal and external systems are integrated in a way that creates a positive user experience for all stakeholders.
Embrace the consumer-centric world we live in. Providing world-class service is paramount to the success of the insurance broker. And today’s consumers are online 24/7 with a variety of communication methods available to them. According to an analysis from IDC Health Insights, 65 percent of consumer transactions with health care organizations will be mobile by 2018. Brokers will need to be equally tech-savvy to improve their customer service and overall reachability. While technology can improve customer service, ultimately brokers who are skilled advocates for both employers and employees are the ones who will build a loyal following.
Health insurance has always been a relationship business. The new type of insurance broker who emerges from this period of disruption will have even deeper ties to their clients by providing advisory and consultative services not easily found elsewhere. While exchange technology will only continue to become more sophisticated, it can’t replace specialized and personalized counsel from a trusted partner. The broker will remain an important part of the health insurance ecosystem for the foreseeable future.