Will 2013 be the year in which health insurance agents and brokers join lamplighters, elevator operators and Western Union delivery boys on the scrap heap of obsolete occupations?
Not so fast, say some agents who are gearing up for the challenges of selling products and serving clients in the world of the Affordable Care Act – a world in which the rules are changing almost daily. The confusion surrounding ACA will make the role of the advisor more important than ever as clients need expert advice from someone who can help them make sense of the new health care requirements.
Educating clients and helping them navigate the rough waters of health care reform will help keep practices afloat and vital to consumers, health insurance agents and brokers said.
“Don’t give up,” said Neil Crosby, director of sales for Warner Pacific Insurance Services, a general agency in San Marcos, Calif. “A lot of agents and brokers feel it’s a bleak outlook, but agents will be more necessary than ever because no one else will be there to guide people through the process of getting coverage.”
Crosby does business in California and Colorado, two states that are creating their own exchanges to enable consumers to purchase health insurance instead of allowing the federal government to set up an exchange for them. He said that his state, California, will use agents as part of the exchange.
Even though health insurance exchanges will enable someone to go online to purchase health insurance, “95 percent of clients still want to meet with a professional and discuss their options,” Crosby contends.
Under the provisions of the Affordable Care Act (ACA), every state must have a health insurance exchange in place by 2014. As of Dec. 1, 17 states plus the District of Columbia indicated to the Department of Health and Human Services (HHS) that they would implement their own exchanges, six states are planning a partnership exchange with the federal government, 17 states will let HHS conduct their exchanges for them, and the remaining 10 states have not made a decision.
The ACA implementation timetable itself could work in an advisor’s favor, said one consultant. Dave Racer, chief executive officer of the Coalition for Healthcare Redesign and the author of eight books on health care reform, said he believes the timetable for implementing Obamacare will not be completed in a timely fashion, and that could be good news for agents. “Governments are never ready to do anything on time,” he said. “I believe agents have an extended life because of the ineptness of government.”
“I think the reality is that agents have a few more years left in the business.”
With HHS releasing new guidelines on ACA on an almost-daily basis, “there are so many unknowns right now,” said Colleen Callahan, president of Callahan Insurance in Pleasant Hill, Calif. Callahan’s practice focuses on the small group and individual health insurance markets. “Being able to tell a client in January what to expect for the rest of the year is difficult,” she said. “I know that the expectation for a good agent will be to educate their clients.”
One challenge facing agents in 2013 is to get information on health care changes to existing customers as early as possible, Callahan said. “We are presenting all of the new Summaries of Benefits and Coverage to our clients earlier than usual because there is so much more information to go over,” she said. “There definitely will be a lot of education going on this coming year. We are telling our clients what we know as soon as we learn it.”
Callahan advised agents to use all the information resources available from their carriers and general agents. “There is so much out there and we are sending out information from our carriers all the time,” she said. “For example, we’ve been sending out information on coverage for preventive services for women because so much has changed in that area.”
“We are educating our clients as we get educated,” she said. “The two most important things you can do for your clients are to educate them and keep them calm.”
But the downside of being an agent in the Age of Obamacare is that in many cases advisors will be doing more work for less commission.
“We’re going to be more busy doing extra stuff that is producing less revenue,” said Kelly Fristoe in Wichita Falls, Texas. “But if you take care of the people and do what you have to do to educate them, you will gain their loyalty.”
One of the unknowns as the ACA implementation moves ahead is how much agents will be compensated for their work. “A lot of us are worried about that because it’s not yet clear,” Fristoe said. “But we do know our phones will ring and people will need our help. I don’t know what our business model will look like as we go forward and we may have to change our model.”
Fristoe said he believes the agent’s job will be “to help our clients make the smartest decisions regarding health care coverage.”
While others might agree on the agent’s purpose, not everyone is confident about the future of the agent.
A 2012 survey of its member agents conducted by the National Association of Insurance and Financial Advisors (NAIFA) showed that those who sell or service health insurance plans have seen their commissions decline dramatically since the ACA’s medical loss ratio (MLR) calculation went into effect. The MLR requires health insurers to spend 80-85 percent of premiums on medical or quality improvement services.
Of the agents polled, 70 percent said they have seen their commissions decrease since Jan. 1, 2011, and another 12 percent said their carriers have informed them that commissions will decrease. Thirty percent said they will stop selling individual health policies if commissions remain depressed, and 22 percent said they will stop selling health insurance altogether.
The survey results showed that the decline in commission has forced many agents to re-evaluate their business practices, in some cases having to lay off employees.
“It really depends on what state you’re in – whether you’re in a Democratic or a Republican state,” said Racer of the Coalition for Healthcare Redesign. “In the Democratic states, agents are frightened, worried and rightly so.”
Racer advised health insurance agents to diversify their offerings by selling products such as critical care coverage. His other advice to agents is to solidify their existing client relationships.
“Agents need to continue to talk up what they do, to show the value they bring,” he said. “They need to continue to build strong relationships with their clients, helping them to understand health care and moving employers into more affordable plans.”
Another possibility for agents, Racer said, is to look at the possibility of moving to a fee-based consulting model “and to start planning that now.”
Racer predicted that there will be an exodus of smaller agencies from the marketplace as many agents decide to get out of the business and those smaller agencies are purchased by larger operations.
“But I’ve had some agents who have been around for a long time say to me, ‘I was around when they created Medicare and we thought that would put the agent out of business and I’m still here. And then, they created HMOs and we thought that would put the agent out of business and I’m still here’,” he said. “Those agents who have been around a long time say this too shall pass, but we don’t know for sure where it will all lead.”